[candiodari]

This statement is far too strong. Obtained illegally - sure. But keep in mind that 99.99% of such money would be money paid for goods or services fair and square - just not taxed.

It is quite customary in Europe, and frankly everywhere on the planet, for tradesmen, shopkeepers, ... to not register 100% of their receipts as income. That way they can increase their income by not paying tax on a decent part of it. Keep in mind that these people would have highly variable incomes, would have unpaid invoices, ... all sorts of things that can't really be checked.

It's not like we're talking bribery and drugs money here. Of course that's exactly what the government would like you to think. In practice the purpose of this is to give the government greater and more direct control over the economy.

Europe has done the same [1], for ostensibly the same reason, but fact of the matter is that it's being done to prevent people from avoiding the extra tax the ECB wants to create : negative interest rates [2]. Right now Europeans can keep money outside of the banking system in large quantities if they so desire. Killing the large notes takes this right away, not by law, but in practice.

The problems are twofold. Firstly are practical problems. Eliminating cash, either totally or simply for larger transactions introduces costs (for small time merchants, 3-5% would be typical in Europe), clearing risks (just because a bank transfer happens or is confirmed does not mean the bank can't take the money back, most merchants would treat this as an extra 2-20% cost depending on the business they're in), extraneous risks (bank accounts can be blocked by various means, the banks themselves, the IRS, or simple stupidity ... without regard to how it affects their owners. You can lose access to any bank account and you have little immediate recourse). And of course, governments don't want to help anyone out with these problems, they're merely interested in imposing themselves as having total control over all money, not just their own.

Secondly the moral issue, or the slippery slope if you wish. Do we want to give governments this power ? Do you want governments to be able to prove, for instance, that you gamble online (can it be used in divorce cases to prove you can't be trusted with money, for instance ?), or that you watch porn, or have weird hotel bookings, or ... Do we want the IRS to simply have the power to do a big data search for anyone having transactions of 3x their monthly income or more and block them ? Because that's the power that's being handed to them by these sorts of measures. They will use this power, even if probably not right now.

There's related issues. Does the central bank have the power to do this ? In practice it does, but why isn't this being discussed in parliament and publicly debated ?

[1] http://www.nytimes.com/2016/05/05/business/international/ecb... [2] https://www.sovereignman.com/trends/it-finally-happened-500-...

[tormeh]

>It is quite customary in Europe

Except northern Europe (although not Belgium). But yeah, it's pretty common.

>fact of the matter is that it's being done to prevent people from avoiding the extra tax the ECB wants to create : negative interest rates [2].

You can avoid that tax by keeping your money in anything but money - which is what the ECB wants. Just buy an index fund. That's what you should do anyway.

[candiodari]

> You can avoid that tax by keeping your money in anything but money - which is what the ECB wants. Just buy an index fund. That's what you should do anyway.

Whichever way you do that, it involves extra risk. Central banks/governments forcing people to take more risk ... well let's put it this way ... we all know what comes next.

2 reasons. Firstly there's a reason they're doing this, so there's already a problem. By definition that would be a problem that puts asset prices at risk. So it means that risks on most assets are higher than generally believed (because the government is pushing the measure of that risk - interest rates - forcibly down, you are bound to underestimate risk as a result). What if the reason behind some of those risks surfaces ?

One of the things the government is doing here is forcing the banks/funds/... to take comparatively massive risks with your pension. The results are already surfacing, but they're getting worse - fast. And the government will have to bail these out, as not doing that will kill the livelihood of tens of millions of people, which will not come without huge consequences.

Second reason is, that even if there's not already a disastrous problem, this takes the capital preservation + profit motive away from markets and (partially) replaces it with pleasing the government/central banks. Central control has always failed, and this next attempt will be no different. The nail factory in Soviet Russia story seems apt here, and is obviously a massive oversimplification, but the basic problem is there.

[pjc50]

Not all risk is equal, and there can be no implied right to risk-free preservation of capital.

What the banks would like people to do is invest in productive capacity and consumer goods; this feeds the "virtuous circle" of employment and economic growth. Investing in businesses would have a normal, uncorrelated risk profile.

What I think people are struggling with is the prospect of big, correlated, exogenous risks like global warming and the collapse of global trade into protectionism. If that kind of thing happens the total amount of value in the economy goes down - so who bears that risk? Do we try to distribute it equally, or put it all on governments which may not be able to bear that kind of systemic collapse? Or do we let the capital-holding class protect themselves while real wages collapse and the risk falls on those least able to bear it?