By Frederic Friedel
Kenneth Saul Rogoff is the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University. He has served as an economist at the International Monetary Fund (IMF), and at the Board of Governors of the Federal Reserve System, and has also been an advisor on the team of a presidential candidate. As a former chess grandmaster, who at the height of this career was ranked number forty in the world, Ken has not been able to abandon his love of the game.
The world is drowning in cash — and it’s making us poorer and less safe. In his new book, The Curse of Cash, released today, Ken makes a persuasive and fascinating case for an idea that until recently would have seemed outlandish: getting rid of most paper money.
The Curse of Cash
Kenneth S. Rogoff
From the New York Times bestselling author of This Time Is Different, “a fascinating and important book” (Ben Bernanke) about phasing out most paper money to fight crime and tax evasion — and to battle financial crises by tapping the power of negative interest rates. Longlisted for the FT & McKinsey Business Book of the Year 2016
Even as people in advanced economies are using less paper money, there is more cash in circulation — a record $1.4 trillion in U.S. dollars alone, or $4,200 for every American, mostly in $100 bills. And the United States is hardly exceptional. So what is all that cash being used for? The answer is simple: a large part is feeding tax evasion, corruption, terrorism, the drug trade, human trafficking, and the rest of a massive global underground economy.
As Rogoff shows, paper money can also cripple monetary policy. In the aftermath of the recent financial crisis, central banks have been unable to stimulate growth and inflation by cutting interest rates significantly below zero for fear that it would drive investors to abandon treasury bills and stockpile cash. This constraint has paralyzed monetary policy in virtually every advanced economy, and is likely to be a recurring problem in the future.
The Curse of Cash offers a plan for phasing out most paper money — while leaving small-denomination bills and coins in circulation indefinitely — and addresses the issues the transition will pose, ranging from fears about privacy and price stability to the need to provide subsidized debit cards for the poor.
While phasing out the bulk of paper money will hardly solve the world’s problems, it would be a significant step toward addressing a surprising number of very big ones. Provocative, engaging, and backed by compelling original arguments and evidence, The Curse of Cash is certain to spark widespread debate.
Munich lecture by Ken Rogoff in November 2014
The Center for Economic Studies (CES), which is an independent institute within the Faculty of Economics of the University of Munich which promotes the international exchange of knowledge and ideas in public finance and other areas of economics. CES invites visiting scholars to conduct their research in Munich, Germany, and to give short a lecture series in return. In November 2014 they invited Ken Rogoff to receive a prize and hold a lecture.
Watch the video — you won’t regret it!
Here is the full lecture that Ken held in Munich at the end of 2014 at the ifo Institut — Leibniz-Institut für Wirtschaftsforschung an der Universität München e.V. It is a fascinating 42-minute talk you should reserve time to watch. The lecture is an early version of what Rogoff has laid out in his new book: that paper money has brought on a great deal of problems for humanity, and that possibly the time come for governments to start phasing out paper currency (cash), except perhaps for small-denomination notes, coins, or both. Miss this lecture at your own peril — with the publication of Curse of Cash the subject is going to become mainstream in a short time.
Addendum: it already is, on launch day. If you have become really interested you can watch this CNBC Squawkbox discussion. There will be plenty more following — the main thesis is fascinating for the media.
I (Frederic Friedel, above in the middle) was able to attend the lecture in Munich and reunite with two old and close friends. Ken has visited me in Hamburg, and I have seen him in London and California. Helmut Pfleger (right) was the first chess grandmaster I met in my life. I used him in two science documentaries in the 1980s, on how computers play chess, and we have been friends ever since.
On the day after the lecture I got Ken and Helmut to discuss a game they had played 44 years ago at the 17th World Student Team Chess Championship in Haifa. Helmut did not remember the moves, but Ken did. It was a Benko Gambit in which Helmut hung on to the pawn and crushed him. Incidentally in 2012 Ken played chess moves for the first time in thirty years: a blitz game against the current World Champion Magnus Carlsen. He (Ken) was slightly better but drew.