The Harvard Economics Professor Kenneth Rogoff has frequently been used by anti-cash and cashless supporters as proof that even the world’s most well-renowned academics are cheering for a world without hard currency. But they have obviously failed to delve deeper into his thesis which supports a less-cash society and not, as they would like to believe, a cashless one.
Indeed, even Rogoff himself has stressed the point – which can be viewed in this short video interview with the Centre for Economic Policy Research (CEPR) – that by eliminating larger denomination notes or by putting caps on cash payments (such as what is currently in place in many European countries) is a way to deter tax evaders and criminals, albeit not at all to fully eradicate fraud or crime from the face of the earth. “You’re not going to eliminate tax evasion, you’re not going to eliminate crime” he argues, “but you’re going to cut both of them by several percent.”
Furthermore, he reminds viewers that the total disappearance of cash would also mean loss of privacy for individuals and greater vulnerability and exposure to risk in case of a natural disaster or power outage. Indeed, Rogoff himself says, “I favor a less-cash society, absolutely not a cashless society, because I think there are issues of privacy, having robustness to power outages is very important.”
One can argue whether eliminating the €500 note or the $100 bill (as Rogoff recommends) will truly deter fraudsters, but what is certain is that a well-diversified portfolio of payment options is the best way to ensure all citizens can participate in the economy – un- and underbanked included - while ensuring that the government has all the tools to best respond in a national crisis.