How many more times will we be told a ban on cash is good for us?

A regular theme of these times is the argument that cash as in paper note and metal coins is bad for us. There are regular efforts to get such theories into the media mostly by establishment figures who somehow present a non-cash world as something of a nirvana for our economic prospects. The latest move on this front has come from the former International Monetary Fund Chief Economist Ken Rogoff who has written a book on the subject and has recently been on the BBC World Service proclaiming such a view. The program called The Inquiry though did not live up to its name as the presenter Linda Yueh only presented the views of Kenneth Rogoff and supported him. He was even allowed to claim unchallenged that arguing for a ban on large denomination bank notes was like “arguing for gun control” or “banning semi-automatic weapons” which was really rather poor unless of course such notes are killing loads of people each year in the United States.

One intriguing statistic presented was that the amount of cash is equivalent to each American or European carrying around US $4000 or 4000 Euros but did not specify the numbers.

Helicopter Money

One misfire here is that the number of establishment views in favour of Helicopter Money would be shot down by such a plan! Perhaps our Ken did not think that through. The transport section of the US Air Force would find that lifting one million dollars in US $100 bills weighs 22 pounds but doing so in the US $10 bills that our Ken would have as a maximum denomination would weigh 220 pounds. With all the Zeroes required (sorry) in Japan its air force would have a job for life!

What are the arguments for banning large denomination notes?

The one pressed hard by Ken Rogoff is shown below.

My argument centers around the fact that all the advanced countries have collectively pumped out trillions of dollars in paper currency, the vast bulk in large denomination notes that are increasingly unimportant for ordinary retail transactions, but are highly valued by those engaged in tax evasion and crime.

In an essay entitled The Sinister Side to Cash in the Wall Street Journal he really piled in.

There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism………Cash is also deeply implicated in tax evasion, which costs the federal government some $500 billion a year in revenue. According to the Internal Revenue Service, a lot of the action is concentrated in small cash-intensive businesses, where it is difficult to verify sales and the self-reporting of income.

This poses more than a few questions. No-one would doubt that organised crime uses large denomination notes and that they are used in tax evasion. But one of the largest amounts of organised crime in recent years has come from the banking sector which has not used cash for this. The proposed US $14 billion fine by the US authorities on Deutsche Bank is an example of this and it joins a list which is both long and large. When the German Bundesbank did some research into the issue it found that it was in fact very hard to find any proof that cash did in fact help crime.

There is scant concrete information on the extent to which cash is being used to facilitate illicit activity……… the volume of notes devoted to such transactions is unknown and would be extremely difficult, if not impossible, to estimate.

Mind you perhaps in Ken Rogoff’s world Sam Allardyce would still be England’s football manager!

Negative Interest-Rates

This is of course the main course to the publicity friendly aperitif and starter discussed above. Ken sings along to

Secondarily, the book also talks about how phasing out large bills would be a major step towards more effective negative interest rate policy, although a number of fairly straightforward tax, legal and institutional changes would also have to be made. Negative interest rate policy is not for everyday use, but for dealing with very deep recessions and financial crises; the book argues that if negative rate policy were done right, it would be rare and short-lived, and vastly preferable to a decade of near zero interest rates.

Actually negative interest-rates have not been “short-lived”. It was only yesterday I was looking at Denmark which tried to escape them and then found itself sucked back into them as if the gravity of a black hole was at play, meaning that over 4 years later no escape is in sight. Also the IMF that Ken used to be Chief Economist of has just suggested that Switzerland should plunged deeper and deeper into negative interest-rate territory. Also should the ECB want to help its QE problem with German bonds one way of doing so would be to reduce its deposit rate below -0.4%.

There is another problem for our Ken if we look at this from him in the Wall Street Journal.

In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy, by encouraging borrowing.

You see if normal monetary policy had worked in the way he is trying to imply we would simply not even be discussing negative interest-rates now because the economic situation would be much better than it is. Indeed Ken seems rather like a snake-oil salesperson at this point.

Take cash away, however, or make the cost of hoarding high enough, and central banks would be free to drive rates as deep into negative territory as they needed in a severe recession.

How many times would you keep taking the same medicine when it is not working? Ken would have both more and larger bottles.

If we look at the experience of negative interest-rates so far then this below is a combination of wishful-thinking and ignorance.

But if a strong dose of negative rates can power an economy out of a downturn, it could bring inflation and interest rates back to positive levels relatively quickly, arguably reducing vulnerability to bubbles rather than increasing it.

If you look at house prices in the countries which have negative interest-rates you would see that with West Ham fans currently being mostly silent that it is the central bankers who are taking up the chorus of “I’m forever blowing bubbles”.


We find ourselves in a world where negative interest-rates and bond yields are on the march. The tantrum which pushed bond yields higher for a while has faded as indicated by reports that the 10 year yield in Finland went negative yesterday and this morning investors have paid Germany 0.7% per annum to buy a two-year bond.

Meanwhile up in his Ivory Tower Ken Rogoff has plans to take control freakery to its maximum. He ignores the fact that his plans so far have not worked and wants to push the pedal even beyond the metal. Along the way such concepts as privacy and legitimate use of currency are ignored. Also if we banned everything used by terrorists and organised crime we would end up at food,shelter,water and oxygen. Back in February I was disappointed to see Gillian Tett offer support for such plans which were supported by this gentleman.

John Cryan, co-head of Deutsche Bank, is not a man given to hyperbole. A couple of weeks ago, however, he made a comment about money that might make ordinary mortals blink.

Speaking on a financial technology panel at Davos, he cheerfully predicted that in a decade’s time cash probably won’t exist.

Er organised crime anyone?

Meanwhile here is a song for our Ken to help pass the time in his Ivory Tower. From David Bowie

This is Major Tom to Ground Control
I’m stepping through the door
And I’m floating
in a most peculiar way
And the stars look very different today

For here
Am I sitting in a tin can
Far above the world
Planet Earth is blue
And there’s nothing I can do





34 thoughts on “How many more times will we be told a ban on cash is good for us?

  1. Great article as always Shaun.

    I can quite easily see the uk sleepwalking into a cashless society.Most of the drones have no concept of inflation or ZIRP, and would quite readily embrace the technology.

    On a separate note, do you think Douche bank will be bailed out then?


    • yeah gods even MSM BBC is publishing articles on DB bringing another 2008 crisis

      perhaps someone better inform them the crisis never stopped…..

      ( for why on earth do we still have 0.25% bank rate and others going to ZIRP/BIRP !! )


    • Deutsch don’t need bailing out unless the $14 billion fine is imposed. At the moment this is a leaked rumour and it serves no purpose to talk about it.

      In the end the Department of Justice (DOJ) will likely settle for about $5 billion which Deutsch can afford. The DOJ is not interested in destroying the World by slavishly insisting on a fine that at the moment it is only considering.

  2. “Speaking on a financial technology panel at Davos, he cheerfully predicted that in a decade’s time cash probably won’t exist. ”

    be so inflated away that it will be re-classed as toilet paper …..


    • Hi Forbin

      It would have been funny if cash had been able to reply ” I will still have a longer lifespan than Deutsche Bank”. As to your comment below he sounds as if he would just cut and cut and cut and be surprised that the whole monetary system did some large scale disintermediation. In that world he would lose all his “power” if people went to private cash systems.

  3. ” Take cash away, however, or make the cost of hoarding high enough, and central banks would be free to drive rates as deep into negative territory as they needed in a severe recession.”

    Baldrick’s cunning plan

    sort of shows that after 8 years after the Banking crisis – we’re still in a Banking crisis(!)

    who’s the real criminals here ? very Orwellian, me thinks


  4. so let me get this straight

    “Cash is also deeply implicated in tax evasion, which costs the federal government some $500 billion a year in revenue. According to the Internal Revenue Service, a lot of the action is concentrated in small cash-intensive businesses,…..”

    Really ?

    “…. where it is difficult to verify sales and the self-reporting of income.”

    so this $500billion is imputed ?

    it is of course complete cotton wool – the money from cash sales cannot be large or your Bank and the IRS will take note ( for USA, even here too the IR will wonder if you’re funding ISIL, we know that from reports in MSM)

    I guess the end game is to remove the last chance we have from serfdom, or indentured slavery
    ( it won’t be called that of course – we’ll be interns ……)


    • Hi Forbin

      You may be interested to know that there have been some changes in the UK Imputed Rent series and for once they look like they will be downwards. However I am pursuing the issue via the Royal Statistical Society as there is never a full and thorough explanation of all these changes.

  5. My credit card has been compromised a few times over the years and the outlets concerned were restaurants / pubs (twice), a sports shop and an independent petrol station. I now carry cash when we eat out and take quite a bit when out and about and likely to use small establishments. Not surprisingly I have never suffered from using cash! I would turn Rogoff’s argument around and say that digital cash is much more likely to be involved in crime (think; online bank hacks, telephone and Internet scams, card cloning etc) the amounts dwarf any use of cash for illicit purposes.
    It’s all about controls and the ability to monitor money and manipulate it when necessary.

    • Hi Pavlaki

      You are right to point out that there are problems with the online and card world. I remember some years back there being a problem with my bank cash/debit card which they were unable to fix for ages in spite of new passwords and cards. In the end I banked elsewhere! More recently I had a problem with the Boris Bike system whereby a rank can fail but not tell those who return a bike and assume it has not been returned.

      On the other hand cards are very convenient these days especially somewhere like London where you can pay for pretty much everything with them. But then there is the rub as nobody is made to do so.

  6. Hi Shaun,

    An excellent thought provoking blog.

    A project to ban cash now is premature as Blockchain technology needs to be fully implemented and proven to scale globally and work first. This is going to revolutionise banking and many other areas of our lives, in much the same way as microprocessors and personal computers have since the mid-1970s, mobile phones have since the 1980’s and emails and the Internet has since the 1990’s..Blockchain technology was created for Bitcoins and an early adopter is Estonia’s Epassports and government services. It would be worthwhile you writing a blog explaining Blockchain technology to your readers and its implications, where financial services are investing heavily in the technology and our lives are going to very different as a result of this next-generation technological revolution.

    The end result from the full implementation of Blockchain technology by the banks will force on all of us the use of virtual currencies. Economies of scale, means that most banks and financial services businesses will merge to form global-mega bank and financial institutions, with probably only 6 globally. On the retail side, banks and their branch structures are already under considerable financial pressure as a result of the Internet and electronic payment systems. Virtual money will make things much more efficient and will considerably reduce the costs to us of using money. There are new risks, including the reliability and robustness of Blockchains, but much of this is inherently automatically build into the concept, encryption and multiple distributed databases, but it also raises many new questions who regulates these global multi-country mega-banks? Imagine the fun of ‘too big to fail’ with this and which lucky central banks get to pick up the tab!

    The use of technology and their cost and efficiency gains is also currently happening in global trade with the WTO global electronic tracking of all goods being implemented to dramatically reduce the costs of moving good globally and speeding up their processing through customs.

    Are these technology changes already having an effect? Well according to a Business Insider article, yes, where growing employment, low GDP growth and rising wages doesn’t add up as the adjustment calculation is falling productivity! The article argues that productivity is not falling but virtual goods as services like Spotify sales and turnover are not accurately reflected in GDP calculations.

    Interesting but also maybe troubling times lie ahead!

    • “…This has a set of particularly profound adverse implications during a financial crises or debt crises like the financial crisis of 2007–08, where politically powerful actors may make decisions that favor some groups at the expense of others….”

      Brilliant ! just what is needed !!

      I doubt many will understand this tech, I mean , what could go wrong ? dont forget the head honchos of the Banking sector did not understand what their Quants do/did ……


    • re: Spotify is causing a major problem for economists


      I can consume five times as much music on a Spotify subscription than I would by buying 10 CDs.
      On the national accounts data I’ve only spent a fifth, but I’m way better off.

      How? I’d posit that there’s no measure of quality here – 50 pieces of regurgitated trash? ( nightcore anyone? )


      This means that actually a greater share of the profit, in theory, from taxi journeys can go to the drivers
      and not the company, because it’s scaling. So actually what could end up happening is the technology allows
      Uber to make a lot of money, and allows them to pay their drivers….

      they’re paid LESS for god’s sake !

      don’t have sick pay or pensions , lot of their drivers are doing 10-hour shifts


      If you’re a consumer whose wages are up and prices are staying flat then you’re likely to be better off.

      did this guy get the memo from Carney ?

      … I don’t know which side is going to play out unfortunately…

      well some of us can read the data ….. wages are lower than inflation ….


      I gave up after that point


  7. It’s precisely because cash is used for tax evasion that it will never be banned?
    Whom do you think is doing the evading?
    Cash = freedom.

  8. Hi Shaun,

    As your resident Hammer I now feel obliged to make a little noise …

    The club as we see it today is a long way removed from the club that I first started to support some 50 years ago. What was once predominantly a local club (but not just for local people) strongly rooted in its local community, with a reputation for fair and attractive play that won us the odd trophy here or there but friends pretty much everywhere, has mutated over the years into a club that seems to have thrown away much that was of social value in a vain attempt to compete with the “big boys”. The club that I supported so strongly as a boy now attracts a level of opprobrium which is in marked contrast to the reputation that the club once enjoyed, not for its success but rather for the way it went about its business.

    And as loose metaphors go, that’s not a bad way to describe the fate of the UK over that same 50 years. 😉

    • I believe that, notwithstanding the embarrassment of Mr Allardyce and the various player/agent/manager scandals, footballers are mere amateurs in terms of fraud/bad faith/letting down the country compared with the golden boys of the City.
      As to social value, at least we can all enjoy the game itself…

  9. in other news….

    The German government and financial authorities are working on a rescue plan for Deutsche Bank in case it cannot pay fines in the US, according to Die Zeit newspaper.

    Germany’s biggest lender is facing a $14bn (£10.8bn; €12.5bn) bill for mis-selling mortgage-backed bonds before the financial crisis of 2008

    So any guesses on when our fraudsters will feel the long arm of the law ?

    never is my guess


    • Never is correct, I am afraid.
      By the way, did you see that the loan to book value of DB is 22%. That tells you that the market discounts more than 75% of what the accountants are happy to sign off as being the balance sheet of the company. I know which I believe.
      I am afraid to say that I am a chartered accountant and would add the incompetence of that profession to the long list of valueless troughers.
      What, after all, is the point of a profession that gave every UK clearing bank a clean audit opinion for the year ends before being bailed out by the government?

  10. I guess that, to those who say that this all sounds crazy, who would have predicted:
    1. Negative interest rates?
    2. QE to fund government spending?
    3. The complete trashing of the savings industry?
    4. Bank fines exceeding $100 billion at a time when banks are supposed to be strengthening their balance sheets?
    5. That, in among the carnage formerly known as the banking sector, bonuses would continue unabated?
    Actually, I would have predicted the last one.

    • You’ve missed the most important thing about the bank fines James: the fact that in most cases the CEOs are still in place in spite of all this egregious misconduct. Fines these days are just a cost of doing business, like stationery or IT, nothing more.

      BTW I’m also a retired CA and I agree we are a very long way from the profession that I joined; CAs these days aren’t much more than yet another scheister (sic).

  11. ‘But one of the largest amounts of organised crime in recent years has come from the banking sector which has not used cash for this. ‘

    Nail head hit.

  12. They want to outlaw cash, but

    IT security is not up to the task. Just look at the Russian hackers leaking Wiggins & Froome’s private data. The thought of the KGB hacking the banking system and disabling it in order to destabilise foreign societies is scary.

    Banks are not up to the task. Just look at the Wells Fargo scandal. It is a third world scam. It would not be surprising in a country rated over number 100 by Transparency. Thousands of Wells Fargo employees should be convicted and dis-barred. The managers should be convicted and given long jail sentences. It is a simple question of trust, without accountability the banks are a national liability and vulnerability – not an asset worth subsidising to prevent it’s bankruptcy.

    • A wrong assumption is assuming that flawed technology means it will never be better. Darpa have recently demonstrated their High-Assurance Cyber Military Systems (HACMS) project by inviting hackers over a 6 week period to crack a drones defences. “The aim is for software in the future to be based upon code as trustworthy as a mathematical proof.”

      If thing don’t dramatically improve then we will all be saying goodbye to the Internet where it evolves into just a hackers playground.

      There has also in the last 12 months been 2 successful early experiments in sending quantum encrypted data.

      • Hi Rods2,
        I think the security issue with the potential end of life of cash is that Joe Soap usually knows how to keep his wallet safe but is remarkably light on skills and knowledge when it comes to keeping his personal data, online banking, credit card account etc etc safe.

        I think relates more to Pavlaki’s comment above about not having problems using cash.

      • You are welcome to disagree, I think current IT security is inadequate. It is a specialisation – I am not an IT specialist, but linux/unix seems to rely on memory address obfusication. I think OS level memory address permissioning is needed – so when some malware tries to access a non-allocated memory location, the OS should return a memory management violation – not unix/c “undefined behaviour”. We have this on file permissions – and should have memory permissions.

        Obviously the above is a single improvement – not a silver bullet. I welcome the idea of hack-proof systems, though I note social engineering attacks a HR vulnerability not an IT vulnerability

  13. What a great article Shaun, you really laid this out well. So thanks for that. Also worth considering…while eliminating cash would make monetary control easier and more centralized, it would also harm the most vulnerable among us…when i see a homeless person, i reach for a buck or 2. Many people do. This helps the desperately poor eat. (sadly, drink too, no doubt)…. The indigent rarely carry electronic payment processing options . So yeah, these plans would make life ALOT worse at the very bottom.

    • Hi jbarnyla and welcome

      You make a good point. It is not all one way as many years ago I gave a couple of dollars to a beggar in Chicago as I was on my way back from watching some basketball. He replied ” I wouldn’t walk around here if I was you”. I looked around and decided he was right and headed away!

  14. I like that story…but if I may, I’d suggest that I consider your Chicago contact to have graduated from “beggar” and should be considered a paid “local personal security consultant.”

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