Random question

[nancylebov]

Would large scale private counterfeiting work as a stimulus for the economy? Why or why not?

Comments

[henrytroup.livejournal.com]

The libertarian cant for criminals is "freelance statists". Counterfeiting (fake pound coins in the UK-recent news) is a private enterprise inflating the money supply. Inrlation in the old economic sense-now replaced with Consumer Price Index.

Inflation in moderation is stimulative; but too much is very bad. Zimbabwe recently went close to end stage inflation- I saw a picture of a child with a huge stack of paper money-almost enough to buy bread! That picture should be in every economics book.

The whole of money is so complex that I haven't a solid argument-to some extent I think it would matter if people knew.

[madfilkentist]

It would probably work as well as official government stimuli -- which is saying absolutely nothing.

[sethg]

No.

Look at how much the money supply has grown since 2009. (I don’t know how much of this growth comes from the stimulus package and how much is from financial institutions holding onto their cash.) If counterfeit money on this scale entered the economy, people would simply lose confidence in the US dollar and use some other medium of exchange for all their transactions (at least, all their cash transactions).

[sodyera.livejournal.com]

I'd thought that identity theft had supplanted counterfeiting some time ago. But then you never specified what was to be counterfeited.

[ndrosen.livejournal.com]

For the most part, it would not, for the same reasons that public counterfeiting -- ahem, expansion of the money supply -- does not in fact stimulate the economy. Keynes was largely wrong; Henry George was largely right, and latter-day Georgists like Professor Mason Gaffney have refined his understanding of the boom-bust cycle.

[papersky.livejournal.com]

It would work like coin clipping, unfortunately, unless they found a way of counterfeiting gold or otherwise using their counterfeited money very fast to expand the actual economy. Theoretically, if someone found a new tech and financed it by conuterfeiting enough money to get it into production, this would have a positive effect... I think that would work as SF, anyway.

[(Anonymous)]

It's just a relatively inefficient way to expand the money supply, and I imagine it would work much like them, except that presumably nobody would be able to anticipate the expansion, and so it would be more effective. (For that matter, how do you know someone hasn't found a way to do this?)

An interesting secondary question is what would happen if, after six months or so of this expansion, it was discovered. For small scale counterfeiting, you can just take the money out of circulation. Could you do that for large-scale counterfeiting, or would the disruption mess the economy up?

[subnumine.livejournal.com]

I'm glad to see that fandom isn't entirely into seventeenth-century economics. Poul Anderson did write a fantasy story about this, called "Fairy Gold", about a struggling medieval village in Norway.

Our Hero saves an elf in the woods, and is given a gold coin (more actual cash than the village has seen in a while) and told to spend it before dawn; he wakes up the captain of the passing coastal trader and buys passage out; the captain buys a season contract at the local cathouse; the madame... but you get the idea. Everybody sells something they've been waiting to sell, or has a bad debt settled, and buys something of greater utility to them. (The author and the elves contrive that the last step is Our Hero's girl bought out of her indenture, and free to go with him, and holding the coin, so its vanishing doesn't really hurt the person stuck with it. They're free and on their way; they're not also rich.)

That's how stimulus is supposed to work. Stimulus by counterfeiting depends on how good the counterfeiting is; when somebody gets stuck with a bad bill, it's an anti-stimulus which will largely undo the effect of the stimulus - but it depends on how many hands it's gone through first.

If the counterfeiting is never discovered, the economic effect will be the same as a gold rush; and that also depends on how the money is invested. One gold rush built San Francisco; others have left ghost towns.