“Cashing Out,” by Nathan Heller. The New Yorker, 10/10/2016. (Book review of “The Curse Of Cash,” by Kenneth Rogoff, Harvard professor and former chief economist of the IMF.)
I still ask if a store will accept my credit-card, but there is a growing, serious movement to end the production of cash altogether, especially paper money, and especially the larger bills. With good reason.
About 80% of the value of our currency supply is in $100 bills. That comes out to $4,200 for every American man, woman, and child. This is astonishing. I certainly do not have any, and most of us do not remember the last time we saw one. Where is it all?
It pays off-the-books wages, funds international cartels, supports corruption abroad, and is the currency of drug dealers—all bad for our society. Cash is used because it is untraceable. Suitcases full of $100 bills are smuggled across borders every day. A million dollars in $100 bills is easily carried in a suitcase, but a million dollars in $10 bills would weigh 220 pounds.
The IRS estimates we are losing $460 billion in taxes every year like this, and the rest of us are making up the difference.
But there is still another problem with paper money. It rewards negative interest rates. Savvy investors cash out of their bank accounts and store the paper money in a safe deposit box, where it earns no interest, but that is better than negative interest. Negative interest rates are in limited use in Japan and Europe. We never reached that point.)
In the US, about half of retail transactions are in cash. Sweden has gone further toward the elimination of cash. In 2014, only 20% of retail transactions were in cash. They eliminated their largest bill in 2013. Many small shops do not accept cash and about half the banks will not issue withdrawals in bills. Signs in stores proclaim them to be a “Cash Free Zone.”
This is a far cry from my first visits to Europe when converting to the local currency was a ritual performed at each border. Rumors spread among tourists of who gave the best rates, usually at your hotel, never at the airport.
Today, Europe even caps the amount that can be paid in cash. Belgium is 93% cash-free. If you go to Europe today, leave your cash at home, but take your credit-card.
(As a young teenager, my traveling aunt would give me her left-over European currency. When visiting France about 15 years ago, I asked our tour guide where I could turn in the French francs. He had never seen such bills before. A small crowd of curious French gathered around us. Maybe at an antique coin dealer, he told me. Certainly not at a bank.)
Many statistics show a decrease in the use of cash all over the world. In 2014, a survey here in the US showed more than half of those under 30 preferred cards to cash even for purchases under $5. (I do to avoid accumulating pennies that I cannot get rid of. Delaware does not have a sales tax.) Cards provide fraud protection, rewards, and leaves a record that can be downloaded to a spreadsheet. All good, if you have nothing to hide.