The Curse of Cash

by Kenneth S. Rogoff

Overview

“A brilliant and lucid new book” (John Lanchester, New York Times Magazine) about why paper money and digital currencies lie at the heart of many of the world’s most difficult problems—and their solutions

In The Curse of Cash, acclaimed economist and bestselling author Kenneth Rogoff explores the past, present, and future of currency, showing why, contrary to conventional economic wisdom, the regulation of paper bills—and now digital currencies—lies at the heart some of the world’s most difficult problems, but also their potential solutions. When it comes to currency, history shows that the private sector often innovates but eventually the government regulates and appropriates. Using examples ranging from the history of standardized coinage to the development of paper money, Rogoff explains why the cryptocurrency boom will inevitably end with dominant digital currencies created and controlled by governments, regardless of what Bitcoin libertarians want. Advanced countries still urgently need to stem the global flood of large paper bills—the vast majority of which serve no legitimate purpose and only enable tax evasion and other crimes—but cryptocurrencies are like $100 bills on steroids.

The Curse of Cash is filled with revealing insights about many of the most pressing issues facing monetary policymakers, from quantitative easing to alternative inflation targeting regimes. It also explains in detail why, if low interest rates persist, the best way to reinvigorate monetary policy is to implement fully effective and unconstrained negative interest rates.

Provocative, engaging, and backed by compelling original arguments and evidence, The Curse of Cash has sparked widespread debate and its ideas have moved to the center of financial and policy discussions.

Product Details

ISBN-13:	9780691172132
Publisher:	Princeton University Press
Publication date:	09/06/2016
Edition description:	New Edition
Pages:	296
Sales rank:	1,155,172
Product dimensions:	6.50(w) x 9.30(h) x 0.60(d)

About the Author

Kenneth S. Rogoff, the Thomas D. Cabot Professor of Public Policy at Harvard University and former chief economist of the International Monetary Fund, is the coauthor of the New York Times bestseller This Time Is Different: Eight Centuries of Financial Folly (Princeton). He appears frequently in the national media and writes a monthly newspaper column that is syndicated in more than fifty countries. He lives in Cambridge, Massachusetts.

Table of Contents

Preface ix

Chapter 1: Introduction and Overview 1

PART I: The Dark Side of Paper Currency:

Tax and Regulatory Evasion, Crime, and Security Issues

Chapter 2: The Early Development of Coins and Paper Currency 15

Chapter 3: Size and Composition of Global Currency Supplies, and the Share Held Abroad 31

Chapter 4: Holdings of Currency in the Domestic, Legal, Tax-Paying Economy 48

Chapter 5: Currency Demand in the Underground Economy 58

Chapter 6: Seigniorage 80

Chapter 7: A Plan for Phasing Out Most Paper Currency 92

PART II: Negative Interest Rates

Chapter 8: The Cost of the Zero Bound Constraint 119

Chapter 9: Higher Inflation Targets, Nominal GDP, Escape Clauses, and Fiscal Policy 147

Chapter 10: Other Paths to Negative Interest Rates 158

Chapter 11: Other Possible Downsides to Negative Nominal Policy Rates 175

Chapter 12: Negative Interest Rates as a Violation of Trust and a Step Away from Rule-Based Systems 182

PART III: International Dimensions and Digital Currencies

Chapter 13: International Dimensions to Phasing Out Paper Currency 199

Chapter 14: Digital Currencies and Gold 208

Final Thoughts 217

Acknowledgments 221

Appendix 225

Notes 233

References 257

Index 273

What People are Saying About This

From the Publisher

"A fascinating and important book. Kenneth Rogoff sets out a compelling and wide-ranging argument for weaning our economies off paper money."—Ben S. Bernanke, former chairman of the U.S. Federal Reserve

"Highly engaging, thought-provoking, and persuasive, The Curse of Cash makes the case that time is running out for paper money. As Kenneth Rogoff has done before, this book sets the standard on a problem that will only become more important; it is also sure to influence discussions about the ability of central banks to deliver growth and financial stability. This is a must-read."—Mohamed El-Erian, author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse

"Should we become a largely cashless society? Kenneth Rogoff makes a strong case that we should in this wide-ranging book, which touches on history, crime, technology, and monetary policy. Clearly and persuasively argued, this is a must-read."—Linda Yueh, author of China's Growth: The Making of an Economic Superpower

"In this fascinating and important book, Kenneth Rogoff argues forcefully that advanced economies should phase out cash because it facilitates crime and constrains policy. With a wealth of data and clear explanations, the book demystifies central banking and negative interest rates, thus elevating the discussion of both."—Anat R. Admati, coauthor of The Bankers' New Clothes: What's Wrong with Banking and What to Do about It

"Most people like cash. Not Kenneth Rogoff—for reasons ranging from its benefits to organized crime to the way it impedes antirecessionary monetary policy. He's written a tour de force explaining why. Reading it will make you both smile and think."—Alan S. Blinder, author of After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead

"Ken Rogoff led the way in stressing the now widely accepted public policy benefits of eliminating large-denomination currency. His new book provides cogent arguments for an even bolder step: eliminating cash altogether. The proposal could not be more timely, and his arguments deserve consideration by policymakers and the general public alike."—Michael Woodford, Columbia University

"The Curse of Cash is brilliant and insightful. In addition to giving a vivid picture of the cash-crime nexus, The Curse of Cash is the book everyone should read about negative interest rates."—Miles Kimball, University of Michigan

"Original and fascinating, The Curse of Cash makes a totally convincing argument that advanced economies have many good reasons for phasing out paper currency as soon as possible. More clearly and with more evidence than anyone before, Kenneth Rogoff makes the case that cash feeds illegal behavior—and that illegal behavior probably now accounts for the majority of cash in circulation. Raising challenging questions, this book will be of wide interest."—John Kay, author of Other People's Money: The Real Business of Finance

Editorial Reviews

07/11/2016
According to this fascinating economic manifesto from Rogoff (coauthor of This Time Is Different), a public policy professor at Harvard University, money isn’t the root of all evil; cash is, and the sooner it’s rooted out, the better. Why? Cash, he argues, is key to criminal activities: tax evasion, bribery, smuggling, human trafficking, illegal immigration, and more. Cash’s liquidity, anonymity, and ungovernability place it beyond the authorities’ control. Rogoff’s principal concern is not with tax evasion or crime, however, but with the ability of central banks to compel consumer spending during economic crises. If central banks could implement negative interest rates, they would have substantially greater power to combat deflation and avoid recessions—but large cash reserves could defeat such efforts. Rogoff sidesteps the politically sticky problem of governments attempting to take away citizens’ cash. Even if one disagrees with him, Rogoff has collected so many fascinating facts about cash (how much is held abroad, how much is used for criminal activities, how much governments profit from its use) that the book never feels like ivory tower pontification. The result is an absorbing exploration of the uses, and misuses, of currency, and its intractability in controlling modern economies. (Sept.)

Publishers Weekly

"You may not have any in your wallet, but $100 bills make up an astonishing 80 percent of the U.S. currency in circulation. In his new book, The Curse of Cash, Kenneth Rogoff . . . proposes a plan to phase out most paper currency in the United States and other economically advanced nations, keeping only low-denomination notes to create what he terms a ‘less-cash' society."

MIT Technology Review

"Winner of the 2017 PROSE Award in Economics, Association of American Publishers"

One of Bloomberg’s Best Books of 2016

One of Financial Times (FT.com) Best Economics Books of 2016

Selected for Canada’s Financial Post Best Personal Finance and Economics Books of 2016

Longlisted for the Financial Times and McKinsey Business Book of the Year 2016

From the Publisher

"Raising challenging questions, this book provides thoughtful insights on a subject that is likely to engage monetary policy arena for time to come."

Cover Drive

"Recommended for readers who seek a greater understanding of negative interest rates and the possibility of eliminating cash."

Choice

08/01/2016
Economist Rogoff (Thomas D. Cabot Professor of Public Policy, Harvard Univ.; coauthor, This Time Is Different), the former chief economist of the International Monetary Fund (IMF), offers a detailed case for eliminating paper money. He explains that the amount of paper money per capita in circulation, especially in large denomination notes, far exceeds what average citizens possess or need. Rogoff maintains that this overabundance of cash is largely used in crime, tax evasion, and terrorism. Paper money, he says, is also prone to counterfeiting and disease transmission. Rogoff explains how this type of currency can be replaced by debit cards and electronic transfer devices. He then discusses monetary policy and how cash constrains central banks from using negative interest rates to combat deflationary recessions. For both the elimination of paper money and the employment of negative rates, Rogoff painstakingly presents both the advantages and drawbacks. While the parts of his work about eliminating paper money are straightforward, the author's chapters delving into macroeconomic theory may bog down general readers. VERDICT Rogoff's provocative, though perhaps imbalanced, work is best suited to readers with at least a basic grasp of economic principles.—Lawrence Maxted, Gannon Univ. Lib., Erie, PA

Library Journal

2016-07-19
A noted economist imagines a modern society that functions without paper money and coins.As former International Monetary Fund chief economist Rogoff (Public Policy/Harvard Univ.; co-author: This Time Is Different: Eight Centuries of Financial Folly, 2009, etc.) notes, though the drift of modern economies is to provide alternate means of account to the paper-and-metal exchange of old, we are still awash in cash. There was enough of it outside of banks, he writes, for each man, woman, and child in the U.S. to have $4,200, mostly in big bills, which, he adds, “is a nearly universal problem in advanced economies.” Though it will likely be a while before we can see our way clear to adopting a system such as that used by the entrepreneurial Ferengi of the Star Trek franchise, who used a substance called latinum so volatile that it had to be encased in worthless gold, there are good reasons, by Rogoff’s argument, to want to do so. The first prong of the argument is easy enough to follow: cash enables crimes such as money laundering and tax evasion, and doing away with it serves justice. The second broad component is more rarified, involving the goal of zero inflation via negative interest, a matter so unthinkable recently that, as the author notes, the theory is just beginning to catch up to an increasing fact. Naturally, the speculators will be a step ahead of the economists, and there are ways to game even the negative interest system for profit; tax laws can be modified accordingly, though “the objective of negative interest rate policy is primarily macroeconomic stabilization, not raising revenue.” Rogoff strives to write accessibly, but such matters are so heady and technical that the latter portions of the book will be daunting to those without training in economics. Money geeks are the primary audience, to be sure, but futurists and trend-watchers will also take interest in the author’s proposals for phasing out cash.

Kirkus Reviews