Trump Federal Reserve Board of Governors nominee Marvin Goodfriend reportedly said in 2016 that cash should be phased out of circulation so the Fed can charge negative interest rates and force consumers to pay fees to keep money in savings accounts.
Trump Federal Reserve Board of Governors nominee Marvin Goodfriend reportedly advocated on two different occasions the elimination of cash from circulation in an effort to prevent individuals from hoarding cash in the event that the Federal Reserve were to push a negative interest rate policy during a financial crisis.
The Mises Institute notes that Goodfriend first floated the idea in a 1999 paper called “The Case for Unencumbering Interest Rate Policy at the Zero Bound” and again promoted the concept at a 2016 Federal Reserve conference in Jackson Hole, Wyo.
Goodfriend reportedly said that the Fed needs the option to push interest rates negative, which would cause consumers to pay fees in order to keep their money in savings accounts, and that cash should be eliminated to prevent banking consumers from pulling their money out of banks to avoid paying those fees.
Bloomberg notes that Goodfriend suggested a few theories for how to phase out cash. He floated eliminating large bills to make cash less convenient. He suggested that the Fed charge banks and/or consumers fees for issuing paper currency. He advocated that the issuance of cash be taxed such that consumers only receive 90 cents when withdrawing a dollar. He also called for abolishing cash outright. The Wall Street Journal notes that Goodfriend additionally suggested that cash bills should contain a magnetic strip so they can be scanned and tracked as they move through circulation.
The Federalist’s Connor Boyack wrote, “From Sweden to India and Venezuela to Australia, governments around the world have already taken steps to eliminate cash from their economy. This is particularly attractive in countries like China, with a government that wants to be able to track its citizens at all times.”
Cash purchases are notoriously difficult for regulators to monitor.
In a January Senate confirmation hearing, Goodfriend downplayed his seriousness in advocating the policy.
“I wrote a paper in 1999 for a Federal Reserve System conference which asked what would happen if interest rates went to zero, and what could the Federal Reserve do. I didn’t propose that, that was an academic paper showing what could be done….It was not a proposal. It was an emergency matter we considered as a matter of thinking about these things before anyone ever imagined anything could happen like that,” he said, omitting any mention of his 2016 speech on the subject.