Tuesday, April 11, 2017
The German government justuifica the existence of cash
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- June 4th, 2017
The German Minister of Economy, Brigitte Zypries, manifested this week in favor of maintaining the use of cash , against those who propose its abolition, and was referred to a report of the advisory board of its portfolio, consisting of 25 economists.
The report, presented yesterday at the headquarters of the Ministry, also criticized the policy of zero interest rates of the European Central Bank (ECB), a point which, however, Zypries did not rule, following the tradition of not commenting policy of this institution .
Why keep the cash?
"The cash must remain an important means of payment and is justified in times of digitization , " said the minister.
As he explained, the independent advisory council defends "with convincing economic arguments maintenance of cash" and is an important contribution to current discussions.
The report was presented by the president of that council adviser, Hans Gersbach , and another of its members, the director, Martin Hellwig , a professor at the University of Bonn , who coordinated the drafting of the document.
The two themes of the report, the debate on cash and monetary policy of zero interest the ECB, were chosen in response to thecurrent debate and experiments being carried out in various parts of the world by reducing the possibilities of payments metal.
"All over the world have been reduced and high denomination notes currently circulating proposals to radically restrict the use of cash , " he recalled Gersbach before summarizing the main arguments of the proponents of the abolition of cash.
First , point, technological progress will stimulate and reduce costs ; In addition, the fight against the underground economy and illegal business would be facilitated and, finally, would make monetary policy with negative interest possible.
The advisory council considers l he three problematic arguments and the final effect is not seen by economists as desirable.
Central banks, the report said , would not save costs with the abolition of cash. "The issuance of cash, except for the one cent coin, he pays dividends to the ECB , " Hellwig said.
The increased use of the possibilities of electronic payments, the report said , should be left to market players and an intervention is only justified if there were serious distortions, while abolishing effective to combat the underground economy is "disproportionate " pointing economists.
Hellwig also expressed suspicion that the current debate has been fueled just by economists who want to increase the chances of influence of central banks and make it easier to introduce negative interest.
The danger of zero interest
From this, the final part of its report, economists warn of the dangers of a policy of zero interest.
Zero interest near zero, or explain economists, radically reduce the chances of profits of financial institutions , which is particularly serious if one takes into account the crisis that has gone through the banking sector.
"With near zero interest the veryfoundations of the financial system into question , " said Hellwig. His analysis says that the longer the policy of zero interest, the greater your risks and be more difficult to end.
According to Hellwig , some problems are already evident as the existence of a housing bubble or the fact that many people, with the possibility of investing their money in the traditional financial market, is resorting to dubious high - risk bets.
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