Synopsis

In The Curse of Cash, Kenneth Rogoff, one of the world’s leading economists, makes a persuasive and fascinating case for an idea that until recently would have seemed outlandish: getting rid of most paper money.

Even as people in advanced economies are using less paper money, there is more cash in circulation–a record $1.4tn in US dollars alone, or $4,200 for every American, mostly in $100 bills. And the US is hardly exceptional. So what is all that cash being used for? The answer is simple: a large part is feeding tax evasion, corruption, terrorism, the drug trade, human trafficking, and the rest of a massive global underground economy.

As Rogoff shows, paper money can also cripple monetary policy. In the aftermath of the recent financial crisis, central banks have been unable to stimulate growth and inflation by cutting interest rates below zero for fear that it would drive investors to abandon treasury bills and stockpile cash. This constraint has paralysed monetary policy in virtually every advanced economy, and is likely to be a recurring problem in the future.