Book Review: A Nation of Counterfeiters

The book “A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States” by Stephen Mihm is an attempt at studying the history of the American way of printing money. This does not just include illegal printing in someones basement but it also includes banks when there was not a national currency.

The problem with this book is the author’s lack of understanding Economics, especially in relation to Capitalism. Let take a look at a paragraph about his opinion of Capitalism:

“This was free-market capitalism at its most radical, and the inevitable consequence– rampant counterfeiting– belied claims that private economic interests inevitably contributed to the public good. Neither the banks nor the bank-note engraving firms had a stake in the larger consequences of their actions; neither had an interest or even an ability to make the sort of decisions necessary to frustrate counterfeiters. Rather, most bank not engravers and the bankers they served put profits– and their own economic survival–before the public interest. That meant producing notes as cheaply and efficiently as possible. But what was good for business was good for counterfeiting, too.”

Murray Rothbard once made the claim that those who do not understand Economics, should refrain from talking about it. This becomes impossible because Economics has invaded most other disciplines so we are going to get ignorant comments like this.

First, the banks did have an interest to keep their currency from being counterfeited. The market actually allocated some resources in stopping counterfeiting, which was the use of detectors, which he mentions in his book. These detectors helped the consumer and businesses tell the difference in the currencies. Mihm might argue that this was the consumers protecting themselves. This is for many reasons. The more counterfeit a bank’s currency becomes the less people are going to use that currency. This is a natural devaluation.  Not to mention that as soon as someone learned that a bank has issued more currency (or someone has printed extra) then people will run to the bank and demand the specie (i.e. Gold).

This is another major error in his book. He constantly talks about how these “wild-cat banks” would print currency without having the species. If a bank did this it would go out of business, people would run on the bank. This is somewhat like what we do now. Wachovia was in the news as a troubled bank and people ran on it, pulling their money out, which put the bank out of business. In fact, banks do this today. This is called fractional reserve banking. The banks are only required to keep 10%. So if you deposit $100 dollars they keep $10 and loan out $90.

Now that I have bashed the book, let me mention that it was not completely bad. It does a very good job of describing the counterfeiting operation found near the Canada-U.S. called Cogniac street. The other part that I found very interesting was his account of the Confederate money being so inflated during the Civil War that the South started to use the North’s money. This means that the South was making itself apart of the North economically. What I am curious of is how they got the currency? They must have traded with the North.

Overall, I would say that the lack of Economic understanding lowered this books score. I give it a 3/10.



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