Should we ban the $100 bill? Or rather stop producing them? Last week Larry Summers, former Treasury Secretary and Director of the National Economic Council wrote that we should do exactly that because people who want financial privacy use them, and big time drug dealers and other criminals use them and also – terrorism! He said “a moratorium on printing new high denomination notes would make the world a better place.”
If you give no thought to the convenience of non-criminal actors, or how it impacts the freedom of a people to have some wealth that is private and portable, sure. Will the cartels simply stop doing business if they have to carry five trunks of twenties instead of one of hundreds? Can there be a credible argument that some real measure of criminality will be reduced? Hardly.
As Glenn Reynolds says in his passionate defense of cash yesterday:
Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and organized crime, but what they really care about is making sure that nobody escapes their scrutiny, for purposes of taxes, regulation and political finagling. Second, if you’re stuck putting your money in a bank, they can force you to spend it (and thus “stimulate” the economy) by subjecting you to negative interest rates, in which money that just sits in the bank shrinks away, providing an incentive to spend.
Have you heard the term “negative interest rates”. I hadn’t until recently – or at least I didn’t really hear it. Like when you stop doing the other things you do when listening to the radio or television because you weren’t sure you heard that last part correctly. Yes, negative interest rate means that instead of paying you money to keep and use your deposits, a bank charges you money for the convenience of keeping your money. You read that correctly. You pay the bank money for holding on to your money.
Shocking for those of us who are used to the bank paying us. However miniscule those returns are today, it is an existential change in the relationship of depositor and banker. Why do it? For the central bankers and their government overlords or servants, depending on your view, it combines a new level of command and control over others’ assets, along with the ability to apply their own pet economic theories. It’s a win-win! When you combine that with pressures that demonize saving actual cash, you have a recipe that is a totalitarian daydream.
There’s enough money mischief by central bankers without these anti-freedom measures. In fact monetary inflation has gotten so bad that we should probably be printing ever higher denominations to keep up. One hundred years ago a $100 dollar bill was worth over $2,000 in inflation adjusted dollars. Portable stores of wealth not dependant on a computer or access to the internet may be anachronistic in the future, but they are pro-freedom and pro-liberty.