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Lunch » Tags » Books » Reviews » A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States » User review

A lesson in the operational definition of money

  • Dec 10, 2007
The history of banks and banking in the expanding United States in the late eighteenth and early nineteenth centuries is an amazing one. As the frontier moved westward faster than anyone had anticipated, vast new lands were opened up for settlement, producing ever increasing amounts of raw goods. While these goods were valuable, in order for the transactions to be carried out, there needed to me some generally accepted medium of exchange. In other words, there needed to be an adequate supply of currency.
Many people held to the precious metal standard, where all currency was to be in the form of coinage, with the largest denominations being struck from silver or gold. There were two serious problems with this position. In the first case, there simply was not enough metal available to make the number of coins the expanding economy demanded. Therefore, the only way that adequate currency could be created was by the issuing of paper money. The second case was that there was no adequate level of central currency as the Federal government generally abrogated any responsibility to develop a sound national currency that was backed by the government and supported by strong laws that were enforced.
Given these major restrictions, free enterprise did what it will always do; it will create a set of solutions to these problems. The first was the development of local banks, started by individuals with an initial holding of secured government securities. Using this as their base, the banks would print and circulate their own currency. However, in the absence of strong government regulations of these banks, many if not most, issued currency whose value was far in excess of their ability to cover. These banks were known as "wildcats" and while they served a desperate need, their high rate of failure led to a high level of public cynicism. To many people, these bankers were criminals.
The second solution was the development of sophisticated groups of counterfeiters, who generally created notes drawn on banks with a reputation for solidity. In an ironic twist, to many people, these counterfeit bills were considered to be more valuable than the notes from the wildcat banks. Therefore, the counterfeit bills were widely accepted as currency and governmental attempts to arrest and bring the counterfeiters to trial were initially ineffective. This was truly an example of an unusual solution being constructed out of an otherwise intractable problem.
This unusual situation still existed until the American Civil War broke out. The North needed a way to finance the enormous cost of the war and a large part of their solution was to establish a sound currency and print and circulate an appropriate amount of money. Their tactics were so successful, even the citizens of the Confederacy began using it as their currency.
This is one of the most interesting tales of how enterprising business people in combination with the citizenry developed a solution to a major problem. While it involved a great deal of lawlessness, the solution demonstrates the theories of money in its' pure state. Even fake money can be transformed into real money if enough people are willing to accept it as such. Which validates the definition of money as "A generally accepted medium of exchange." Note that legal does not necessarily have to be a component of the operational definition.

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More A Nation of Counterfeiters: Ca... reviews
review by . January 18, 2008
. . . on a subject most people don't even consider!    I'm a big history buff. I'm even reasonably proficient on some of the monetary battles which have taken place throughout American history. But the material presented in this book was truly new to me.    Although a history book, the author is a good storyteller while relating the accounts of various counterfeiters operating at different points in American history. One also learns a great deal about the …
review by . December 27, 2007
Like the early American currency that the author describes, this book is a bit inflated. We are told that in many places, counterfeit and other dubious currency was the only medium that enabled trade and that people were often grateful for the presence of any paper money. Then, a few pages later, we are told the same thing again.  Repeating a point for emphasis is good, but combined with labored prose, the repetition makes for annoying reading. What's worse is that some of the background …
review by . December 24, 2007
I admit to one of those folks who thrive on trivia, in particular, historical trivia. This book fit my needs perfectly. This history of counterfeting in our country, the United States, is not something that you run across in your everyday history text, nor, with one exception, much less an entire book devoted to the subject. This I liked. The author has done a wonderful job of research and has presented it is a very readable fashion. Mr. Mihm has taken a subject, that at first glance, would seem …
review by . December 02, 2007
A book about counterfeiting runs the risk of going in two, potentially dangerous, directions. It could become a technical tome, full of monetarist detail or obscurities of weights and measures. Or it could be a police story, full of the derring-do of the Secret Service and their predecessors but spare on the historical or economic context of the issues involved. Stephen Mihm should be commended, not only for avoiding these two extremes, but in fact for combining a great deal of historical and economic …
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Charles Ashbacher ()
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Charlie Ashbacher is a compulsive reader and writer about many subjects. His prime areas of expertise are in mathematics and computers where he has taught every course in the mathematics and computer … more
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Mihm vividly and entertainingly describes the muddled and often fraudulent economy of pre-greenback America: those freewheeling, pre–Civil War days when the federal government not only did not print paper money but likewise did not bother to regulate those regional banks that did. With more than 10,000 shades and varieties of cheaply printed currency on the market by the 1850s, counterfeiters had a field day. Mihm, an assistant professor of history at the University of Georgia, details the flimflam men and their ruses, and paints a stark picture of a world where counterfeit currency was at times issued in such volume that it threatened to spark significant inflation. Mihm's villains include the notorious privateer, minister and alchemist Stephen Burroughs, along with numerous bankers, engravers and charlatans. Mihm's title was a phrase used in 1818 by Hezekiah Niles, proprietor of what was the country's leading financial journal, theWeekly Register. Niles wrote, Counterfeiters and false bank notes are so common, that forgery seems to have lost its criminality in the minds of many. As Mihm ably shows, the chaos did not end until Lincoln's presidency, and even then it receded only grudgingly. 37 b&w illus.(Sept.)
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ISBN-10: 0674026578
ISBN-13: 978-0674026575
Author: Stephen Mihm
Publisher: Harvard University Press

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