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Patrick Barron on Cash Elimination

I thought Patrick Barron’s response to the Financial Times on cash was especially fantastic.  He wrote:

Dear Sirs:

I was appalled at your supposed “case” for eliminating cash, which you yourselves describe as the peoples’ “go-to safe asset”. And what IS your case?

One, “cash…limits the central banks’ ability to stimulate a depressed economy.” Really? Although I am not in favor of debasing money as a path to prosperity, I see no limit to the central banks’ ability to hit the “enter” key on their computer screens in order to manufacture out of thin air as much money as they dare. Two, banks cannot impose a negative interest rate–what we common folk call stealing–on the cash in one’s pocket. Your preposterous goobledygook that a negative interest rate is required by central banks in order to have sufficient “ammunition” when tightening from a “lower band” is as vacuous a statement, although often heard, that one can imagine. Three, that unlike electronic money, cash cannot be tracked…to which I answer “so what?” and “thank God for that!” Four, that former chief economist of the International Monetary Fund, Kenneth Rogoff, thinks eliminating cash is a wonderful idea. Let’s set the record straight. The IMF gets its money from sovereign states, who tax their people against their will in order to give the money to the IMF to squander and give bad advice around the world. Any self-respecting economist would try to hide the fact that he had anything to do with such an institution; therefore, I find little comfort in Mr. Rogoff’s endorsement of the cash-confiscation scheme. Four, the state can more easily levy a Value added tax in order to make tax collection easy. Oh, how nice! Here…let me put my cash in the bank in order to make it easier for government to tax it away. Ah, but then you conclude your support of the cashless society with the caveat that we minions might, just might, be allowed to carry some cash…but at a cost. Our cash could carry an expiration date, for example. As you state: “The benefits of cash are significant–but they need not be offered for free.” A more Orwellian statement would be hard to find.

Published in C.Jay Engel