Jim Grant Rejects Rogoff's "Curse Of Cash", Warns "Government Wants To Control Your Money"

Tyler Durden's picture

Authored by Jim Grant, originally posted at The Wall Street Journal,

If there is a curse between the covers of this thin, self-satisfied volume, it doesn’t have to do with cash, the title to the contrary notwithstanding. Freedom is rather the subject of the author’s malediction. He’s not against it in principle, only in practice.

Ken Rogoff is a chaired Harvard economics professor, a one-time chief economist at the International Monetary Fund and (to boot) a chess grandmaster. He laid out his case against cash in a Saturday essay in this newspaper two weeks ago. By abolishing large-denomination bills, he said there, the government could strike a blow against sin and perfect the Federal Reserve’s control of interest rates.

“The Curse of Cash,” the Rogoffian case in full, comes in two parts. The first is a helping of monetary small bites: a little history (in which the gold standard gets the back of the author’s hand), a little central-banking practice, a little underground economy. It’s all in the service of showing where money came from and where it should be going.

Terrorists traffic in cash, Mr. Rogoff observes. So do drug dealers and tax cheats. Good, compliant citizens rarely touch the $100 bills that constitute a sizable portion of the suspiciously immense volume of greenbacks outstanding—$4,200 per capita. Get rid of them is the author’s message.

Then, again, one could legalize certain narcotics to discommode the drug dealers and adopt Steve Forbes’s flat tax to fill up the Treasury. Mr. Rogoff considers neither policy option. Government control is not only his preferred position. It is the only position that seems to cross his mind.

Which brings us to the business end of this production. Come the next recession, the book’s second part contends, the Fed should have the latitude to drive interest rates below zero. Mr. Rogoff lays the blame for America’s lamentable post-financial-crisis economic record not on the Obama administration’s suffocating tax and regulatory policies. The problem is rather the Fed’s inability to put its main interest rate, the federal funds rate, where it has never been before.

In a deep recession, Mr. Rogoff proposes, the Fed ought not to stop cutting rates when it comes to zero. It should plunge right ahead, to minus 1%, minus 2%, minus 3% and so forth. At one negative rate or another, the theory goes, despoiled bank depositors will stop saving and start spending. According to the worldview of the people who constitute what Mr. Rogoff fraternally calls the “policy community” (who elected them?), the spending will buttress “aggregate demand,” thus restore prosperity.

You may doubt this. Mr. Rogoff himself sees difficulties. For him, the problem is cash. The ungrateful objects of the policy community’s statecraft will stockpile it.

What would you do if your bank docked you, say, 3% a year for the privilege of holding your money? Why, you might convert your deposit into $100 bills, rent a safe deposit box and count yourself a shrewd investor. Hence the shooting war against currency. If the author has his way, there will be no more Benjamin Franklins, only Hamiltons, Lincolns and George Washingtons. Ideally, says Mr. Rogoff, many of today’s banknotes will take the future form of clunky, base-metal coins “to make it even more difficult to carry large quantities of currency.”

It’s plenty difficult enough now. Federal statute makes greenbacks in five- and even four-figure sums virtually non-negotiable. Just try to buy a car with a briefcase full of “legal tender.” Or try to deposit those tens of thousands of green dollar bills in the bank. The branch manager would likely file a Suspicious Activity Report. This intelligence would reside with the Treasury’s Financial Crimes Enforcement Network, as mandated by the Bank Secrecy Act of 1970. The government seems to hate cash as much as the fashion-forward economists do.

To such deep thinkers as Mr. Rogoff, 0% is only a number, not a boundary. It ought not to constrain an enlightened central bank, which strives to set a negative inflation-adjusted interest rate when prices are drooping. Thus, if the CPI should happen to come in at 1%, let the federal-funds rate be set at, say, minus 1%. If the CPI should measure minus 1% (meaning that prices are actually falling), let the funds rate register minus 3%.

This is a big can of worms that the author has pried open. He assumes, first and foremost, that falling prices are a calamity. It is not such a calamity that many Americans don’t spend most of the weekend seeking them out. Still, the policy community wants nothing to do with them.

And the policy community, especially in Europe, has had its way. More than $13 trillion of sovereign debt (German, Japanese, Swiss) is quoted at a yield of less than nothing. In Denmark, the banks pay homeowners to take out a mortgage. In Switzerland, depositors pay the bank to accept their francs.

Negative rates? You rub your eyes and search your memory. You can recall no precedent. And if you consult the latest edition of “A History of Interest Rates” (2005) by Sidney Homer and Richard Sylla, you will find none. A recent check with Mr. Sylla confirms the impression. Today’s negative bond yields, he says, are the first in at least 5,000 years.

A positive integer would almost seem inherent in the idea of interest. When most of us want something, we want it now. And if we don’t have the money to buy it now, we borrow. “Present goods are, as a rule, worth more than future goods of like kind and number,” posited the eminent 19th-century Austrian theorist Eugen von Böhm-Bawerk. He called this behavioral truism the core of his theory of interest.

Then again, because not everyone is equally impatient, some of us are prepared to wait, therefore to lend. Seen in this light, the rate of interest is either the cost of impetuousness or the reward to thrift. In the topsy-turvy world of Mr. Rogoff, negative rates would be the reward to impetuousness and the cost of thrift. A small price to pay, he insists, for a quick exit from a deep slump.

The author does not forget to salt his text with words of caution. They are unconvincing. Mr. Rogoff is a true believer in the discretionary command of monetary matters by former tenured economics faculty—the Ph.D. standard, let’s call it. Never mind that, in post-crisis America, near 0% interest rates have failed to deliver the promised macroeconomic goods. Come the next crackup, Mr. Rogoff would double down—and down.

Curiosity is notable by its absence in these pages. How have we come to this radical pass? What is it about today’s monetary and banking arrangements that seems to impel us to more and more desperate policy gambits? The nature of modern central banking and the pseudoscience of modern monetary economics are themselves surely part of the problem.

Interest rates are prices. They impart information. They tell a business person whether or not to undertake a certain capital investment. They measure financial risk. They translate the value of future cash flows into present-day dollars. Manipulate those prices—as central banks the world over compulsively do—and you distort information, therefore perception and judgment.

The ultra-low rates of recent years have distorted judgment in a bullish fashion. True, they have not, at least in America, ignited a wave of capital investment—who needs it in a comatose economy? They have rather facilitated financial investment. They have inflated projected cash flows and anesthesized perceptions of risk (witness the rock-bottom yields attached to corporate junk bonds). In so doing, they have raised the present value of financial assets. Wall Street has enjoyed a wonderful bull market.

The trouble is that the Fed has become hostage to that very bull market. The higher that asset prices fly, the greater the risk of the kind of crash that impels new rounds of intervention, new cries for government spending, bigger deficits—more “stimulus.” Interest rates today, in the U.S., are perilously close to zero. What will the mandarins do in the next emergency?

You have to wonder if the agitators for negative interest rates read the newspapers. The crisis of state and municipal pension finance is no longer looming but upon us. In a world of 2% long-dated Treasury yields, the pension managers operate under the fanciful assumption that they can, on average, generate annual returns in excess of 7.5%. Just how America’s income-starved savers and pensioners would receive the news of the adoption of negative interest rates could be a fruitful topic for Mr. Rogoff’s next book; it plays no part in this one.

You have never met a more cocksure lot than the monetary-policy clerisy. The author, one of the highest of these high priests, casts aside his pro forma concerns about radical experimentation to deliver the following prediction about the coming brave new world: “A true shift to a world where negative interest policy is possible will be transformative, comparable to moving off the gold standard in the 1930s, moving off of fixed exchange rates in the 1970s, and the advent of modern independent central banks around the world in the 1980s and 1990s. Like all of these changes, there will be uncertainties during the transition, but after awhile, central banks and financial market participants likely won’t be able to imagine doing things any other way.”

It would make one more confident in such forecasts if the leading lights of the policy community had not been looking the wrong way in 2008. How did they miss the biggest event of their professional lives? The simple answer is that, though central bankers believe themselves to be independent of their governments (a debatable claim), they are hardly independent of each other or of the doctrines of John Maynard Keynes and his modern-day disciples.

The Nobel physicist Richard Feynman had their number as long ago as 1974, when, in an address to the graduates of CalTech, he warned against “Cargo Cult Science.” He talked about the inhabitants of the South Seas who, after seeing a cargo plane once land on their island, build makeshift runways and don bamboo headphones to re-create the setting in which the plane would land again. Cargo-cult scientists, like the islanders, do everything right, Feynman said: They “follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.”

So it is with monetary policy. The economists build their runways and don their headphones. They create their econometric models and decorate their scholarly papers with mathematical appendices. Like the hopeful cargo cultists, they faithfully implement the rigmarole of modern science. Still, the economic planes don’t land.

Meteorology is a legitimate science, though anyone with a weather app on a smartphone knows how fallible the meteorologists are—how frequently they revise their forecasts of the short-term future of such inanimate things as raindrops. How much less reliable, then, are the economists who presume to forecast human behavior not just over the course of days but over the sweep of years?

As for the campaign for zero cash in the service of negative interest rates, Mr. Rogoff’s brief is best seen not as detached scientific analysis but as a kind of left-wing crotchet. Strip away the technical pretense and what you have is politics. The author wants the government to control your money. It’s as simple as that.

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max2205's picture

Minimum wage....minimum interest....because it matters to a capitalist economy. .... the Fed has criminalLy over stepped it's purpose.   Thanks Congress. 

Captain Chlamydia's picture

5 things they do not tell you about economics - Ha Joon Chang

1. 95% of economics is common sense

2. Economics is not a science

3. Economics is politics

4. Never trust an economist

5. Economics is too important to be left to the experts

chunga's picture

6. The tribe always tries to steal everyone's money.

bleu's picture
bleu (not verified) chunga Sep 12, 2016 9:15 PM

Curse of CASH??? What of the American CURSE? http://wp.me/p4OZ4v-3z

ejmoosa's picture

Keynesian economics is not a science.

Austrian economics is a science.

The problem is that economics is one of the newest of all sciences.  And the field has been hijacked by Keynesians who, working with government leaders, are leading us down the path of destruction as would a quack doctor would if a real illness came to town, and no one knew about simple hygiene that could defeat that illness.

We need to wash our hands of Keynesians and rid ourselves of their bad policies once and forever.


Captain Chlamydia's picture

Libertarian myself. I know. 

BarkingCat's picture

Neither economics is a science.

Economics cannot be a science because it tries to shove into formulas something that is not quantifiable - human behavior.

Austrian economics is superior because it does not pretend that it has the magic formula to control every uncontrollable aspect of the economy (including human behavior).


ejmoosa's picture

So you want to say human behavior is not predictable?

Higher minimum wages do not cost jobs?

Price increases do not reduce sales?

The more you tax the less you get of something?

These results are more than predictable.

Silver Shield's picture

This war on cash meme is another controlled Hegelian Dialectic.
Only gold and silver offer a true option out of this rigged game.
And at this current gold to silver ratio... Only silver is an option.

Kagemusho's picture

With their severed genitalia in their dead mouths. As to which comes off first, heads or reproductive equipment, well, flip a coin.

Old Dirty Bastid's picture

Reproductive equipment - so we can see the look of shock in their eyes before the beheading. It's the simple things that make life so worth getting up in the morning...

MalteseFalcon's picture

"Then, again, one could legalize certain narcotics to discommode the drug dealers and adopt Steve Forbes’s flat tax to fill up the Treasury. Mr. Rogoff considers neither policy option. Government control is not only his preferred position. It is the only position that seems to cross his mind."

It's always the solution that gives these frauds away.

Always solving "the problem" with less individual freedom and more government control.

A similar fraud?  "Climate change",

HardAssets's picture

Typical Rules for Radicals communist tactics. You can't reason with them, because their apparent irrationality is only a tactic.
They want control and will tell any lies to get that.
They lie to us and to their 'useful idiots'.

An example of this is the guy who came up with obama care. He admitted that they lied to get it passed. Later he lied again while trying to claim he was misunderstood.

NAV's picture

And if the savers don’t stop saving at -3%, line ’em up and shoot ‘em. That’ll keep ‘em from saving… if they’re dead.

Let’s see, mathematically speaking, if Ken Rogoff were reduced to 0%, Harvard would save upwards of $300,000 annually. Not a bad return…

Kirk2NCC1701's picture

re "Bankster heads on pikes."

That sounds like anti-Bankerism, possibly anti-Kazarian.

Even so...  Where are those damn pikes?

fockewulf190's picture

It´s bad enough that people are working for colored pieces of paper. 

Now they want to snatch even that away and force you to work for digital ones and zeros.

Just for shits and gigs, you´ll then be charged to store those virtual ones and zeros in an electronic bank account. 

Then comes the law that all deposits, withdrawals and purchases, including investments, must be booked to, from, or made, using your own designated payment card issued from a government bank.

Then comes the law that mandates the collection and inspection of all financial data from such accounts for income tax assessments, upon which any owed taxes of any kind will be automatically deducted from, or credited to, your account.  No more yearly tax filings.

Then comes the law mandating electronic implants for all humans.

Next thing down the pipe is a tax on human oxygen consumption.

To be followed by an emissions tax for belching out carbon dioxide and contributing to global warming.

Which will prompt the adoption into law of the Georgia Guidestone´s Rule #1: MAINTAIN HUMANITY UNDER 500,000,000 IN PERPETUAL BALANCE WITH NATURE.

And then the globalists will have won.

VW Nerd's picture

...to be followed by an order to do this, or do that, and if you do not comply within 2 days, your account will be frozen.  If in 10 days you do not comply, your account will be confiscated.  An authoritrian's wet dream.

doctor10's picture

anybody serious about recapitalizing the USA will release the 500, 1000, 5000 and 10,000 currency notes. ASAP

junction's picture

Off topic: Now we know why there was an insane rush to get rid of Roger Ailes at Fox News, an unreliable news censor.  As the mainstream press pushes its "cargo cult" version of the news, Western civilization is under constant attack by the NWO's proxy killers, insane jihadist killers flush with money to buy whatever they need to carry out their killing sprees.  Ailes was always a serial sexual molester, using his position of power and authority to try to score.  A fat old bald man trying to paw Miss Americas.  Until Hillary's health went into a death spiral, Ailes was an acceptable risk, that if he let his troops actually tell the truth about Hillary's damaged health, her true health situation was not that bad.  Two months ago, Hillary's health turned real bad, with signs of vascular dementia.  Now, Ailes had to go and Gretchen Carlsen got the assignment to shaft Ailes.     

LawsofPhysics's picture

Please, The Fed already controls the money and OUR GOVERNMENT!

What kind of bullshit is this?  Roll the motherfucking guillotines, nothing changes otherwise.

Toonces McGraw's picture

I wonder if they will outlaw pallets the same day they do cash, hostages be damned.

adanata's picture


Yep... they're just tightening the noose.

loveyajimbo's picture

GRANT for SecTreasury... or the head of the Fed, while he breaks it down and ENDS it... after an in-depth audit and many prosecutions...

conraddobler's picture

Cracks in the narrative starting to widen?

Ruh rho Shaggy.

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Sep 12, 2016 4:43 PM

Of course it is all about control! Serfs that find a way to avoid the skimming are a problem.

King Tut's picture

That's what it is all about- money=storage of labor- when you are given the authority to convert labor into paper you can then skim off someone else's labor without actually having to physically do work whether it's fractional reserve banking, loaning w/interest, taxation, etc. 

Francis Marx's picture

Control my money??? They steal it now. Thou shall not covet thy neighbors stuff.

AlbertthePudding's picture

Isn't this just a case of another "useful idiot" chess or no chess!

In.Sip.ient's picture

No use for $100 bills???


Does nobody buy weekly groceries for a family???

When's the last time that bill was less than

$100 ...!!!




BarkingCat's picture

Carrying hundreds today is like carrying twenties was in the 1980s.....or maybe 1970s.

It really does not go that far. I usually take out a $1,000 when I go to the ATM and when shopping I only pay with cash. That $1,000 does not last as long as I think it should

Bunga Bunga's picture

Financial repression does not work when you can flee from it.

cowdiddly's picture

Trying to blame cash as the reason for terrorism or crime is a simpleton's exercise. You could just as easily make the case that cars or computers zip lock bags or a multitude of things makes it possible. An absurd logic.

Its true that the real reason they want to ban it is more control and in a NIRP world cash sittting there becomes king and people will hoard cash and metals and such to protect themselves..

They will never actually be able to ban it for 2 reasons.

The first reason is they very reason's this Rogoff idiot mentions, terrorism and crime. If you ban cash then the trillions the big banks launder for drug lords  the gov't heroin ops and the ability to do black market transactions will find other means bypassing the banking system that will steal the big banks profits or their cut if you will. No more gunrunning profits, or bribery profits for the banks. Ain't gunna happen

The second reason is that if you ban cash, then then the peole will be forced to use alternatives. The use of crypto-currency, metals and foreign notes like Canadian or Euros will take its place. That;s the fastest way I know of for the US dollar to LOSE its reserve currency status  and the Rembini is waiting all to willing in the wings to take its place in transactions legitimate or other.

They are at lands end and want to go to the ridiculous idea of NIRP. but cash, bitcoiners and hoarders are in the way. They now realize that QE in reality only ends up with the banks and asset managers who then turn around and frontrun these same baffoons and buy the very same  bonds  paper and stocks that the CB does thus the money never makes it to the real economy to create the inflation they are Jonsin for.

Now that they have painted theirselves into the corner they really only have two choices left which are in reality just two forms of the same thing. HELICOPTER MONEY

A) They can get the money to the real economy by giving it directly to the people which they LOATH to do because that lets you, the debt slaves, off the hook who they planned on your perpetual servitude. Never gonna happen

B) They create helicopter money and give it directly to the government for huge infrastucture spending projects to get the money into the real economy.

AND  lookie lookie CO-INKIDIKIE. Here is Donald Trump with an original 1% chance of getting elected and his Giant 2500 mile Wall wiping out 16 of the finest liars money can buy and the last remaining contestant passing out sick.

Who these clowns think they are foolin anyhow?.you have a choice? RIGHT



Dark Daze's picture
Dark Daze (not verified) cowdiddly Sep 12, 2016 5:44 PM

Well, look, what it really is, is a tax. A tax that is planned on being implemented by a PRIVATE BANK on all citizens, with absolutely no authority from Congress. 

I find it so interesting that people that are worth 10, 40, 100 billion dollars feel no duty to pay their fare share. They should be stripped of their citizenship and deported to Tunisia.

booboo's picture

Terrorist don't need cash when Uncle Schmuk is dropping finished goods in your camp

NAV's picture

There’s ample so-called proof in the New York Times article cited by Tyler today -- Trump Slams Fed's "False Stock Market", Says Yellen Should Be "Ashamed" -- that the Federal Reserve is not independent, but the real proof is that the NYT, the Empire state’s voice of the bankers, is on the Fed side against Donald Trump.

IOW, The Fed is a gang including the NYT. The Fed is not an arm of anything; it is a full body. And the government is not an arm of the Fed, it is a subsidiary – it works for the Fed.

Several times a week, the New York Times uses a biased, anti-Trump headline story on the front page. The reason?  Donald Trump is a problem for the Federal Reserve.  If there’s one factor that defines the Trump campaign, it is that it is anti-politician, and for Trump to charge the Fed with politics is to begin hitting at the core of the central bank’s criminal takeover of the American economy.

There’s a reason why Goldman and the rest of the Fed gang put their chips on Hillary and would prostitute their media outlets, such as the WSJ and the NYT. And there’s a reason why Blankfein even supported Hillary against Barack Obama: the Federal Reserve is a private larceny center doling out rewards for political prostitutes and punishment for renegades like Donald Trump.

It is said that the presidency is stronger than the Fed because President Lyndon Johnson strong-armed Fed chairman William McChesney Martin.  The difference is that Johnson strong-armed the Fed chairman to get money for a project that would protect his presidency. Donald Trump intends to strong-arm the Fed to begin breaking its hold on America’s financial system.

This time, it is different.

Dark Daze's picture
Dark Daze (not verified) Sep 12, 2016 5:39 PM

Great article. Totally shredded him, in a very polite way. Jim Grant is what we need a lot more of.

hoagy goldmikel's picture
hoagy goldmikel (not verified) Sep 12, 2016 6:04 PM

Ken Rogoff is a tool of the American Elite - Trump and Rothchild will be taking him out shortly.



Omen IV's picture

Rogoff is a scum bag - he does what these clowns did at Harvard:

The internal sugar industry documents, recently discovered by a researcher at the University of California, San Francisco, and published Monday in JAMA Internal Medicine, suggest that five decades of research into the role of nutrition and heart disease — including many of today’s dietary recommendations — may have been largely shaped by the sugar industry.
“They were able to derail the discussion about sugar for decades,” said Stanton Glantz, a professor of medicine at U.C.S.F. and an author of the new JAMA paper.
The documents show that a trade group called the Sugar Research Foundation, known today as the Sugar Association, paid three Harvard scientists the equivalent of about $50,000 in today’s dollars to publish a 1967 review of sugar, fat and heart research. The studies used in the review were handpicked by the sugar group, and the article, which was published
in the prestigious New England Journal of Medicine, minimized the link between sugar and heart health and cast aspersions on the role of saturated fat.
The Harvard scientists and the sugar executives with whom they collaborated are no longer alive. One of the scientists who was paid by the sugar industry was D. Mark Hegsted, who went on to become the head of nutrition at the United States Department of Agriculture, where in 1977 he helped draft the forerunner to the federal government’s dietary guidelines. Another scientist was Fredrick J. Stare, the chairman of Harvard’s nutrition department.
In a statement responding to the JAMA report, the Sugar Association said that the 1967 review was published at a time when medical journals didn’t typically require researchers to disclose funding sources or potential financial conflicts of interest. The New England Journal of Medicine did not begin to require financial disclosures until 1984

ClownBaby's picture

Hookers don't take checks.

aminorex's picture

This is why Monero (XMR) has appreciated 200x since I started buying, and why I think it is still 50x undervalued.  There is no other currency which protects your privacy and can not be seized. $25 in 2017, $1000 in 2020.

Econogeek's picture

Jim Grant for Fed Chairman.   Hope the Trump people are smart enough to put him at the top of the list.

ultraticum's picture

Trump will load up the bus with the usual Keynesian retards.  We will all learn soon enough . . . again . . . that the red/blue Statist paradigm is no way out of this mess.

JailBanksters's picture

Look at it this way

How many Jewish advisors does trump have on the payroll ?


JailBanksters's picture

Hows that going to work, you've just changed the name on the door.

It's the same criminal banking cartel, you have to shutdown down the private bank creating their own private money and selling it to the Government.


Stevious's picture

$100 bills are already gone -- history.

In 1964 at a convenience store a $100 bill would buy 2,000 hershey's chocolate candy bars at a nickle each.

Today at a convenience store at $1.19 you can buy 84

That means that a $100 bill today only has 4.2% of its former purchasing power.  96% has vaporized.


Mr.BlingBling's picture

You're ignoring heuristics. The kiss of HFCS is infinitely sweeter than that of icky old sugar.

VW Nerd's picture

Control a nation's money and you control the nation.  Control the world's money and you control the world.  Control a person's money and you control the person.  History bears this out.  Ask the Rothschilds.  Real money and honest currency are soverign in one's posession.  Many would consider any person or institution who would ponder to abolish real money and currency to be of evil intent as Mr. Grant intimates in his article.

NAV's picture

Ken Rogoff is proposing a usury machine – which will operate automatically.

Could it be that the Fed is fine tuning its usury operations down to the smallest level, the people, eliminating even competition from savers? In fact, eliminating savers altogether? As for themselves, I received a Cash Advance offer from Citi this month with an APR of 25.49% and a penalty APR of up to 29.99%, to vary based on the Prime Rate.

Diodorus Siculus, first century Greek historian, wrote: “’Usury’ is the practice of lending money at excessive rates. This has for centuries caused great misery and poverty for Gentiles. It has brought strong condemnation of the Jews.”

Saint Thomas Aquinas, 13 century scholastic philosopher, wrote in “On the Governance of the Jews”: “The Jews should not be allowed to keep what they have obtained from others by usury; it were best that they were compelled to work so that they could earn their living instead of doing nothing but becoming avaricious.”

Martin Luther, TableTalk of Martin Luther: “But the Jews are so hardened that they listen to nothing; though overcome by testimonies they yield not an inch. It is a pernicious race, oppressing all men by their usury and rapine. If they give a prince or magistrate a thousand florins, they extort twenty thousand from the subjects in payment. We must ever keep on guard against them.”