Kenneth Rogoff: belief

Transcript context

…Sweden has done it. It doesn’t take that long if people are on board. It’s very hard to run across currency in Sweden today, and they didn’t even pass laws. You’re right. You have to travel 150 kilometers to get to an ATM machine, but it’s not completely phased out by any means. It’s still there. First of all, we’ve had enough inflation that the $100 bill is now a $75 bill, I’ll say to start with. I think most of the world’s currencies held in these large denomination notes. I’ve done further work — very little of it’s used in transactions. I think most of it is in the underground economy. It’s not necessarily nefarious. There’s drug dealing, human smuggling, and everything, human trafficking, but I think the large majority of it is tax evasion. Lots of people do that. I’m not trying to be holier than thou and just say everybody who does that is evil, but I’m looking from the government’s point of view. Making money by saying, hey, people love these $100 bills and not figuring out that they’re using them not to pay taxes — I’ve argued that that’s penny-wise and pound-foolish. That’s the core of the argument. From an efficiency point of view, don’t you want to price discrimination in your tax system? Say people pay their nannies with $100 bills. They wouldn’t hire the nanny if they had to pay taxes. Furthermore, if the transaction were recorded, they’d have to worry about social security issues. It’s a lot of paperwork and bureaucracy, very forbidding for a lot of people. You’re just lowering output by not making it easy for them to pay the nanny with cash.…

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