Larry Summers is defending his call to get rid of the $100 bill.
In a Washington Post op-ed written with the Harvard Kennedy School’s Peter Sands, the Harvard professor focused on a Wall Street Journal editorial that took on his original call to ban the denomination.
Summers is not alone in calling for the end of larger denominations.
Last week, European Central Bank president Mario Draghi said the bank is considering a ban of the 500 euro note because it’s a convenience for criminal activity as well as savers. (The ECB, we’d note, has taken interest rates into negative territory in an effort to kickstart the eurozone economy and move inflation closer to its 2% goal.)
And while the Journal wrote, “Beware politicians trying to limit the way you can conduct private economic business. It never turns out well,” Summers contended that this claims contains, “two levels of illogic.”
The first is that even a staunch libertarian recognises that there must be some antifraud efforts in an economy that won’t impact business activity.
But Summers seems to take slightly larger issue with the Journal’s contention that — through monetary policy — politicians are working to curtail the economic freedom of ordinary people.
Here’s Summers (emphasis ours):
[It] is surely a stretch to assert that ceasing government’s active effort to circulate and print 500 euro notes or $100 bills constitutes a government infringement on the conduct of private economic business. Do the Journal editors believe that liberty was constrained by the U.S. decision in the 1960s to stop printing $1,000 dollar bills or to stop issuing bearer bonds? Surely it is not a government’s obligation to provide every means of payment or store of value that someone might choose to use. Nor, it should be emphasised, did the abolition of the $1,000 put us on any kind of slippery slope to monetary perdition.
Our advocacy for the elimination of high denomination notes is based on a judgment that any losses in commercial convenience are dwarfed by the gains in combatting criminal activity, not any desire to alter monetary policy or to create a cashless society … And we believe that for the foreseeable future there will be a role for cash in modern economies, though we would not be surprised if in many contexts its transactions costs come to exceed those of various electronic payment schemes.
Summers’ bottom line is that removing the $100 note would only have a muted effect on a very wealthy minority, as most people would not mind the inconvenience of carrying a few extra notes in lower denominations.
He also noted that governments already routinely intervene in private commercial affairs (think tax laws), and people have the freedom to pick whichever legal tender they like (think Bitcoin).
And so while removing the $100 bill may be seen as some vague infringement of liberties, to Summers it is simply the logical step in our ever-more-financialized economy.