She wasn't writing for the paper nor at the weekend magazine. The most recent mention in other media was Feb. 10's CoinDesk piece "Have We Reached Peak Blockchain Hype?" where she was referenced as: "...noted blogger on all things financial, Izabella Kaminska".
But now she's back and jumping into the middle of some very serious stuff.
From FT Alphaville:
“The argument that eliminating the $100 [bill] will automatically reduce crime is, at best, suspect”
In a world plagued by low productivity, inequality, negative interest rates and deflation, the idea that something as simple as a physical cash ban might magically turn things around is, understandably, a tempting proposition.*Four days.
Furthermore, there are many convincing arguments for why this would be the case.
Most simply, cash is the means by which the criminal and tax-dodging grey economy get to have their cake and eat it: i.e. retain a right to claim the fruits of a collaborative and productive society supported by a social welfare system funded by taxes, without having to contribute their share of the bill (or in the case of the criminal element, despite actively disrupting the collaborative structure). Without cash, then, crime doesn’t pay, because there’s no way to protect the proceeds of a criminal lifestyle. As a consequence, the argument goes, criminals would simply pack it in.
On a nerdier finance level, banning cash seems a neat way to break through the zero lower bound. If there isn’t a bearer cash-out option, after all, everyone’s current liquid wealth becomes subject to an equal amount of tax whether they like it or not. More pertinent still, unless a person is prepared to transfer their cash to productive ventures (with some personal risk), everyone’s risk-free liquid capital turns into a depreciating asset. And that, in turn, sends a larger message to society that if you’re not prepared to take risk or pay your taxes, you don’t get the right to long-term par value protection for your wealth. In other words, keep what you need for consumption’s sake in liquid form, but be forced to share some fraction of it with the wider welfare state or — if you have more than you need — get a move on with investing it in our collective future prosperity.
Put that way, it’s fair to assume the productive and tax-paying members of society would see logic in a cash ban.
But perhaps things aren’t as simple as that.
To wit, see the latest thoughts from Nicholas Colas, chief market strategist at Convergex, on why it isn’t necessarily all about the Benjamins. On the matter of eliminating high-value notes from society to reduce crime and tax evasion, Colas notes:
Consequently, he says:...MUCH MORE
- Criminals always find a way. Cigarettes were the primary currency in the U.S. prison system until most states passed bans on smoking over the last decade. Now, inmates use everything from prepaid debit cards to postage stamps to foil envelopes of mackerel as currency.
- China’s largest banknote is worth 100 RMB (about $15), which should make the country largely immune from the ills caused by high denomination bills. Interestingly, Larry Summer’s own missive about the perils of the $100 bill notes that “China… has made attacking corruption a central part of its economic and political strategy”. Yes, there are no doubt $100 bills circulating in China but even the Sands paper only cites one example of a corrupt official found (in 2014) with a large quantity of $100 bills. Clearly there is more to corrupt behavior than the existence of high denomination bank notes.
- A Boston Fed study published in 2014 found that 5% of American consumers have a $100 bill in their wallet or purse. They tend to be more affluent than the average consumer (no surprise). To put that 5% in context, it amounts to 12 million people carrying $100 bills every day. And since we doubt criminals answer Fed surveys we assume that those 12 million people are all law abiding citizens using their currency for legitimate reasons. Bottom line: real people use $100s too.
