The assault on large fiat notes has been a cornerstone of modern economic theory in developed nations in recent times. Countries such as Italy and France for example have banned cash transactions that go over 1000 Euros. Spain and Russia have followed suite banning transactions above 2500 Euros and greater than 10,000 US dollars respectively.
The primary aim for banning high value bills has been to capture some of the “gray” economy that exists in all economies. Italy loses more than 100 billion Euros annually in unpaid taxes. The US is by 2001 data estimated to have a tax gap of $345 billion where $197 billion comes from under-reporting of individual income. While these imposed limits may not cause insurmountable problems for ordinary citizens, they risk crossing into territory that is equitable to a fiscal police state.
Evidence to “kill”
The consternation against cash is being introduced under differing circumstances throughout the world. Terrorism, crime, corruption and tax evasion are the most amply provided reasons for the ban on large bills. An often cited and outspoken voice in the US belongs to former US Treasury Secretary & former director of the National Economic Council, Lawrence H. Summers. He has made the case against the 500€, 100$ and even $50 bills citing a Harvard Kennedy paper. The paper links bills like the 500 euro note and others of high denomination to crime, corruption and terrorism.
The Kennedy paper focuses on transportation costs for criminal enterprises as the main deterrent to switch away from high denominational bills. 1 million in US dollars of 20$ denomination weighs approximately 110lbs whereas the same value in 100’s is only 22lbs; it is more costly and risky to transport more weight with the same value.
Furthering the argument, Summers’ primary source writes that;
“Whilst there is scant empirical evidence of the impact of eliminating high denomination notes, there are studies that show that switching from cash to electronic means of payment can cut crime.”
Upon further review, the cited Kennedy paper uses an example that admittedly has no focus on denomination;
“we must be cautious in extrapolating directly from such studies, since they do not focus on denomination, let alone high denominations, their results do support the underlying contention that cash facilitates and fuels illicit activity.”
There is no denying that cash plays a role in crime, however no studies have been cited that scientifically link high denomination notes with crime.
The study in question analyzed the conversion of welfare delivery benefits from paper checks to electronic means such as debit cards and saw a 9.8% decrease in overall crime rate as a result of the switch. At what cost does this occur? The affected people are given debit/credit cards where all records of their transaction history are readily available to hackers and the companies themselves.
The companies receive compensation for the selling of their data, YOUR data and what do you receive in return? Targeted advertisements geared towards your interests. Fantastic method to extract additional revenue, however if you do not wish to take part you have no way of opting out or protecting your data. Bitcoin and the cryptocurrency ecosystem creates the possibility where the user is given back the choice and protection of their personal data.
Putting it together
The war on cash is a real one, with high value transactions the first being controlled. The elimination of high denomination notes will not happen suddenly, it will most likely occur by ending the printing of newer bills of high value, allowing the bills left in circulation to slowly self-eliminate. This will help the fight on crime and terrorism, there is no denying an additional small percentage of crime and terrorism will be collected. This fails however, to address the real problems. That is the funding and psychology for these organizations.
The war on drugs in the US alone has spent 1$ trillion since 1971 and in a ten year period that is what the US is estimated to have spent on buying illegal drugs, directly funding the nefarious entities. Want to rip the rug out from under these organizations? End the drug war.
Additionally, begin the reparations on the psychology of the people at the shit end of our foreign policy. End the use of our military to impose our own economic and philosophic ideas on regions of the world that help breed anti-west sentiment.
Not to minimize, simplify, or reduce the damage inflicted it could be summed up by the relationship of parents and children. Those that have control to exert and those at the mercy of those with power need to remain in balance, the more controlling a parent is the more likely the child is to rebel.
Bitcoin is a potential solution. No one can take or deny a transaction you make (51% attacks aside). There are no limits to your value that can be controlled by governmental entities efforts over high denominational notes; value is only controlled by the network of users.
You are not at the whim of the brokers of power to distribute your information where it benefits them. You are not at their control through macroeconomic policy effects such as negative interest rates. The possibility to control who and what sees your data is a possibility reachable now through cryptocurrency.
This isn’t to say that crime should run free; governments will still have the power to follow undesirable criminal organizations, as every transaction is there for all to see. We are all trying to live together on our planet, we can all benefit from an inclusive global currency.
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