Is the U.S. Treasury a Meth Lab?
Hey guys, I was listening to a Freakonomics Radio podcast “Why Are We Still Using Cash?” and came across a few interesting points. The amount of cash in the world, especially those of large denominations, has grown so rapidly over time that back in 1976 only 25% of U.S. cash was made up of 100 dollar bills and now it’s 80%.
It facilitates crime, bribery, and tax evasion – and yet some governments (including ours) are printing more cash than ever. Other countries, meanwhile, are ditching cash entirely. And if Star Trek is right, we won’t have money of any sort in the 24th century.ROGOFF: The growth in cash — how much the government’s issued — it’s just booming. They don’t know where it goes. They don’t know who’s using it. But they know it’s really popular, and they like the money.
DUBNER: I mean, the way you describe the government’s role and the government’s attitude and their profit incentives, you make them sound like a drug dealer. Like we’re manufacturing this stuff, right? We have our own meth lab — it’s called the Treasury — and we’re distributing it to kind of whoever wants it, no questions asked.
The fact that the U.S. Treasury profits $70 billion a year from printing all this money seems to be a logical reason for why they continue to do so; however, I’m inclined to side with Ken Rogoff on the idea that less cash will lead to cuts in tax evasion and other crimes. The benefits received from this extra tax revenue and drop in crime would probably outweigh what’s currently being received.
There’s already been a major shift toward handling finances online rather than messing around with paper, which can be seen through apps and services like Venmo, Square Cash, PayPal, etc. What are your thoughts, should we start a transition to a less-cash or cashless society or is that too extreme?
Spare me the 43-minute podcast and explain how less cash leads to less tax evasion? I know having physical cash is harder to trace, but I imagine that large transfers are still done via wire or some other form.
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