Should Cash Be Abolished?

At the World Economic Forum in Davos Switzerland, Joseph Stiglitz the Nobel Prize-winning economist argued in favor of phasing out currency and moving toward a digital economy.

The view expressed by Stiglitz is similar to that of former IMF chief economist Kenneth Rogoff who has been arguing for many years that there is an urgent need to remove cash from the economy. It is held that cash provides support to the shadow economy and permits tax evasion. Some estimates suggest this could be up to $700 billion in the US.

The Governor of the Bank of England — Mark Carney — has expressed similar views in support of the removal of cash.

Yet another justification for its removal is that in times of economic shocks, which push the economy into recession, the run for cash exacerbates the downturn — i.e., it becomes a factor contributing to economic instability by facilitating a cash-induced savings surge rather than an increase in demand.

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Other arguments go further, including the position that in the modern world most transactions can be settled by means of electronic funds transfer. Money in the modern world is an abstraction, or so it is held.

But is it true that money is an abstraction?

The Theory of Money & …
Ludwig von Mises
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The Emergence of Money

Money emerged because barter could not support the market economy. A butcher who wanted to exchange his meat for fruit might not have been able to find a fruit farmer who wanted his meat, while the fruit farmer who wanted to exchange his fruit for shoes might not have been able to find a shoemaker who wanted his fruit.

The distinguishing characteristic of money is that it is the general medium of exchange. It has…

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