Not only do people use multiple reasons for doing something to convince themselves, but also to convince others. Recently Bloomberg borrowed my work (without citing) to discuss the Crypto-E-dollar. My piece was a warning, but Bloomberg portrayed the E Dollar as a viable solution strictly for economic reasons. Today they ran a new story on banning high denomination cash to aid law enforcement. They cited a paper done by a Harvard economist, Peter Sands, entitled Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes. Here is an abstract of the paper.
Illegal money flows pose a massive challenge to all societies, rich and poor. Tax evasion undercuts the financing of public services and distorts the economy. Financial crime fuels and facilitates criminal activities from drug trafficking and human smuggling to theft and fraud. Corruption corrodes public institutions and warps decision-making. Terrorist finance sustains organisations that spread death and fear. The scale of such illicit money flows is staggering. Depending on the country, tax evasion robs the public sector of anywhere between 6% and 70% of what tax authorities estimate they should be collecting. Global financial crime flows are estimated to amount to over US$2tr per year. Corruption amounts to another US$1tr. Most of the effort to combat such illicit financial flows focuses on the perpetrators, the underlying criminal activities or on detecting illicit transactions through the banking system. Yet despite huge investments in transaction surveillance systems, intelligence and interdiction, less than 1% of illicit financial flows are seized. In this paper we suggest a different approach, one that would complement existing policies and make them more effective. Our proposal is to eliminate high denomination, high value currency notes, such as the €500 note, the $100 bill, the CHF1,000 note and the £50 note. Such notes are the preferred payment mechanism of those pursuing illicit activities, given the anonymity and lack of transaction record they offer, and the relative ease with which they can be transported and moved. By eliminating high denomination, high value notes we would make life harder for those pursuing tax evasion, financial crime, terrorist finance and corruption. Without being able to use high denomination notes, those engaged in illicit activities – the "bad guys" of our title – would face higher costs and greater risks of detection. Eliminating high denomination notes would disrupt their "business models".
Maybe not so ironically, when economist Willem Buiter discusses banning cash he allows the caveat of leaving denominations five dollars and below for older people who don't feel comfortable with electronic payments.
When I hear Peter Sands say he wants to ban large denomination bills to 'stop the bad guys', it sounds very similar to: "Dad can I stay out all night to go to a party? I just thought it would be good to give you and mom a quiet night at home." If you wouldn't accept your kid's 'quiet night at home' line, why would you accept an economist trying to convince you that banning cash is a good idea for law enforcement reasons. Both have ulterior motives, one is slightly more veiled than the other.