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The Bonfire of the Currencies?

Two recent books by renowned economists have set the stage for today's great debate over the future of money in a digital age. In particular, public and private moneys are entering into a sustained rivalry, with far-reaching implications for markets and politics.

SANTA BARBARA – Ready or not, the financial world is being forced to face the possibility of a future without traditional notes and coins. Is cash going the way of the dodo? Should the prospect of its extinction be welcomed or feared? And what would its disappearance mean for domestic and global markets and politics?

Two recent books by renowned economists have set the stage for the coming debates, highlighting two questions in particular. The first is whether cash should disappear. The second is whether it actually will disappear. Kenneth Rogoff of Harvard University and Eswar Prasad of Cornell University have much to say on both issues.

Does Money Make the World Go Around?

For Rogoff, cash is a curse. Paper currency, he argues, “lies at the heart of some of today’s most intractable public finance and monetary problems,” and thus should be phased out as quickly as possible. He highlights two big problems. On one hand, by permitting large recurrent and anonymous transactions, cash facilitates tax evasion and other crimes. High-denomination bills like US “Benjamins” ($100 notes) or Switzerland’s 1,000 franc note play a starring role in a broad range of criminal activities, from drug trafficking and money laundering to racketeering and extortion.

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