-OpEd-

GENEVA — There is a war on cash. A growing number of countries are taking steps to restrict this concrete manifestation of our toils, with notable economists such as Larry Summers and Kenneth Rogoff even pleading for requiring all economic transactions to be electronic. What is their motivation, and is this an attack on freedom?

Greece, Sweden and Italy have already gone too far in limiting how cash is used. Former Prime Minister Mario Monti, who succeeded Silvio Berlusconi, reduced the authorized limit for cash transactions from 2,500 euros to 1,000 euros in 2011. The Danish government decided this year that boutiques, convenience stores and restaurants must stop accepting cash.

From a purely economic standpoint, cash doesn't have the same value as money in a bank account. The risk of the first corresponds only to that of the central bank, while money in an account is as risky as the commercial bank that is holding it — and the loans they can issue thanks to it.

For individuals, bills and coins offer assurance. "Everyone is obligated to accept money from the central bank," says German economic journalist Roland Tichy. "It guarantees both the forging and immediate realization of a contract at the point of sale: money for merchandise." In the age of cyber crime, he adds, "a keyboard is riskier than a banknote."

But those who want to limit cash transactions point to the risks of carrying it, not to mention the logistical cost of bills for banks and lost revenue for the state through black markets and tax evasion. Online businesses are naturally enthusiastic regarding a cashless society. But studies claiming to show the advantages of limiting cash transactions have been financed primarily by credit card companies, as Tichy observes on his blog.

The major reason for banning cash, favored by backers of Keynesian economics, is to support economic recovery. Former Treasury Secretary Larry Summers says excess liquidity could condemn the economy to lasting stagnation. Despite interest rates hovering near zero, investment opportunities still may not be attractive enough. If cash isn't banned, it may be necessary to introduce negative interest rates to get people to put their money to work.

Kenneth Rogoff, former chief economist at the International Monetary Fund, suggests that banning cash could kill two birds with one stone by supporting central banks in fiscal expansion policies, while also fighting tax evasion.

It's the debt, stupid

That theory is debatable, both economically and politically. The idea that liquidity is the cause of stagnation is widely disputed among economists. The underlying problem is the mountain of debt. Consumer debt levels more than doubled between 1980 and 2010 in industrialized countries, and the trend isn't slowing.

Daniel Stelter, author of Debt in the 21^st Century, explains that without reduction in debt levels, the hope for significant growth won't be realized. Unconventional strategies of central banks might permit a modest lift in GDP, but at the cost of devaluing money. Employment and investment won't actually take off. At the same time, slower productivity growth, the aging of populations, and rising taxes all conspire to put the brakes on growth. With no solution for lowering debt, there is no way out.

"When the situation demands it, the powers of the world are able to take drastic measures," Stelter explains in Manager magazine. The economist recalls when the government seized gold from American households in 1933. The goal was to combat the Great Depression and, more specifically, devalue the dollar. Now the question is whether authorities would go as far as to ban cash completely.

Individuals already hold relatively little of it. In Germany, the average person has just 103 euros in their wallet and 1,440 euros at home, according to the Deutsche Bundesbank. Approximately 80% of German transactions are still in cash, and the central bank reports that citizens want to keep it this way.

Government mistrust of citizens has become so great that any money not controlled or certified by the state is assumed to be the product of a reprehensible act. Cash has suddenly started to stink. It's no longer regarded as the fruit of honest labor or compensation that citizens would like to hold onto.

In Switzerland, anyone carrying an amount equal or greater to 10,000 Swiss francs (9,670 euros) must be able to furnish justification to the authorities. And this limit risks being reduced. Still, it's worth noting that there is a clear distinction between East and West: In Europe, suspicion can be prompted by the sale of a watch, while in Asian countries it's not unusual to purchase a building using cash.

"The sphere of private life does not exclude fiscal honesty," Andreas Lusser writes in his book Objections: Why Our Money Deserves Privacy.

When Russian novelist Fyodor Dostoyevsky was condemned to a penal colony in Siberia, he gave birth to the phrase, "Money is coined freedom."

A resistance movement is in the works to reject this Orwellian nightmare, this notion of total transparency for citizens. Private life is protected by dollars and coins, and it's worth defending.