The Government is Counterfeiting

Economics: Lesson 85

Is it counterfeiting when government-licensed banks create money out of nothing?

Counterfeiting; when someone makes a copy, a fake of the real thing. The counterfeit is meant to be carefully passed off to the general public in a way that will trick everyone into thinking that the counterfeited copy is the real thing and with the same value. This is exactly what the government has done.

In 1971 America left the gold standard, which limited the amount of money that was allowed to be printed, since every dollar had to be backed up by the same amount of gold. That system greatly restricted what the government had to spend, and it is not surprising that the government got rid of it. With the gold standard gone it means that there is paper money floating around the country that is not backed up by gold. That money is not worth the paper it’s printed on, and if everyone suddenly wanted to get their money back in gold and silver coins, the banks would not be able to pay everyone.


If we think of money in this way, by the definition of counterfeiting, it is counterfeiting when the government creates money out of nothing. The paper money means nothing once it has lost the value that the gold standard once assured. But, the temptation for the government to create more money is too great, and the more that is printed the more the government will run up huge deficits, national debt, give failing enterprises unlimited credit, and ultimately disguise what is really going in the monetary economy.

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