In defense of cash
John Cochrane has a great post in defense of cash, reacting to hypotheses of phasing out banknotes. He makes several illuminating points and, most importantly, he doesn’t shy away from a rather unpopular (at least, among legislators and policy wonks) argument: cash remains one of the few ways in which a citizen can preserve her privacy. Writes Cochrane:
If the U.S. were willing to allow anonymous electronic transactions, then we could get rid of cash. But we already have lost a great deal of the ability to transact anonymously, and the current technological and policy trend is entirely in the other direction. One used to be able to take more than $10,000 out of banks at will; now such a withdrawal must be reported. Smaller cash transactions are voluntarily reported by banks under fear of “know your customer” and anti-terrorism regulation. Remember the glorious ending of the Shawshank Redemption, where the hero takes huge piles of cash out of a bunch of banks and heads to the Mexican border? Forget it. And it’s already being used politically: Justice is using know-your-customer rules deny legal but unfavored industries such as marijuana dispensaries and payday lenders access to banking.