He used to be Harvard’s head honcho, which is a pretty cool thing to be if you’re of that ilk. He was also treasury secretary and director of the White House National Economic Council. So Larry Summers, even though he only holds an endowed professorship these days, is probably pulling down a decent paycheck.
I bet he pays for stuff with a credit card, because he’s too smart to use a debit card. But what Larry Summers doesn’t do is use big bills.
Harvard’s Mossavar Rahmani Center for Business and Government, which I am privileged to direct, has just issued an important paper by senior fellow Peter Sands and a group of student collaborators. The paper makes a compelling case for stopping the issuance of high denomination notes like the 500 euro note and $100 bill or even withdrawing them from circulation.
Oh cool. Stuff Harvard thinks. That’s certainly important.
The fact that — as Sands points out — in certain circles the 500 euro note is known as the “Bin Laden” confirms the arguments against it. Sands’ extensive analysis is totally convincing on the linkage between high denomination notes and crime. He is surely right that illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds as would be the case if the $20 bill was the high denomination note. And he is equally correct in arguing that technology is obviating whatever need there may ever have been for high denomination notes in legal commerce.
Cash. The government hates it. At a kilo per million, it makes for a great way for criminals and terrorists to move money without the government knowing about it. Burn the witch! After all, “technology is obviating” any need for big bills. Just use your platinum card. Duh.
What should happen next? I’d guess the idea of removing existing notes is a step too far. But a moratorium on printing new high denomination notes would make the world a better place.
Better for whom, Larry? Would it make it harder for criminals and terrorists to move money? Well, sure, and seriously, isn’t that the only thing that matters? Shouldn’t all societal choices be based on the most important consideration possible, what makes the government’s job easier?
The government has done everything possible to eradicate cash as a median of exchange, to the point where its mere possession is proof of criminality. Of course, this also serves an ulterior purpose, as it allows the government to seize cash since no one but criminals use cash anymore, right? But Larry is only talking “big” money, like the $100 bill. And the $50. Because a cool mil in Jackson’s weighs 50 lbs., and that’s a lot to tote around.
And what sort of miscreant would disagree with someone so knowledgeable, so credible, so brilliant, as Larry Summers?
I confess to not being surprised that resistance within the ECB is coming out of Luxembourg, with its long and unsavory tradition of giving comfort to tax evaders, money launderers, and other proponents of bank secrecy and where20 times as much cash is printed, relative to gross domestic, compared to other European countries.
Bad dudes all. Who else but bad dudes wouldn’t hop aboard any speeding train in which one could find Larry Summers in a first class, fully reclining seat. Well, Larry’s confusion is understandable. There aren’t many who sip champagne at the cocktail parties Larry attends who would be aware of, and capable of explaining, how the groundlings live. At Harvard, they are handed a double platinum AmEx card upon matriculation, with the understanding that they will pay their bills when the bonus check clears.
So Larry wouldn’t know about the millions of people who use cash, need cash, including those filthy $100, $50 bills he so despises. There are people who work for a living. Not the ones at Goldman Sachs, but mowing the lawns of people who work at Goldman Sachs. They live hand to mouth. When they get paid, they head straight to the supermercado to buy food for the niños. Those darn niños get hungry and want to eat every day.
And every few years, they head off to buy a new car. Well, not exactly new, in the sense that Larry gets a new Tesla to keep his carbon footprint under control (those Maybach owners are so thoughtless). New to the buyer, and ten years old to everyone else. Even so, it costs more than a few $20s, and so he carries with him a pile of $100s so he isn’t hit over the head on the way when someone sees a big bulge in his pants pocket.
But, Larry ponders, if they can’t get the black card, at least let him get one of those pedestrian cards they have for “those” sort of people. Here’s the thing, Larry. There are a lot of people, even though you don’t actually know any of them, who have no bank account, no credit history and no savings, who still need to buy stuff. It’s not that they don’t want a black card, just like you, but credit card issuers don’t think very highly of them as credit risks. Debit card issues can’t help them, as they’ve never earned enough money to put it into the bank.
And still, they need to eat. To pay rent. To buy the new old car. To survive. And they use cash.
There are even people who don’t trust banks. I know, it seems incomprehensible to the guy who was Treasury Secretary that anyone might mistrust financial institutions like
Lehman Brothers, Bear Sterns, Citibank, but they do. Crazy, right? And some have cultural reasons why they prefer to keep their savings under the mattress. How dare they not assimilate, but still, it’s not yet a crime.
And these people need big bills, because those $20s make the mattress lumpy and uncomfortable.
It’s certainly a matter for a very official guy like Larry Summers to be concerned with, since crime and terror are the sorts of fears that official guys perceive as a problem demanding a fix. And given the weight of the evidence, combined with the availability of plastic, what possible reason could exist not to do away with big bills? I wonder who mows your lawn, or waits your table, or serves up the champagne on the silver platter at gala balls, Larry? Maybe you should ask them.