“Nobody really knows the shares of stock of large bills held by non-criminal hoarders” and therefore neither of criminal ones, contrary to what cashless supporters would like the public to believe. Indeed, the favored argument used by anti-cash academics such as Peter Sands and Kenneth Rogoff, is that larger denominations are mostly used for illicit activities or tax evasion.
Larry White, senior fellow at the Cato Institute, and professor of economics at George Mason University, proves these arguments unfounded in an article he published on Alt-M, a blog promoting ideas for an alternative monetary future, citing recent studies by the Federal Reserve Bank of San Francisco and the ECB. In the former, it was found that 8% of payments exceeding $100 in the US are still made in cash by law-abiding citizens and that cash is one of the most popular payment methods regardless of age or income. In the latter, the study found that many ordinary Europeans, aside from using cash more frequently than believed (79%) for daily purchases, also use it as a store-of-value for emergencies and savings.
White also distinguishes between illicit criminals (terrorist, kidnappers, etc.) and peaceful traders of illicit goods (sex workers, drug dealers, etc.) where the latter generate positive-sum outcomes in the economy. He and other pro-cash academics believe that “banning high-denomination notes in order to raise the cost of such trades means reducing the economic welfare of the participants in those markets.” Therefore, doing away with high-denomination notes would only be harmful both to the economy and to ordinary citizens that choose cash as a safety net or a tool to avoid surveillance of their every move.
To read Larry White’s original article, please click here.