The Washington Monthly has just published my review of Moneymakers: The Wicked Lives and Surprising Adventures of Three Notorious Counterfeiters, the new book by Ben Tarnoff about three American counterfeiters who plied their trade between 1750 and 1865. In reading this entertaining, educational history, I was struck by how useful the idea of counterfeiting is to an analysis of the great financial crisis of 2008 and beyond. The root of the problem is counterfeit credit. As I write in the review:
“The Civil War, Tarnoff tells us, marked the end of the golden age of counterfeiting. While the Democrats were off rebelling, the progressive Republicans in Congress passed legislation that established federally chartered banks, created a federal monopoly on the issuance of paper currency, and assigned the Secret Service the job of stamping out counterfeiting. It largely has. . . . The final blow to currency counterfeiters was delivered during the Depression by Franklin Roosevelt, when he took the U.S. off the gold standard. After that, money wasn’t worth something because of how much gold a country held in reserve, but because of the credit a country deserved based on the health and vibrancy of its economy. Seen in that light, however, it would seem that counterfeiting is not only not dead but thriving. What, after all, was the financial crisis of 2008 but the triumph of fraudsters who in a period of deregulation and financial innovation created counterfeit credit, validated counterfeit credit, and greedily sliced, diced, resold, and insured counterfeit credit, until they swamped the economy and drowned it in worthlessness?”
So how to you remove counterfeit money from an economy? Apparently you just wring it out like you would a wet rag, twisting it out, job by job, opportunity by opportunity, purchase by purchase, misery by misery, until order is restored.