Book Reviews

Book Reviews Finance & Development, September 2016, Vol. 53, No. 3

A Barbaric Relic Kenneth S. Rogoff

The Curse of Cash

Princeton University Press, Princeton, New Jersey, 2016, 248 pp., $29.95 (cloth).

The Johns—Law and Keynes—strove to defenestrate gold, and they rather liked fiat paper. But advances in payment technology have always driven both new payment media and monetary theory. Technology is such that physical media can now mostly be abandoned in wired societies. In The Curse of Cash, Kenneth Rogoff passionately presses the case that they should be eliminated because the social ravages of paper currency far outweigh the benefits.

If such a plan is ever fully implemented, this book will have been at least its initial, if not ultimate, blueprint. Meticulously written, it covers everything needed for such a monetary reform. But the book is not excessively polemical. Rogoff details almost all the arguments against tinkering with paper currency, then labors to refute or defuse them.

The plan allows for both macroeconomic reform and possibly massive confiscation of illicit cash. Its boldness in these dimensions reminds me most of the Colm-Dodge-Goldsmith Plan of 1946 for German monetary reform. But, to state my doubts up front, given that precursor, I am skeptical that it can ever be implemented without an occupying army or a totalitarian regime that forecloses the issuer’s geopolitical aspirations.

Critiques against today’s currency denominations have become a cause célèbre for senior academic economists. Foremost, high denominations are the lifeblood of the underground economy. At a minimum, Rogoff and others want to eliminate large denominations like $100, €500, and Sw F 1,000 notes.

Eliminating paper currency would have numerous desirable effects, including reduced tax evasion for high-volume cash and off-book businesses and unreported wages. Terrorists, human traffickers, drug dealers, gunrunners, corrupt politicians, and dictators would risk confiscation of their cash or at least disruption of their activity.

What of lost privacy in personal transactions? That ship has already sailed in a society with ubiquitous video surveillance, U.S. National Security Agency snooping, and massive data gathering by social media and other hackers. Will the illicit activities simply find alternative mechanisms? What of the socially positive uses of underground cash? People in egregiously run economies would lose an avenue to escape hyperinflation. A...