The Invention of Counterfeiting

(This is part III of a series I'm doing on money)

It is safe to say that shortly after the Lydians began making the world's first coins, that some enterprising fraudsters got into counterfeiting.  These were very likely practicing criminals who were adept at fraud and innovative in discovering new ways to commit it, and once money in the form of coins began to circulate it undoubtedly had to occur to them that a means of fleecing the honest folks had appeared and they were determined to take advantage of it.  For their product, they would have had to use some amounts of gold and silver, which were used to plate the base metals making up the bulk weight of the counterfeit coins. 

To get the gold and silver that they needed, they would shave the edges of the real coins.  This had two effects on their criminal enterprise.  One, they were able to get the raw material that they needed, but two, if the person that they were passing off the shaved coin to was not aware that the coin was not a full coin, that coin became accepted as such and thus any merchant who accepted the coin at its stated face value was defrauded. 

Coin clipping became prevalent in the early years of coinage and persisted for centuries.  Not only was it practiced by criminals, but kings themselves practiced it in order to increase their own wealth.  This would have course, introduced inflation, as that once the public became aware of this debasement then prices would rise.  That one gold coin that might have purchased twelve sheep would then purchase eleven as that a clipped coin wasn't really worth what the king said it was worth.  And even if the king wasn't debasing currency, counterfeiting would and could introduce inflation depending on its prevalence.

Coins of course, were not the only money that was counterfeited.  Once paper money began to circulate, it also became a target of counterfeiting.  Counterfeiting banknotes was an easier endeavor than striking a fake coin in the sense that the raw materials for this type of forgery were more readily available.  I think that's one reason why counterfeiting for many centuries was an act punishable by death, and that death penalty was meted out when counterfeiters were caught.  Banknotes printed by Founding Father Benjamin Franklin had the warning "To counterfeit is death".  That kind of penalty for counterfeiting might seem harsh by today's standards, but let's look at it from the viewpoint of medieval authority for a moment.

Say that you're a king.  Your government is issuing money to be used as a means of commerce.  You want strict control over the treasury and you want your people to have confidence in the money that they're using as that confidence in your currency is a form of confidence in your rule.  After all, your portrait is on that coin.  That money that is issued by your state has your guarantee that it is going to be worth a set value, and not only do you want your money being used by your people, you also want that money to have the reputation such that it can be accepted by those foreign merchants you're dealing with.  If your money is more widely accepted than that of your rival kingdom, then you have a wider influence.  You wouldn't want anyone messing around with debasing your money (unless you're the one doing the debasing, which I will cover in a future posting).  You want anyone who does it to be caught, and to be put to death. 

Likewise if you're a king, you might want to employ counterfeiting your enemy's currency if you're at war with that enemy.  During the Revolutionary War, Great Britain was counterfeiting colonial currency in an effort to destabilize the Continental Currency that was issued by the Continental Congress.  The Union government counterfeited Confederate banknotes in order to destabilize the South.  Adolf Hitler's regime was working on a plan to counterfeit the currency of the Allies in 1944.  And in more modern times, North Korea is reported to be counterfeiting American hundred dollar bills ("superdollars") in large quantities.  One pound coins issued by the United Kingdom are also being counterfeited, and from the images of those that I've seen they're really good fakes.

Counterfeiting is going to be with us as long as there's a human race.  It's no longer confined to money, as that there are vast amounts of fake consumer goods being counterfeited.  I can walk across the border into Nogales and locate fake Rolex watches rather easily.  My employer has to worry about being stuck with counterfeit computer chips. 

Counterfeiting is not the only means of debasing currency.  I will discuss this more in a future posting, but I think I'm also going to post a story about a guy in New Jersey who counterfeited nickels.  Stay tuned.



The Invention of Money

When The Man With the Money made his appearance, we not only did not know his name, we also did not know where the money came from.  We didn't at that time care where the money was coming from, as that it was being handed out to us free of charge.  I think even in the realm of the conscious we don't care where the money we get comes from, as long as it comes out of someone else's pocket and finds its way into ours.

Have you ever stopped to consider where money comes from?  Well, some of you will tell me that it comes from the mint, and/or the Bureau of Engraving and Printing if you're resident stateside.  Others are aware that it is issued by banks, and others will say that you get it by working.  There are all sorts of answers to the question "Where does money come from?" and I think that you will also get several answers if you ask the question "Just exactly what is money, anyway?".  I think in order to get a grasp on how to answer these two questions, we need to examine just how it was that money came to be invented.

It is commonly accepted that as of this writing, we have had 5000 years of civilization.....maybe 6000.  Well, let's split the difference and say that civilization itself was invented 5500 years ago, OK?  I think it's safe to say that 5500 years ago the human species were speaking languages, organized into families and tribes, and that the prime function of your average human being was day to day survival.  Survival would have come from learning how to harvest food, learning how to hunt for it, and also in the domestication of livestock in order to get food and clothing.  Somewhere along the way some trades emerged, as that people were figuring out how to make bricks and cut wood.  They were figuring out how to dig ore out of the ground and to convert it into metal.  Various occupations were beginning to emerge.

The thing of it is about specializing in an occupation, is that if you're a builder, what you build isn't something that you can eat.  So what you do is you build a house for somebody, and that somebody gives you some food, or maybe some livestock with which to turn into food.  What you have now is trade.  In this simple example, trade is done by the barter system.  There isn't any money involved since no one commodity has yet emerged as a common commodity to trade or to use as a reference in fixing a value onto something or some other commodity.

About 3000 BC or thereabouts, the Egyptians were aware of gold.  It was first used as a form of adornment but it also emerged as a measure of wealth.  It wasn't the only measure of wealth.  In the Book of Genesis, Chapter 13, Old Testament patriarch Abram, as he was then know, is described as being very wealthy in livestock, silver, and gold.  What this is telling us is that wealth, at that time, was viewed in terms of two precious metals and livestock.  Any one of these commodities could be traded for any of the other two commodities, as well as for any other commodity.  Thus, we already have a system of economics in place, and although it was still based on barter, gold and silver start to emerge as a convenient medium of exchange. I guess that you could call this "money" in a somewhat loose sense, but if you're defining money as "coins" of a uniform standard or of a common currency (cigarettes and whiskey have been known to function as money) we're not quite there yet as far as money being invented.

Around 600 BC, that began to change.  The historian Heredotus credits the Lydians of Asia Minor as being the world's first producer of coins.  They were made out of electrum, a gold-silver alloy that flowed to them out of a nearby alluvial plain.  They found that these were convenient units of exchange, and they also found that those they traded with to obtain their goods also liked these units of exchange.  Coins quickly spread to being used by the Greeks, and later on, the Romans, as well as other kingdoms.

With the invention of coins, some other things were invented too.

That will be the subject of my next entry.

The Man With the Money

Way back when I was in the fifth grade, the 1968-1969 timeframe, I had a dream one night that I remember well to this very day.  There are a few others from my childhood that I could reminisce about, but this particular one seems to stand out from the rest, and also seems to have a relevance to our current events that no other dream from that time period has.  It might have inspired an episode for the Twilight Zone, or a short story, but it did neither of those.  As that I have been thinking on and off about that dream a lot lately, it is inspiring a blog post.  I'm even going to give this dream a title.  The title of this dream is "The Man With the Money".

In this dream, The Man With the Money came to our fifth grade class.  He was wearing a short sleeve blue shirt, red bow tie, white pants, a straw hat, and he wore a smile that would have caused the CrackerJack Man some intense jealousy.  He was in his mid 50s or something like that, cleanshaven, white/gray short hair, with radiant blue eyes to match his smile.  The Man With the Money didn't tell us his name.  We never knew what it was nor did any of us ask.  It didn't seem to matter.  He was The Man With the Money.  The Man With the Money seemed to have an unlimited supply of money, and he was giving it to us.

The Man With the Money gave me a fifty dollar bill.  He also gave me a few twenties, tens, fives, and ones.  He handed me a half dollar, which was also neat because when I was a kid you just couldn't get a Kennedy half dollar.  The Man With the Money not only gave me a shiny new half dollar with Kennedy on, he also gave me some quarters and some other change.

The Man With the Money also gave away money to the other kids.  He had a lot of it.  It seemed that once you got done looking at the money that he gave you, that you could go back to him and he would give you even more money.  It wasn't like anything I had ever seen before.  The Man With the Money had this endless supply of the dough and he was willing to give it away!  And more importantly, he wasn't going to run out of it either. 

Needless to say, The Man With the Money was very popular with us.  We loved him.  We were glad that he came to us!  I mean, this guy was better than Santa Claus.  Forget about the toys or our other wants.  Forget about what we needed.  The Man With the Money was visiting our school, and he was going to make sure that we had all the money that we wanted!

As what happens with all dreams of this nature, it came to an abrupt end.  I found myself in my bed.  I was so sure that I had some money that I looked under the covers for it.  I asked, "where did my money go?"  It was gone!  It had disappeared!

I remember feeling cheated.  I had had, in my possession, a whole lot of money that had been freely given to me, and all of a sudden, it was gone.

OK.  So why did I post this?  Where am I going with this?

Stay tuned.