By Dr. Paul Hein
Are you old enough to remember slugs? I don’t refer to the slimy garden pests, but to those featureless discs of metal that were used in coin machines in place of coins. I am old enough to recall seeing them and being told that you could put in in a candy machine in place of a nickel and get a candy bar. The person who used a slug robbed the candy-bar vendor because, although nickels were never lawful money, a person with twenty of them could exchange them for a dollar of actual money, i.e., silver; but a person with a bushel basket of slugs could exchange them for nothing.
Have you ever noticed the ridges on the edges of some coins? It is called a “milled” edge and it has an interesting history. Gold and silver are rather soft metals. It didn’t take unscrupulous people long to discover that one could shave some of the metal from the coin by running a knife around the edge and scraping off some of the coin’s substance. If you removed 5% of the coin’s weight by doing this, you could settle your debts at a 5% discount. The milled edge put an end to this practice — called “clipping the coinage,” by the way — by making it immediately obvious if the coin had been clipped.
From these examples it is easy to see what “counterfeit” means with respect to coins. A counterfeit coin is one composed either of a base metal instead of gold or silver, or one which has had its weight reduced by clipping. In either case, the person receiving the coin is not getting full measure. Currency, or so-called “paper money” was, of course, never the money itself, but only a claim check for money on deposit with the issuer of the paper. When you gave goods or services for a piece of paper, you did not do so because you desired the piece of paper for itself, but because the paper was a claim upon something which was valuable; namely, gold or silver coin. The issuer of the paper had the actual money on deposit, ready to be claimed by the holder of the paper, which he found easier to carry about than the actual metal.
COUNTERFEIT CURRENCY was issued by people who had placed nothing on deposit for redemption with their paper. When counterfeit currency was presented at the bank for redemption this sad fact became known to the holder of the counterfeit, who then realized that he had given goods and services for a worthless promise. Thus, the counterfeiter robs his fellow man as surely as if he had used a gun, but much more subtly.
Now with these facts in mind, let’s look at our present-day money. The coins themselves are slugs, but cunningly manufactured to resemble silver. Don’t forget that the definition of counterfeit includes the words “with intention to deceive or defraud.” Of course, I have no way of reading the minds of those responsible for issuing our coins, but I notice that the old silver quarter and the new nickel-coated copper ones appear, on visual inspection, to be the same. The currency also bears a remarkable resemblance to the redeemable bills of a generation ago. Yet behind today’s dollar bill there is nothing anywhere, on deposit, which may be claimed by the holder. And checks, of course, are not payable in anything other than coin or currency. Thus, by the standards of a few years ago, all of our modern money is counterfeit.
To put it another way, the word “counterfeit” no longer seems to have much meaning. It seems to boil down to geography. Currency printed in the Bureau of Engraving and Printing is “good;” that printed in your basement is “bad.” Neither the “good” bill nor the “bad” one entitles its holder to a specified amount of anything. Neither the issuer of the “good” bill nor the “bad” one has placed on deposit anywhere anything to justify the issuance of the bill. It’s just that your bill, printed at home, hasn’t the proper pedigree. After all, there’s no use counterfeiting if just anyone can do it! From the time of Genghis Khan, who used mulberry bark impressed with his seal as “money,” counterfeiting has always been a lucrative business — especially when done as a government-protected monopoly! Think of it. The counterfeiter obtains everything for nothing.
WHEN YOU CAN TAKE a few cents’ worth of copper or paper and pass it off as one hundred cents, cost is no object. You simply produce a few more coins or bills than you really need, and use the extras to pay for the rest. For example, the Susan B. Anthony “dollar” coin contains about three cents worth of copper with a nickel coating. So not only will it very nicely pay for itself, it will pay for an additional thirty-two more “dollars” as well.
It’s like going to the grocery store to buy milk, only for every three gallons you “buy” you magically obtain ninety-seven more gallons which the grocer buys from you! In such a case, would you worry about the price of milk? For those who can successfully counterfeit, the word “price” has no relevance. You can see, however, that the success of the scheme lies in being able to do it yourself, while punishing anyone else who attempts it. Thus, counterfeiting on a really large, or national scale, is an operation that necessarily involves government.
That same government which inveighs so ponderously against monopoly and pays frequent lip service to the ideal of free enterprise, with its resultant competition, certainly allows no competition in the printing and issuing of money!
Let me anticipate an objection. Perhaps you’re going to tell me that if the government oversees the counterfeiting, and if all the money is counterfeit, it doesn’t really make any difference.
But isn’t that the same as saying that if everyone is robbed, then robbery is somehow OK? Remember, the counterfeiter is a thief who takes what you have to offer and gives nothing — of his own — in return. Is the loss any more bearable if the thief has, in effect, a government franchise? Is the loss any less painful because everyone else is being robbed as well? No, but the loss is a lot less visible. A sore thumb doesn’t stick out when all thumbs are sore.
The images are from a couple of coin and conservative websites
Dr. Paul Hein, a retired ophthalmologist who lives in Ballwin, Mo., has always had the keenest eye for the misdoings of our betters on a fundamental point of economics. That is, their printing of unbacked paper notes that pretend to be lawful, valuable dollars and which promise nothing except the ruin of the federal republic. Dr. Hein is the author of a favorite book about economics, All Work and No Pay; Life Saving Lessons in Modern Money, and was president of the Monetary Realist Society. He is married and father of four children.