Regular QEW reader Denise alerted me to an article on the New Normal in Dining (in this time of coronavirus) in the Murdoch papers this week, which reported:
Restaurants and Catering Australia said many measure that are in place currently will continue even after restaurants reopen, such as a strong takeaway offering, maintaining social distancing, using disposable cutlery, crockery and glassware, zero cash payments and limited interaction between staff.
Avoiding the use of cash is a good idea, and certainly people are becoming accustomed to cashless transactions in this time of coronavirus. Indeed, there are benefits to doing away with physical cash in addition to the social distancing benefit. In his excellent book The Curse of Cash, published in 2016, former IMF Chief Economist Ken Rogoff makes a compelling case for abolishing large denomination bills. In developing one of his main arguments against large currency notes, Rogoff notes (on p. 2):
There is little question that cash plays a starring role in a broad range of criminal activities, including drug trafficking, racketeering, extortion, corruption of public officials, human trafficking, and, of course, money laundering. The fact that large notes are used far more for illegal activities than legal ones long ago penetrated television, movies, and popular culture.
So, in Australia, there is a strong case for abolishing $100 notes. In 2018, UNSW economist Professor Richard Holden and Opposition MP Dr Andrew Leigh advocated Australia should do so, as reported by ABC News:
$100 note should be dumped to starve black economy, economist and Labor suggest
Rogoff’s other main argument for abolishing large-denomination notes is that it would provide greater flexibility for monetary policy. He notes (on p. 2):
…phasing out paper currency is arguably the simplest and most elegant approach to clearing the path for central banks to invoke unfettered negative interest rate policies should they bump up against the “zero lower bound” on interest rates. Treasury bill rates cannot fall much below zero, precisely because people always have the option of holding paper currency, which at least pays zero interest.
So arguably we should welcome the fact we are becoming accustomed to going cashless and we should look at eventually abolishing paper currency. Senior Business columnist for the Sydney Morning Herald Stephen Bartholomeusz wrote last month:
The coronavirus will accelerate the trend toward a cashless society
There are obviously some transitional issues to think about, such as what it would mean for charities reliant on cash donations, but the benefits of a cashless society appear substantial, and it is definitely an option we should consider.
They’re watching you Gene. Be afraid, be very afraid. Hack hack. Now I know what you secretly spend your money on.
Many thanks Gene for your great article and then mention!
I also wonder whether this will see a bigger push into crypto currency? I was told today that Maccas are moving to cashless for ever! I guess teenagers will need to have a debit card?
Thanks Denise. I think it might push people into crypto, especially those people concerned about privacy