«Oil of Russia», 07.09.16, Moscow, 21:57 Project Syndicate logoProject Syndicate, USA Kenneth
Rogoff (Kenneth Rogoff)
The world is drowning in paper: every year the central banks of the largest countries in the world produce cash at hundreds of billions of dollars, with mostly large bills, such as $ 100 in US share of banknotes in $ 100 account for nearly 80% of the total amount of cash (as per Central population is a staggering $ 4200). The share of the bill of 10 000 yen (about $ 100) accounted for about 90% of the amount of cash in Japan, the amount of which in terms of per capita approaching $ 7000. As I point out for the past two decades, basically all this cash help the growth of the underground economy, not legal.
I’m not defending the idea of a cashless society in the foreseeable future, it is unfeasible and undesirable. However, a society where cash will be less, will be more equitable and safe.
On the background of the rising popularity of debit cards, electronic transfers and mobile payment use of cash in the formal economy has long been declining, especially in conducting transactions medium and large size. Studies of central banks indicate that only a very small percentage of large bills stored and used by ordinary citizens or businesses.
Cash contribute to crime because they are anonymous. Special problems cause large bills because they are very easy to carry and hide. A million dollars in $ 100 bills for placed in the bag, and a million dollars in banknotes of 500 euros (about $ 565) -. in a handbag
Of course, there are many other ways to pay bribes in addition to the use of paper money officials to commit financial crimes and evade taxes. But most of them are associated with high transaction costs (such as in the case of rough diamonds) or the risk of detection (for example, in the case of bank transfers or credit card payments).
Yes, payments in the new cryptocurrency such as bitcoin, not that in general can not be traced, but it is almost impossible. However, the value of these currencies is very susceptible to sharp fluctuations, and in addition, the authorities have a lot of tools by which they can limit their use, for example by prohibiting them to accept payments to banks or retailers. The uniqueness of the cash that they are liquid, they are almost always take
Dimensions losses alone tax evasion cause aback:. They are estimated at about $ 700 billion in the US per year (which includes federal, regional and local taxes), and they are even more in Europe, where higher taxes. It is difficult to calculate precisely, but there is little doubt that losses from crime and corruption even bigger. And it is not just about illegal drug trafficking and banditry, but also about human trafficking, terrorism, extortion.
In addition, cash payments to employees of employers who do not have documents, are the main engine of illegal immigration. Reduction in use of cash -. It is much more humane way to limit immigration, than the construction of a barbed wire fence
If the authorities were not so intoxicated with the benefits they receive by printing paper money, they would have quickly regained consciousness looking at all of these losses. And lately some what movement has already begun. The European Central Bank recently announced that it would gradually withdraw from circulation a mega-bill of 500 euros. This step, which should have been done a long time ago, it was possible to make in spite of the tremendous resistance of Germany and Austria, where the population loves cash. Even in the Nordic countries the mass of cash in terms of per capita looks relatively modest compared to the enormous volumes in the euro area – more than 3000 euros per person
Governments in southern Europe, desperately seeking to increase tax revenues themselves. We took up the solution to this problem, even though they do not control the issuance of banknotes. For example, Greece and Italy are trying to reduce the attractiveness of cash by limiting the maximum amount of cash payments in the retail trade -. 1,500 euros and 1,000 euros respectively
Of course, the cash saved an important role in small everyday transactions, as well as the protection of confidentiality of personal life. The representatives of the central banks of the countries of northern Europe who favor maintaining the status quo, are fond of quoting Russian writer Fyodor Dostoyevsky: “Money is minted freedom.” Of course, Dostoevsky wrote about life in the royal prison in the middle of the XIX century, but not in the modern liberal state. However, some Scandinavians what right. The only question is whether the current system is well balanced. I would say that is bad, and it’s quite obvious.
The plan to limit the circulation of paper money must be based on three principles. Firstly, it is important that ordinary citizens had the opportunity to continue to use cash for convenience, and anonymous purchases at a reasonable amount, but it is necessary to destroy the business model for those who commit major, repetitive anonymous transactions at the wholesale level. Secondly, any plan should provide for a very gradual movement (ten or twenty years), all adapted and could, if necessary, make corrections in the process, if you encounter unexpected problems. Thirdly, such reforms should take into account the needs of low-income households, especially those who do not have a bank account.
In his new book, “The Curse of cash”, I propose a plan providing for a very gradual withdrawal of treatment of major bills, with small bills (denominated in $ 10 or less) remain in circulation without any restrictions. The plan also promotes financial inclusion, as it offers low-income households without charge debit accounts that can be used to obtain benefits and other payments from the state. This latter measure has already been implemented in some countries, such as Denmark and Sweden.
The reduction in the use of paper money is hardly possible to do away with crime and tax evasion, but it will cause the underground economy to a more risky and less illiquid assets. Cash may look something insignificant and small in a modern, high-tech world of finance, but the benefits of the phase-out of the main part of the paper money will be a lot more than you might think. Learn more at http : //www.oilru.com/news/531852/
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