The Corner

Then They Came for the €500

CNBC:

The European Central Bank will stop issuing 500 euro ($575) banknotes towards the end of 2018 on concerns it could facilitate illicit activities but outstanding bills will remain in use indefinitely, the ECB said in a statement on Wednesday.

“The 500 euro note will remain legal tender and can therefore continue to be used as a means of payment and store of value,” the bank said.

“The 500 euro banknote, like the other denominations of euro banknotes, will always retain its value and can be exchanged at the national central banks of the Eurosystem for an unlimited period of time.”

The ECB has been looking to get rid of the 500 euro note, despite the objections of Germany’s central bank, due to concerns that it is also used by criminals and militants to finance their activities.

Writing In the Financial Times, Larry Summers approved:

There is little if any legitimate use for €500 notes. Carrying out a transaction with 20 €50 notes hardly seems burdensome — and this would represent more than $1,000 in purchasing power. Meanwhile, 20 €200 notes would represent close to $5,000 in purchasing power. Who in today’s world needs cash for a legitimate $5,000 transaction? Indeed, the ECB found in a study that 56 per cent of the EU public had never laid eyes on a €500 note. Cash transactions of more than €3,000 have, in fact, been made illegal in Italy; in France, the maximum is €1,000.

But then:

To be sure, it is hard to estimate how much crime will be prevented by the halt in production of €500 notes.

Oh.

No matter:

It will surely impose some burdens on criminals and might interfere with some transactions. The main point is that even a small reduction in crime would more than justify the loss of any possible benefit that comes from the €500 note.

I wonder,

It would, of course, be tinfoil time if I suggested this was just part of a slippery slope.

Summers:

In this instance, Europe has taken the lead on a significant security issue. But its action should be seen as a beginning rather than an end in itself.

Oh,

Summers:

First, the world should demand that Switzerland stops issuing SFr1,000 franc notes…. Second, the question of the facilitation of criminal activity should be placed prominently on the agenda of the Group of 20 leading nations. There would be a strong case for stopping the production of notes with value greater than, perhaps, $50, and also for greater co-operation to assure that new financial technologies, such as bitcoin, do not become vehicles for facilitating illicit transactions.

Ah “cooperation”.  

A month or so back I looked at the assault on cash (and, yes, it is a thing, and one that is all the more dangerous in an age of negative interest rates) in a piece for NRODT, making the case for cash—and the privacy it brings—as a vital element in the preservation of the rights of the individual against the presumption of the state.

I concluded as follows:

[Y]es, there is cash’s role as crime’s discreet accomplice. Well, as I alluded to before, government already has a wide range of powers to combat that. To ask for much more seems excessive. To borrow a famous comment a wise man once made: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

That wise man? He is on the $100 bill.

The $100 bill that Larry Summers would scrap. 

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