Citi Group's top economist, Willem Buiter, sees a big problem with cash.
He is of the opinion that becasue interest rates are so low, the Federal Reserve is not able to pump sufficient quantities of money into the economy.
He holds this view despite the fact that the money supply has grown by near 50% , since the interest rate controlled by the Fed, the Fed Funds rate, has been near zero.
Buiter somehow views this money growth as not sufficnt, despite the fact that sound economics teaches that it is increased production of goods and services, not increased money printing that grows an economy.
Part of this "problem" of Keynesian imagined slow money growth, in Buiter's views, is because of cash. For Buiter, when interest rates are extremely low he sees the potential for people to hold their funds as cash instead of putting it in the banking system, where banks can use it as reserves to increase the money supply even more.
So, according to Bloomberg, Buiter suggests three methods to address this "problem."
- Abolish currency.
- Tax currency.
- Remove the fixed exchange between currency and central bank reserves/deposits.
The first two methods obviously drive cash out of people's hands and into the banking system. As Bloomberg notes, these are certainly controversial recommendations, but that hasn't stopped Buiter:
Buiter is aware that his idea may be somewhat controversial, so he goes to the effort of listing the disadvantages of abolishing cash.
- Abolishing currency will constitute a noticeable change in many people’s lives and change often tends to be resisted.
- Currency use remains high among the poor and some older people. (Buiter suggests that keeping low-denomination cash in circulation — nothing larger than $5 — might solve this.)
- Central banks and governments would lose seigniorage revenue.
- Abolishing currency would inevitably be associated with a loss of privacy and create risks of excessive intrusion by the government.
- Switching exclusively to electronic payments may create new security and operational risks.
Buiter dismisses each of these concerns in turn, finishing with:
In summary, we therefore conclude that the arguments against abolishing currency seem rather weak.There you have it. One of the top global bankster economists is calling for the abolishment of cash. This despite the fact that the Federal Reserve is quite capable of flooding the system with money, even if there is cash in the world. The only thing elimination of cash would do is result in every monetary transaction being tracked. That is a goal that certainly is considered an extremely dangerous goal by any person that considers government involvement in personal affairs excessive already. The last thing needed is the abolishment of cash, to be replaced with electronic cards that record every penny spent and earned.
Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics