Right, you seem to argue that $100 bills are pretty much only used for crime. Why do we print them? Who benefits?
We benefit. The taxpayer benefits. The Federal Reserve profits from issuing money, and that money is transferred to the Treasury for whatever the government wants to spend it on. But other people who benefit from $100 bills are people who want to conceal income or hide resources, or facilitate illicit transactions. You can fill in the blanks as to which category of criminals you want to illustrate—it’s all of them.
One thing in the book that proved really interesting is how the Pentagon is talking about a “cashless battlefield,” and how cash is so problematic for U.S. forces abroad. They were flying in billions in cash during the Iraq war to pay for sandbags, informants, and so on. But then they are watching those bills essentially circle back to bite us, from insurgents or other dark forces out there who want to buy materials for explosive devices and use them on Americans. That was the kind of thing that I never imagined bumping into at the beginning of this project. There are so many back alleys to the story of cash’s role in our world.
Where do you keep your own money?
I keep $80 in low-denomination bills in my earthquake preparedness kit. So whatever the incentives to get rid of cash, it’s clear we are not there yet. Where else do I keep my modest wealth? In a checking and savings account, to build a little security fund. Financially, we are behind on our retirement savings, but we’re doing more than nothing, and we’re wondering what will hold value, not 10 years from now, but 30 years from now. What I love about the cash question is it leads you down that path of thinking, what gives money value? It’s faith in the government.
People seem to have less faith now, at least in the dollar. The price of gold has soared. Do you think gold is more or less important in a cashless society?
I can’t believe that the gold bugs get away with saying gold is real money, and say it with a straight face, as if gold was handed down from on high. That is funny to me. I say that money is an idea. Money is what we say it’s going to be. That said, even though everyone thinks that going back to the gold standard is unrealistic and a really bad idea, central banks hoard gold and keep buying more of it. And you don’t see them doing that with coal or land some other commodity. So that is a bit of a paradox.
We’ve heard promises about mobile-phone money, but it seems to be arriving pretty slowly in the United States.
Actually, I think it’s coming fast. It will vary by country and by region, but where the value proposition is glaring, people are jumping in. You see it with M-Pesa in Kenya and the Eko program in India that I featured in the book. So here’s a young guy, an electronics repairman in a slum, and the agent comes out and explains how he can send money to relatives in the countryside via cell phone instead of taking a bus. It’s stunning ease-of-use compared to how he had to send that money before. And so he jumps in. For you and me, Google Wallet is not going to make or break us right now. But once those tools provide a value proposition that is undeniable, then you and I will also jump in. I don’t know precisely what it will be—maybe tying in discounts, or Groupon kind of offers.
What technology do you see as being the one that finally replaces cash?
I don’t know what the decapitation stroke of the death-by-a-thousand-cuts is going to be. The whole issue of “no more electricity” is tricky. You might need something that was solar-powered, with solar cells on one side. That would be a way to end-around the doomsaying.