In a March paper, Alexei Kireyev of the International Monetary Fund advises abolishing cash without having the citizens aware of the process. First, large banknotes are to be withdrawn from circulation, next limits on cash transactions are to be imposed, then computerization of the world’s financial system and control of international cash transactions are to be enforced and, finally, private companies are to be encouraged to avoid cash transactions. See The Macroeconomics of De-Cashing.
Kireyev draws on the ideas of former IMF chief Kenneth Rogoff. In his 2016 book “The Curse of Money”, he advocated the abolition of cash. In his opinion, it would contribute to the fight against crime, tax evasion and the reduction of the grey area. The ECB obliged him and promised not to print the 500 euro note after 2018. The government of India did the same thing: on November 9, 2016, it unexpectedly devaluated all 500 and 1,000 rupee banknotes overnight – a severe blow against the black economy and corruption. The next day, chaos reigned on India’s streets – crowds of people in front of banks, empty ATMs – everyone wanted to withdraw his money, exchange the old rupees for new, valid ones, and there were even casualties.1)
The other governments eagerly followed this ideas of the great economic gurus, not worrying about what was happening on the Indian streets: Australia wants to withdraw its 100 notes from circulation,2)and Venezuela has already abolished the 100 bolivar note. France, Italy, Spain and Greece already have ceilings for cash withdrawals, and a ceiling of EUR €5,000 is currently being discussed in Germany. In some countries, the renunciation of cash is becoming a means of political struggle. In Poland, Prime Minister Mateusz Morawiecki introduced cashless payments to the state postal service. Soon it will also be possible to pay his tickets directly at the patrol car. Not all Polish politicians probably like the idea that officials will not come into contact with cash – for example, the head of the Polish National Bank Adam Glapiński, who introduced the new 500 zloty note at the same time.
The abolition of cash is only one step on the road to even greater insanity: Kenneth Rogoff has other crazy ideas behind him. The craziest: he demanded negative interest from European politicians on the grounds that they are necessary anyway when the next crisis comes. We remind the reader that negative interest rate is limited by cash. If interest becomes too negative, people will hoard cash.
What consequences would his idea have if it were implemented? What if negative interest rates were introduced? The money from accounts would flow into tangible assets, especially jewellery, gold bars and other precious metals. Their prices would rise to unprecedented levels, as would inflation driven by speculation. This would be boosted by rising real estate prices, as people would invest in houses rather than in worthless plastic money. The barter trade and black market would flourish as it did in times of war – the opposite of what is desired would be achieved. And the criminals and corrupt politicians would certainly find another means of exchange to conduct their business – it is well known that arms dealers and terrorist groups pay with diamonds.3) The abolition of cash and introduction of negative interest rates would dispossess ordinary citizens, making them transparent to the authorities at any time – after all, it would be easier to control and influence the transparent people whose lives can be traced by account statements.
The renowned economists, bankers and governments forget that cash cannot be abolished, only money printed by central banks can be abolished. They do the calculation in their ivory towers without considering the host, without ordinary citizens. The citizens will be outraged by this and take to the streets, as they did after the devaluation of banknotes in India. In the end they will find alternative currencies to do their business without the government’s interference. The economic gurus don’t care – the experiment on the living organism is important, even if it kills them.
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