Startling developments happened in the past few months. Like, did you hear the talk about getting rid of $100 bills?
It’s not just C-notes. 500EUR notes in Europe, 1,000CHF notes in Switzerland—everywhere people are talking about killing large-denomination bills because… some people use them to evade taxes or to commit crimes.
You don’t pay your drug dealer with a credit card. So the thought is, get rid of the large-denomination bills and crime goes away.
This is scary.
Part of economic freedom is anonymous transactions. Take the extreme example where cash is eliminated altogether. Everything goes on a credit or debit card.
Your whole purchasing history is stored on the Internet. Well, if you’re not doing anything wrong, you have nothing to hide, right? Part of freedom (including economic freedom), however, is the ability to do bad things.
Do you want to eliminate the option for people to do bad things or give people the choice to do the right thing? All morality is meaningless if people have no choice. This is a deep philosophical issue.
Again, some people think a perfect world is a world without crime, but that’s not true. A perfect world is where people could commit crimes, but don’t.
This talk about large-denomination bills is really gaining momentum, and I think that’s at least half responsible for the run up in gold prices over the last couple of months.
Think about it—in a world without cash, gold (and silver) becomes the currency of anonymity. You can see how this will play out: they ban cash, people start using gold… well, now we have to make it illegal to hold gold because gold is the money of the underworld.
How much will gold be worth then?
This also speaks to the need to hold gold in physical form, not in “paper” form. I’m not one of these people who distrust securitized gold or gold futures, but if it ever becomes illegal, holding ETFs or futures will do you no good whatsoever.
I actually think it’s best to hold physical gold as well as “trading gold.”
I read an article that all the anti-terrorism rules placed on the banking industry have turned out to be completely counterproductive. When dirty money was in the banking system, it could be tracked. Now that people have turned to cash and barter, it can’t be tracked, and we are actually less safe.
This trend toward pushing people outside the banking system is a very dangerous one. When people are underbanked, their social mobility is limited, to say the least.
They work under the table, they don’t pay taxes, and they can’t contribute to Social Security. Whenever I make large deposits in my bank, it feels like I am going through airport security. Everything I do is viewed suspiciously.
The upshot here is that no matter how much social engineering you perform, you will never get people to behave the way you want, and the rules only make things worse for people who actually obey them.
Every law passed to fix something over here creates unintended consequences over there. Then new laws are passed to counteract the old, bad laws, which increases complexity, which increases the need to pay people to understand the complexity, which creates a deadweight loss.
And people wonder why we grow at only 2%.
One of these days I will run for public office, maybe. I will campaign on a platform of doing nothing.
Courtesy: Jared Dillian
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