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It came from a voice that has, by law, the ear of the German government.
Peter Bofinger is a member of the German Council of Economic Experts – the
“Five Sages on the Economy” – which in its official function advises the
government and parliament on economic policy issues. These folks are taken
seriously.
So Bofinger told the German magazine Der Spiegel in an interview
(full interview behind paywall) that cash should be done away with.
In Denmark, a new law was proposed that would allow shops to refuse
cash payments. Officially, it’s to reduce the “administrative and financial
burdens” of handling cash. Since it’s up to the shop to decide, the law
sounds innocuous. But it would be another step to making money a purely
electronic entity that can be seamlessly tracked anywhere. It would also
be another step in granting the central bank the absolute power to
inflict confiscatory monetary policies on any entity or person with money in
the bank.
This law would come in handy. Danmarks Nationalbank has imposed a negative
deposit rate of -0.75%, with the intent of flogging savers and confiscating
their money until their mood improves and limiting the appreciation of the
krone against the sagging euro. But to evade the wrath of negative deposit
rates, savers can pull cash out of the bank and store it under their
mattress. And this must be stopped – by making cash useless.
So, Der Spiegel asked, was this law in Denmark “a good
idea?”
“With today’s technical possibilities, coins and notes are in fact an
anachronism,” Bofinger said. “They made payments incredibly difficult,” with
people wasting all sorts of time at the cashier as they wait for the person
ahead of them to dig through their belongings to find some cash, and for the
cashier to render change (rather than, for example, waiting for someone to
find the right credit card, complete the transaction, and wait for
approval).
This sort of dubious, government-mandated timesaver was even too
shaky for Bofinger….
“But the additional time is not the largest benefit of the elimination of
cash,” he said. “It dries out the markets for moonlighting and drug
trafficking. Almost a third of the euro cash in circulation consists of
500-euro notes. No one needs those for shopping; light-shy figures use them
for their activities.”
To forestall that these criminal elements switch to other currencies, he
said that “it would be better if the Eurozone, the US, Great Britain, and
Switzerland give up cash at the same time.”
And then he added the real reason for abolishing cash in such a coordinated,
wide-ranging manner:
“It would be easier for central banks to impose their monetary policies.
At this time, they cannot push interest rates appreciably below zero because
the savers would hoard cash. If there is no cash, the zero bound is eliminated.”
So, given that this needs to be a multinational effort, should the German
government throw its weight behind the elimination of cash on the
international scene?
“That would be at any rate a good topic at the G-7 summit,” he said, which
is coming up on June 7–8 in Bavaria.
But support is not unanimous on the German Council of Economic Experts.
Lars Feld, one of the other “Five Sages on the Economy,” shot him down in the
Frankfurter
Allgemeine with a nod to Fyodor Dostoevsky’s famous quote, “Money is
coined freedom.” Feld put it this way: “Cash is coined freedom.”
Feld also criticized Bofinger for having “apparently neglected the
constitutional aspects of this proposal.” Not that they couldn’t be
ruled away by the courts, but for now, the constitution – and not only in
Germany – would still be a roadblock.
And there was another problem: Cash enables individual citizens to “escape
the reach of the state” when their intentions are not legitimate, including
moonlighting, which has the illegal dimension of tax evasion, he said. “But
moonlighting is often for those affected the only chance to earn a livelihood
at all.”
So deprive them even of that?
Cash is one of the few ways to escape for a tiny moment the powerful
octopus arms of our seamless, borderless surveillance society. And it is one
of the last, if feeble, checks on the absolute power of central
banks. And it represents an aspect of “freedom,” as Feld put
it. Hence the by now overt war on cash. Cash simply must cease to exist.
A disturbing scenario is playing out for folks fretting about “financial
instability,” as it’s called in central-bank jargon. Read… “Buyers
beware”: Capital Markets “Completely Backwards”
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