Last week, the European Central Bank (ECB) announced that it was ending the production and issuance of the 500-euro banknote in a move to clamp down on illicit activities. This is a move that should be emulated by the United States, says former Treasury Secretary Larry Summers.
Writing in an op-ed in the Financial Times over the weekend, Summers lauded the European monetary authority for getting rid of the high-denomination banknote. He argued that since the 500-euro banknotes do not provide any “legitimate” use then it was a wise move by the ECB, one that should be considered by central banks around the world.
Summers would go on to cite several statistics.
One of them is that more than half of the European Union citizens have never seen a 500-euro bill. The other is that certain cash transactions that are high in value have been prohibited. Meanwhile, he would write about Friedrich Schneider of Johannes Kepler University Linz, who found that criminals use physical cash for 80 percent of drug trades, 70 percent of small arms trades and half of human trafficking statistics.
The former Obama economic advisor says the ECB has “taken the lead on a significant security issue,” and that the rest of the world should do the same. Therefore, he wants Switzerland to stop issuing SFR1,000 franc notes and the U.S. to stop producing notes with values greater than $50.
“In this instance, Europe has taken the lead on a significant security issue. But its action should be seen as a beginning rather than an end in itself.
“First, the world should demand that Switzerland stops issuing SFr1,000 franc notes. After Europe’s bold step, these notes will stand out as the hard-currency world’s highest denomination note by a wide margin. Switzerland has a long and unfortunate history with illicit finance. It would be tragic if it were to profit from criminal currency substitution.
“Second, the question of the facilitation of criminal activity should be placed prominently on the agenda of the Group of 20 leading nations. There would be a strong case for stopping the production of notes with value greater than, perhaps, $50, and also for greater co-operation to assure that new financial technologies, such as bitcoin, do not become vehicles for facilitating illicit transactions.”
This a very dangerous op-ed piece, especially coming from a man with a great deal of clout in the academic and political world.
Indeed, this isn’t the first time that Summers has perpetuated the war on cash.
Earlier this year, he called for the end of the $100 bill (SEE: War on Cash: Larry Summers wants ‘to kill the $100 bill’). Much like in the FT op-ed, he averred that it would stop illegal activities and protect ordinary people.
Cash is king for a reason. Cash prevents an invasion of privacy, cash ensures anonymity in your transactions and cash stops the government from tracking and monitoring your every move. If we ever move into a cashless society then government surveillance of your daily life will only grow, while helping financial institutions in a variety of ways.
Be sure to check out our new book “The War on Cash: How Governments and Banks are Killing Cash and What You Can Do to Protect Yourself.”
The bankers cannot make any money on cash transactions, the real reason Larry is pushing for a cashless market. Also, when people use cash they tend to spend less, not so when a credit card is used.