Will the Real Counterfeiter Please Stand Up?

The USA Today is reporting that the Secret Service is saying that counterfeiting is up with the holiday season and the credit crunch. Here:

“Counterfeiting arrests in the USA jumped 28% this year over 2007 — the highest number since 2004, according to the Secret Service, a division of the Homeland Security Department that safeguards the nation’s currency. Counterfeiters passed $64.4 million in fake cash into the economy, a 5% increase over 2007 and also a five-year high, says Special Agent Darrin Blackford, spokesman for the agency.”

This makes sense that since the benefits of counterfeiting currency has gone up while the costs have been ever decreasing with technology. Now you can have a scanner and copies at your finger tips that will vividly print off anything. So it is very likely that counterfeiting is up. At the same time, stay at home moms do not turn into counterfeiters overnight due to an economic downturn.

The statistical problem is that it isn’t always true that more arrests mean more acts. It could be possible that the Secret Service has gotten more funding or better at catching counterfeiters. This would be through technology and more man power. I am not completely in love with econometrics but I believe a good regression to control for that would be good here.

The underlying story here is that what is the difference between the counterfeiter and the Federal Reserve. They both print money with nothing truely baking it. Back during the so called “wild cat” banking days, banks could only issue what currency they had in gold. If someone counterfeit their currency then it would cause there to not be enough gold in the vaults and this would be a huge problem. Now this isn’t a problem. If someone went out and counterfeited a one hundred dollar bill it would not make a large difference in the economy. The only difference is that the government is backing the Fed and the mint to print money.

With these bailouts the Federal Reserve will be issuing a lot of money into the economy via banks. The counterfeiters are actually helping them do their jobs. Of course, they aren’t going directly to banks.

The rest is here.


Published in: on December 29, 2008 at 12:35 am  Leave a Comment  
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