Germans love cash. According to a research of the German Federal Bank (Bundesbank), more than half of total revenues in German stores is received in cash. In restaurants, the figure is 70 percent, and the cafés and eateries has even 94 percent. Thus, Germany is unlikely to be happy with the proposal to abolish cash, which recently was made by a number of European and American experts.
In particular, a member of the economic advisers to the government of Germany, Professor Peter Bofinger of Würzburg University proposed the abolition of cash in the euro area, the US, UK and Switzerland. "With today's technical possibilities coins and banknotes are a true anachronism" - said Bofinger in an interview with the weekly Der Spiegel, published on 16 of May.
In the US, the idea of the abolition of cash is supported by Professor of Economics Kenneth Rogoff of Harvard University. In this way, he offers to deal with criminals operating in the illegal labor market, and drug traffickers. "The anonymity of cash is readily used by those who commit illegal operations or evade taxes," - said Rogoff in an interview with the German newspaper Handelsblatt.
A member of the board of the Bundesbank, Carl-Ludwig Thiele does not believe that the rejection of the cash payment will successfully confront organized crime. In the absence of cash, fraudsters can find workarounds - transactions with foreign currency, precious metals, or barter- Thiele said in a speech at the Fifth Congress of the Bundesbank on cash held in late January in Wiesbaden. Even if you cancel only large bills in denominations of 200 and 500 euros, it will not give the desired effect, said Thiele. According to him, countries where it happened, have not a significant decrease in the crime rate.
A professor of the University of Freiburg Lars Feld, as part of a group of economic advisers to the government of Germany, does not agree with the need the abolition of cash either. In an interview with Frankfurter Allgemeine Zeitung, he called the cash "hammered freedom" and noted that their use allows citizens to avoid excessive control by the state. A labor activity in circumvention of the tax authorities is contrary to the law, but often, for certain groups of people it is a "last chance to make a living," said Feld.
Cancellation of cash is not a new idea. Such a proposal was made by a group of bankers from Sweden five years ago. In 2014, he spoke out for the abolition of cash and the former president of Harvard University and former US Treasury Secretary Lawrence Summers.
In some countries, the maximum amount of payment for goods purchased for cash already operates. In Italy, it is 1000 euros, and France will soon have a limit equal to that amount; and it is 500 euros in Greece. Introducing such a restriction, the authorities are guided by the same arguments that lead supporters of cancellation of cash: the fight against tax deviators and opposition of organized crime. Speaking for the protection of personal data, activists have criticized the practice, believing that it is necessary to ensure greater transparency in the actions of not consumers but the state.
However, another reason, why the theme of the abolition of cash now so widely discussed, appears there. Central banks in Europe and the US is pursuing a policy of cheap money, that is, provide funds to banks at ultra percent. According to Kenneth Rogoff, as long as money can be stored on the bank accounts and cash, central bank’s efforts to lower the benchmark interest rate to a very low negative mark to persuade local banks to let money into circulation, will not bring the desired result.
In London, May 18 well-known economists and representatives of the European Central Bank participated in a conference on the future cash payments. The Swiss National Bank (SNB) - one of the first central banks, which introduced a negative deposit rate for commercial banks, organized this not-accident event. The SNB’s deposit rate is -0.75; this is the so-called "default interest", which the banks preferring to keep their money in the accounts, rather than to provide loans to businesses and individuals, have to pay. The European Central Bank (ECB) also charges penalty interest, but its rate is still less than in Switzerland (-0.2 percent).
Still, the question remains the same: does the commercial banks extent such practices on ordinary investors, and if yes, how? Until then, these negative effects were felt by only the largest customers of some banks as investment funds and companies that have over half a million euros in the account.
Public demand for the abolition of cash proof that the government and central banks around the world do not know what to do to overcome the debt crisis, says business consultant Daniel Stelter. He calls the assumption, that it is enough for banks to lower the interest rate to a negative mark to encourage companies to borrow and invest, naive. "Companies are investing in projects because it is profitable, not because banks are willing to give them money almost for free," - said the expert.
According to Shtelter, free throw percentage, which forces banks to provide more loans, is increasing the risk of unsuccessful investments and the formation of bubbles in the capital market, what "will only aggravate the crisis." Cash in euros is legalized means of payment in the European Union, and for their withdrawal, many laws would have been changed. Even the supporter of the abolition of cash Rogoff believes that this will be possible only "after a long period."
source: dw.de
In particular, a member of the economic advisers to the government of Germany, Professor Peter Bofinger of Würzburg University proposed the abolition of cash in the euro area, the US, UK and Switzerland. "With today's technical possibilities coins and banknotes are a true anachronism" - said Bofinger in an interview with the weekly Der Spiegel, published on 16 of May.
In the US, the idea of the abolition of cash is supported by Professor of Economics Kenneth Rogoff of Harvard University. In this way, he offers to deal with criminals operating in the illegal labor market, and drug traffickers. "The anonymity of cash is readily used by those who commit illegal operations or evade taxes," - said Rogoff in an interview with the German newspaper Handelsblatt.
A member of the board of the Bundesbank, Carl-Ludwig Thiele does not believe that the rejection of the cash payment will successfully confront organized crime. In the absence of cash, fraudsters can find workarounds - transactions with foreign currency, precious metals, or barter- Thiele said in a speech at the Fifth Congress of the Bundesbank on cash held in late January in Wiesbaden. Even if you cancel only large bills in denominations of 200 and 500 euros, it will not give the desired effect, said Thiele. According to him, countries where it happened, have not a significant decrease in the crime rate.
A professor of the University of Freiburg Lars Feld, as part of a group of economic advisers to the government of Germany, does not agree with the need the abolition of cash either. In an interview with Frankfurter Allgemeine Zeitung, he called the cash "hammered freedom" and noted that their use allows citizens to avoid excessive control by the state. A labor activity in circumvention of the tax authorities is contrary to the law, but often, for certain groups of people it is a "last chance to make a living," said Feld.
Cancellation of cash is not a new idea. Such a proposal was made by a group of bankers from Sweden five years ago. In 2014, he spoke out for the abolition of cash and the former president of Harvard University and former US Treasury Secretary Lawrence Summers.
In some countries, the maximum amount of payment for goods purchased for cash already operates. In Italy, it is 1000 euros, and France will soon have a limit equal to that amount; and it is 500 euros in Greece. Introducing such a restriction, the authorities are guided by the same arguments that lead supporters of cancellation of cash: the fight against tax deviators and opposition of organized crime. Speaking for the protection of personal data, activists have criticized the practice, believing that it is necessary to ensure greater transparency in the actions of not consumers but the state.
However, another reason, why the theme of the abolition of cash now so widely discussed, appears there. Central banks in Europe and the US is pursuing a policy of cheap money, that is, provide funds to banks at ultra percent. According to Kenneth Rogoff, as long as money can be stored on the bank accounts and cash, central bank’s efforts to lower the benchmark interest rate to a very low negative mark to persuade local banks to let money into circulation, will not bring the desired result.
In London, May 18 well-known economists and representatives of the European Central Bank participated in a conference on the future cash payments. The Swiss National Bank (SNB) - one of the first central banks, which introduced a negative deposit rate for commercial banks, organized this not-accident event. The SNB’s deposit rate is -0.75; this is the so-called "default interest", which the banks preferring to keep their money in the accounts, rather than to provide loans to businesses and individuals, have to pay. The European Central Bank (ECB) also charges penalty interest, but its rate is still less than in Switzerland (-0.2 percent).
Still, the question remains the same: does the commercial banks extent such practices on ordinary investors, and if yes, how? Until then, these negative effects were felt by only the largest customers of some banks as investment funds and companies that have over half a million euros in the account.
Public demand for the abolition of cash proof that the government and central banks around the world do not know what to do to overcome the debt crisis, says business consultant Daniel Stelter. He calls the assumption, that it is enough for banks to lower the interest rate to a negative mark to encourage companies to borrow and invest, naive. "Companies are investing in projects because it is profitable, not because banks are willing to give them money almost for free," - said the expert.
According to Shtelter, free throw percentage, which forces banks to provide more loans, is increasing the risk of unsuccessful investments and the formation of bubbles in the capital market, what "will only aggravate the crisis." Cash in euros is legalized means of payment in the European Union, and for their withdrawal, many laws would have been changed. Even the supporter of the abolition of cash Rogoff believes that this will be possible only "after a long period."
source: dw.de