Once in a while I read an article that is so absurd on its face that I wonder if the writer has penned it purely as satire or as a honey pot for trolls. Today was such a day when I read a piece in Slate by Timothy Noah that argued that the Federal government should stop printing $100 bills because they are used primarily for tax evasion and organized crime. Really?
People use $100 bills all the time for entirely practical reasons… I prefer to use cash to pay for things and large bills are easier to carry. It’s about being practical, not crime.
I prefer to use cash because despite what Visa will have you believe, debit cards are not as good as cash and much to Mastercard’s pleasure there are a great many things in life that are not indeed priceless. I use cash because I don’t want to see credit card processors and card issuers benefit from rent seeking on my dime.
To be clear I do not believe that regulatory agencies should intervene any more than they already do in payment networks and interchange transactions between consumer and merchant banks because the fact is that the paperless transaction system that we take for granted today is extraordinarily complex and the institutions that invest in these networks should be able to profit from them. I don’t shun credit or debit cards either, in fact I purchase a great many things online where cash simply is not an option.
American Express recently sponsored a “small business Saturday” event that I found ironic given that American Express is the least friendly of credit card networks and if anyone really wants to express support for small businesses they would leave their credit card in their wallet and use cash so that the merchant could pocket the 2% (or more) in fees that automatically go to the transaction network to process paperless transactions.
For a fascinating look at the economics of payment card networks read Todd Zywicki’s paper on this subject.