At a lecture on Feb. 23, Kenneth Rogoff, professor of economics at Harvard University, discussed the idea of moving to a society with less cash, which forms the basis of his new book, “The Curse of Cash."
Rogoff prefaced his presentation with a disclaimer, noting that his work is often misunderstood and that he has received several death threats as a result of these misunderstandings. Other critics of his work, he noted, believe him to be promoting an Orwellian government. In response to these criticisms, Rogoff stated that his belief is not that money is inherently bad, and that we should live in a cashless society; rather, he is calling for what he has dubbed a “less cash” society in which we rid ourselves of the “big bills that don’t really have good use.”
These big bills include the $100 USD, 500€, and ¥10,000 bills. Rogoff argued that these bills had use in the past, as they facilitated the process of handling and exchanging large sums of money. He added that while this is no longer a limitation for the government, such large bills continue to be of great value to the underground economy, tax evaders, and criminals. The “black money” that these groups hold comprises a large amount of the wealth, he noted.
However, while the capital holdings of currency are vast, Rogoff explained that 80 to 90 percent of all currency remains unaccounted for. He noted that other economists claim this to be the result of foreign groups' work and that these economists believe that most of the nation’s wealth exists overseas. On the contrary, Rogoff noted that economists have employed very sophisticated methods of tracking currency in order to obtain more reasonable estimates of overseas holdings. These methods show that well over half of U.S. currency is held in the United States, indicating that the problem is primarily domestic.
Rogoff claimed that average citizens would hardly be affected by removing large bills from circulation, as many citizens do not often use $50 or $100 bills; he added that these bills are more useful to money launderers and those in illicit businesses. To illustrate this, he noted that a popular television series, “Breaking Bad,” features a very well-researched and accurate depiction of money laundering, clearly depicting the difficulties associated with physically storing large sums of money. Without large bills in use, such operations would be even more difficult, almost to the point of infeasibility.
Rogoff noted that India’s government recently made such a reform, cutting off circulation of the 500 and 1000 rupee bills. This action was met with mixed responses, and Rogoff explained that developing economies likely should not be undertaking these monetary decisions. However, he noted that developed economies are indeed working on phasing out large notes; for example, the European Union is slowly removing the 500€ bill from circulation and has found great success in doing so.
This lecture was given as part of the University’s Future of Capitalism Talk Series and was hosted by the Princeton Institute for International and Regional Studies. The event took place in Robertson Hall at 4:30 p.m on Feb. 23.