The government offered a brief window in which old notes could be swapped for new ones, with the idea that everyone from human traffickers to tax cheats would have to show up at banks with vast sums of money and confess their sins or lose the value of their cash holdings altogether.
As George Mason economist Lawrence H. White has written, "A serious currency shortage immediately arose, with predictable consequences. Honest wage laborers in the huge cash economy went unpaid, honest construction projects came to a standstill, honest shopkeepers saw sales dry up, and honest businesses failed. Honest people wasted billions of hours waiting in queues to exchange old notes for the trickle of new notes."
Rogoff concedes that "Crime will continue with or without cash, but for very good reasons, cash is a medium of exchange highly favored by the underground economy, and the underground economy accounts for a significant share of the demand for cash."
Importantly, this argument for cash is not merely a defense of crime and tax evasion, as some on the other side might have you believe.
Now, you may be thinking, even if cash advocates are not motivated by a desire to promote crime or tax evasion, those outcomes might be side effects of their favored policy.
Banning cash, as demonetization advocates suggest, would almost certainly eliminate some crime and tax evasion.
Carrying suitcases full of cash around to pay for basic goods is inefficient, but one way to make that problem less severe is to exchange lots of small denomination notes for fewer large denomination notes.
https://reason.com/archives/2018/04/22/in-defense-of-cash
As George Mason economist Lawrence H. White has written, "A serious currency shortage immediately arose, with predictable consequences. Honest wage laborers in the huge cash economy went unpaid, honest construction projects came to a standstill, honest shopkeepers saw sales dry up, and honest businesses failed. Honest people wasted billions of hours waiting in queues to exchange old notes for the trickle of new notes."
Rogoff concedes that "Crime will continue with or without cash, but for very good reasons, cash is a medium of exchange highly favored by the underground economy, and the underground economy accounts for a significant share of the demand for cash."
Importantly, this argument for cash is not merely a defense of crime and tax evasion, as some on the other side might have you believe.
Now, you may be thinking, even if cash advocates are not motivated by a desire to promote crime or tax evasion, those outcomes might be side effects of their favored policy.
Banning cash, as demonetization advocates suggest, would almost certainly eliminate some crime and tax evasion.
Carrying suitcases full of cash around to pay for basic goods is inefficient, but one way to make that problem less severe is to exchange lots of small denomination notes for fewer large denomination notes.
https://reason.com/archives/2018/04/22/in-defense-of-cash
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