Paper money has its advantages

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Sir, Kenneth Rogoff, in “Paper money is unfit for a world of high crime and low inflation,” (May 29) desires to eliminate “the zero bound on policy interest rates,” thus repeating the so-often expressed but incorrect economists’ notion that there is such a “zero bound”.

That he knows it is incorrect we find out in the next sentence, where the problem is said to be that central banks cannot set “rates too far below zero”. So the “zero bound” has become the “too far below zero bound,” quite a different “bound”. How far below zero “too far” is, he does not say.

Prof Rogoff goes on to wonder whether “governments could credibly issue an anonymous electronic currency” instead of paper money.

Whether or not one shares my personal preference for banknotes, one has to admit that with governments’ obvious propensity to spy on the citizens, it would take a very bold faith, indeed extreme credulity, to believe that any government would make or keep an electronic currency anonymous.

Alex J Pollock, Resident Fellow, American Enterprise Institute, Washington, DC, US

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