Washington Examiner reviews the upsides and downsides of eliminating paper currency

Recently, the Washington Examiner columnist Mr. Kevin Cochrane in an eminently readable article reviewed the upsides and downsides in eliminating paper currency (WE, March 9). He reveals that Kublai Khan who invaded China introduced paper money, started a postal system besides spreading disease in that country.  According to Wikipedia, Kublai Khan established the Yuan dynasty in 1271. The dynasty ruled over present-day Mongolia, China, Korea, and some adjacent areas; he assumed the role of Emperor of China; he was the grandson of Genghis Khan.

Cochrane recalls that it took the Chinese “a few hundred years to overcome the Mongol hordes, build a wall to keep them out, and abolish currency in the early Ming Dynasty”.

“But now, almost 500 years later, the rest of the world is catching up with those Chinese emperors” Cochrane said.

He discovers that now “there is an effort gaining momentum to limit, or even abolish, physical money” He concedes that there are “some very positive upsides and also some very disturbing downsides just like most disruptive events in history – gunpowder, the steam engine, music videos – but this time the ledger of pluses and minuses is a little more difficult to balance”.

Cochrane describes many reasons for abandoning paper currency:

He says that the Chinese abandoned paper money because of inflation though Governments today say they want it eliminated because of crime.

“India recently required its 1.2 billion people to surrender all of their largest notes for smaller bills, effectively eliminating more than 80 percent of the currency in circulation” he refers to demonetization in India.

Cochrane quotes the Indian prime minister as saying that the action was to stop counterfeiting. Cochrane concludes that there was another more subtle reason behind the move – taxes. Mr Cochrane  did not list  all the reasons for demonetization advanced by the Indian Prime Minister.

Please see the full text of Prime Minister’s talk  published by the Wall Street Journal (Accessed on March 13, 2017):

http://blogs.wsj.com/indiarealtime/2016/11/08/full-text-of-indian-prime-minister-narendra-modis-speech-on-replacing-largest-rupee-notes/

Mr Cochrane characterizes tax evasion as “India’s national sport”. He claims that the USA does not have this problem “because less than 15 percent of all transactions statewide are completed in cash, and those only average about $21”.

If you can eliminate cash, transactions will be traceable making it easy for levying income tax.

Cochrane gives an interesting difficulty in cash transactions:

“A million dollars in $100 dollar bills weighs only 20 pounds, but the same amount in $10 dollar bills weighs more than 200 pounds and requires an Olympic weight-lifter to carry it. Having only small bills purportedly moderates or even ends illegal undertakings.”

You may, if you so desire, read Mr. Cochrane’s article at:

http://www.washingtonexaminer.com/the-upsides-and-downsides-to-eliminating-paper-currency/article/2616688

 

 

 

 

 

 

 

 

 

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About ksparthasarathy

I am a former Secretary of the Atomic Energy Regulatory Board. I am a former Raja Ramanna Fellow in the Department of Atomic Energy. Free lance journalism is my hobby
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