In the history book of great debate face-offs, this one will barely get a mention but the WSJ Weekend Review of Rogoff's new book by Jim Grant is a fun "must see." Rogoff's case against cash was outlined a couple of weeks ago in a WSJ op-ed. For some time, paper money haters have hidden behind the "almost all large denomination bills circulate in grey and illegal markets" premise. The cocktail party dollar amount per capita now hovers at about $4200.00 . The sounds right economics has not stood up to deeper investigations into the truth, however.
On the other side of the argument lies the verbal wizardry of the bow tie wearing Grant. (If he had an English accent he'd be infallible !) Oddly, the pure bred Bear with the strong affinity for yellow metal finds himself defending the cotton fiber fiat he became famous for bashing. Perhaps, Grant is putting Rogoff's idea to the fire because if followed Mr. Grant would lose his arch-villain. Like Mr. Glass and the Security Officer in Unbreakable #GIK. Thus, Grant's entertaining destruction of Rogoff's cashless society is couched on the sinister powers a CB would gain in such a system.
Our view is Rogoff is falling prey to the silliness of the Modern Monetarists. Since the collapse, these advocates have promulgated a simple counter factual -If it's not working, you need to do more. Living in the UpsideDown of negative rates lends no precedent of success. As Grant points out, Homer/Sylla show no prior time period for the phenomenon. Conversely, Grant fears any CB playbook that extends beyond the shackles of the gold standard - or silver, or zinc or Beany Baby. Are we to believe that Central Bank policy makers are conspiring to gain Dark Side powers with no pedigree of efficacy?
Monetary policy tends to work when performed in a fertile fiscal agar. The Negative Yielders have failed on multiple fiscal/macro platforms that could have provided traction. Deeper negative numbers are not the answer because the price of money is not the question. Electronic fiat is a higher Sacrament in the Order of Faith Based Financial Systems. Currency has its place. My suggestion to both men is this: How about we just get rid of the Penny?