“Scrap Cash” says BoE Chief Economist
At first I thought Mr Haldane was a man after my own heart. For some time now I have been saying that money / cash as we know it will disappear as a means of transaction fairly soon. But Mr Haldane is a bit more radical than that. He wants to punish savers good and proper. Holding cash – then you pay for doing so. Haldane’s really devoted to negative interest. ‘Make ‘em put their money where the cash till is.’ That’s how he sees the future world.
Now I am as keen as anyone that the world economy should flourish. In fact it has been and still (more or less) is, at present. That won’t last because the cycle, that old treadmill of economics, is heading for a downturn. But what goes down must come up so a little patience and we should see the ‘brokers delight’ of buying and selling on a big scale once again.
Or will we, Mr Haldane?
You obviously don’t think so because you are recommending tough punishments for those who are prudent. Negative interest has the same effect as more vicious forms of torture. It forces you to be imprudent – which is, after all, what it is designed to do. It compels you to spend on possessions and services or propping up financial markets that would be better left to the speculators who are busy fixing them. Why is the Bank of England’s Chief Economist and Executive Director of Monetary Analysis and Statistics so keen to stop us saving?
Turn the saving coin over and you get spending. That is what makes an economy grow. Now spending requires two things – something to spend and something to spend it on. The first has been – and is still being – provided by Mr Haldane and his friends who have created money with which to “buy” debt thus freeing up cash to have that profligate splurge they confidently think will “kick-start” the economic cycle. Actually, in countries in which the cycle needs a boost it won’t work for the very good reasons that (a) people mostly have as much as they want (or can get into their overstocked cupboards) (b) we are all being taught to conserve the planet not rape it for increased material possession.
As far as I know, no economist has yet factored into the economic cycle the possibility that people will actually heed the warnings about planet destruction. It is true that many won’t. Many more live such poor material lives that they have a long way to go before they have emotional room to consider future generations. But the big spenders, America and Europe, are cooling their race to the shops. Others will follow. Uncontrolled growth is not an option.
The 2007/8 crisis jolted the behaviour of all thinking people. Its impact still rumbles on. Forcing spending by imposing negative interest rates would see people resort to cash hording, the first signs of an impending Weimar Republic. So, Mr Haldane suggests, let’s do away with cash then people (“the muppets”?) will have no way to behave prudently.
I do hope the man in the street sees through that, Mr Haldane. I fear for us all if he doesn’t.