Abolishing cash altogether Given that the limitations in the use of negative rates as a monetary policy tool ultimately stem from the ELB, some economists have entertained even more radical proposals such as: to tax cash to lower the ELB or to eliminate the ELB by abolishing currency altogether.46 These would reduce or remove the arbitrage opportunity to escape negative rates by substituting deposits for cash.
By removing the lower bound, abolishing cash would provide monetary policy with ample room for manoeuvre in the case of severe cyclical downturns. Abolishing cash would also hamper some illegal activities and promote transparency. Last but not least, society would benefit from economising on the costs of storage and use of currency, which are non‐trivial.