Harvard professor and renowned economist Ken Rogoff has said that to tackle tax evasion and illicit activities the amount of physical cash around the world needs to be reduced.
Speaking to CNBC, Rogoff said that cash provided the ideal avenue for tax evasion.
The evidence, I think, is overwhelming that that is a lot of the use. I’m trying to find a sweet spot where ordinary people can use it to buy normal sized retail transactions, but it gets used less for tax evasion.
Looking at the money in the world, Rogoff says that there is a lot of it around, which are mostly in large denomination notes such as the $100 bill.
There are more than 4,000 for every man, woman and child in the U.S. We print more constantly.
He estimates that around 80 percent of the cash in existence is in $100 bills whereas in other countries with big bills it’s around 90 percent.
Of course, while the use of digital currencies such as bitcoin is increasing in our day-to-day lives, it’s blemished history through Silk Road and bitcoin exchange hacks means that its use is still relatively low compared to cash.
However, Rogoff states that while bitcoin is in the news the digital currency remains ‘very low scale now,’ as people can’t go into a drug store and use it.
Even though Rogoff doesn’t want the world to become a cashless society he explains that there is a sweet spot that needs to be reached.
According to Rogoff, there are a lot of issues involved when it comes to getting rid of money such as privacy, natural disasters, and price control.
I think leaving some around definitely makes sense.
Rogoff states that even though there is a lot of money in the world, countries such as Germany and Austria only use a tiny fraction of what they are carrying around to what is outstanding.
A lot of it’s in the underground economy; a lot of it’s tax evasion and the scale is stunning.
Compared to the U.S. those in Europe use twice as much money, according to Rogoff.
He mentions, though, that while the government makes a lot of money by printing more ‘it’s penny wise and pound foolish.’ This is due to the small revenue created from it compared to the money lost to tax evaders.
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Last modified: May 21, 2020 10:17 AM UTC