Thursday, January 10, 2008

Counterfeit Nation-2

"In a 'Nation of Counterfeiters' ... Stephen Mihm takes us back to the screwball days between the American Revolution and the Civil War, when the dollar did not exist. No U.S. dollar? That's right, at least not as we know it, in the form of paper money. America's currency, such as it was, was issued by hundreds of private banks. ... But 19th-century America abounded in phony banks issuing bogus notes. And often even the chartered banks circulated paper way beyond what they could even partly back up, acting as legal counterfeiters. ... 'Bills could function whether counterfeit or not', the author writes. It was literally confidence money. ... Moneymakers had to find realms other than the currency in which to flourish, like Ponzi schemes and, more recently, sliced and diced mortgages", Steven Kotkin's review of A Nation of Counterfeiters, at, 6 January 2008.

The only thing new is now we centralize counterfeiting at the Fed. Instead of issuing phony bank notes, the "counterfeiters" issue overvalued CDOs. Many years ago, John Exter, founder of Ceylon's Central Bank, wrote about the "inverted pyramid of debt". Antal Fekete describes the operation of Exter's pyramid at, 28 September 2007. See also my 24 August post.

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