Currency killer: meet the Harvard economist who wants to get rid of cash

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Kenneth Rogoff, professor of economics at Harvard University, argues that there is little need for law-abiding citizens to have US$100 bills, or similarly large banknotes. Photo: Bloomberg

Published: 1:58pm, 8 Sep 2016Updated: 9:47pm, 8 Sep 2016

Kenneth Rogoff has an interesting résumé: international grandmaster of chess, former chief economist of the International Monetary Fund, professor at Harvard University.

And he is now—unofficially—the No 1 enemy of cash.

“I’ll admit, it’s a very quirky topic,” Rogoff said at a press lunch on Tuesday put together by the publisher of his new book, The Curse of Cash. But he insists that a country without so much cash is an idea whose time has come.

Law-abiding citizens rarely have need for US$100 bills, yet there are 34 of them in circulation for every woman, man, and child in the US. That suggests the bills are circulating mainly in the underground economy. If the biggest bill were worth US$10, rather than US$100, delivering someone a million bucks under the table would require a 100kg chest rather than a 10kg briefcase. Forcing people to use smaller bills, Rogoff argues, might make crime more conspicuous and less convenient.

Police pile stacks of suspected drug money after a raid at the home belonging to Chinese-Mexican businessman Zhenli Ye Gon in Mexico City. The haul of more than US$200million, consisting almost entirely of US$100 notes, weighed more than 2 tonnes. Photo: AFP

Rogoff also contends that suppressing cash would make it easier for the Federal Reserve and other central banks to boost economic growth by pushing interest rates into negative territory. That’s the strange world where you pay to keep money in the bank and get paid to borrow it. The theory is that negative rates will induce people to save less and spend more, which will revive growth. Savers won’t tolerate negative interest rates on their savings as long as cash is an alternative. Why not simply withdraw stacks of US$100 bills and keep the cash in a mattress or a safe?

Rogoff says he doesn’t want to get rid of cash all at once. First, he would phase out US$100s, then 50s, then 20s, leaving smaller bills in circulation for the foreseeable future. “I want to have a less-cash society, not a cashless society,” he said.