In Freakonomic’s episode, economist Kenneth Rogoff argues that we should phase out paper money, as it is mainly used for crime including drugs and money laundering. I believe that it is a good idea to get rid of large denomination paper money as it is mostly used for illicit activities. However, I disagree that getting rid of paper money will solve the whole issue. First, there are cryptocurrencies and it is likely that criminals are going to use more cryptocurrencies for their illicit activities. Second, there is always issue of when a system fails. What do we do if the network fails and we can’t access our accounts? Rogoff says small amounts of money will still circulate but hmmm…Third, with all the money online, it is easier for the government to track and put constraints on a person. Given that governments tends to become more inefficient and corrupt with time that might not be the best scenario.
Hence, what should we do? I do completely agree that large denominations are more lucrative for criminals rather than average people. So getting rid of 100, 50 dollar bills will not be an issue. However, I believe keeping some paper money around will be useful for emergency purposes if the electronic system fails. Also, I do believe that cryptocurrency will be used more and will hopefully become more reliable overtime so we can store some wealth there. Hence, when you seem safe do diversify to cryptocurrency because it will give you anonymity and less accessible to the government.