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If you want a catastrophe, ban cash

Categories : Cash connects people
April 26, 2016
Tags : Consumers, Currency, Money, Payment instruments, Public good, Trust, Usage
Banning cash would only cause confusion and push companies and consumers to be more inventive with their earnings.
Communication Team / Equipo de Comunicación

MoneyWeek Editor, John Stepek explains why banning cash would have disastrous consequences on the economy and on consumers. Supporters believe that by charging negative interest rates to bank account holders, they will stimulate the economy. Meanwhile, that might only cause people to seek other means to hoard their earnings such as via 0% interest loyalty cards like Starbucks or Amazon.


“Our economy is made up of people interacting with each other”, writes Stepek. “Economic policies ultimately succeed or fail due to their impact on human behavior. So it’s astounding just how little attention economists actually pay to the psychological impact of their proposals.”

 

Banning cash, unlike allowing it to live in harmony with other modes of payment, would only cause confusion and push companies and consumers to be more inventive with their earnings – and therefore less transparent – to avoid large negative interest rates.  

 

To read the full editorial, click here.

 

 

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