The downward spiral continues. Americans are in danger of losing the remainder of their financial independence as the president has nominated an avowed enemy of cash, economist Marvin Goodfriend, to the Board of Governors of the Federal Reserve.
Goodfriend has written and has said in speeches (2016) that the existence of cash hinders the ability of the Federal Reserve Bank (a private corporation) to “lower interest rates to less than zero,” which is nothing more than a euphemism for charging a fee for bank deposits (and, of course, paying no interest).
Tho Bishop from the Mises Institute says, “Given his radical views on monetary policy, it’s not hyperbole to suggest that Goodfriend’s nomination would represent a genuine danger to the economic well-being of every American citizen—or at least those outside of the financial services industry (emphasis added).” (reference) Goodfriend has also suggested lowering the value of printed money compared with its electronic equivalent. So in his plan, a ten-dollar bill would purchase less than the use of a debit or credit card for the same amount.
If you choose to deposit your cash in a bank and accept that the bank is going to charge a fee for safe storage, that’s your business. But Goodfriend’s idea of devaluing cash compared with electronic funds, encouraging people to stop using cash altogether, is an attack on financial freedom. As J.D. Tuccille said, “Cash means freedom, which is why so many [government] officials hate it.”
Harvard economist Kenneth Rogoff, a supporter of Goodfriend, said, “I believe that within a decade, all the world’s major central banks and treasuries are likely to have taken the simple steps necessary to create the foundations for effective negative interest rate policy in deep recessions or financial crises.” (reference)
Goodfriend believes, correctly, that the use of cash makes lowering interest rates below zero more difficult. And why would he want to lower interest rates below zero? As he has said, “In the next crisis the Fed might want to push interest rates into negative territory to prod people to stop sitting on their money and do something with it, such as consumption or investment that would get growth going again.”
As we’ve stated before, one of the ways a business acquires funds for startup or expansion is through borrowing. Borrowing from whom? From a bank. People don’t “sit on their money,” as Goodfriend has said. He knows very well that banks lend money to fund business expansion as well as to finance (unfortunately) consumer spending with credit cards and home equity lines of credit and myriad other forms of debt. There is no lack of consumer spending just because people use cash.
What he really wants is nothing more nor less than the ability to track and control all financial transactions. The advantage of cash isn’t just its convenience for relatively small, day-to-day expenses. The use of cash provides a shield between us and those in government who would like to track everything we do in order to ensure they mulct every tax penny out of us that they can.
To the extent that we are able to use cash our financial privacy is protected. If you choose to use your debit and credit cards and automatic payments for all expenses that’s your business. Government forcing you to do so is nothing less than financial tyranny.