Counterfeit Capitalism: Exploring the Blurred Line Between Genuine and False Currency in the Antebellum US Economy

While some individuals beyond the realm of the numismatic community may not share the same obsessions over currency as those of a life-long hobbyist, it is highly probable that we all — to varying degrees — fixate on the money in our pockets.

Our concern is typically centered on how many of the little green slips we possess, not whether they are genuine or counterfeit. As Stephen Mihm suggests in A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States, “our ignorance is a testament to just how secure we feel about the nation’s currency.”¹

Prior to the Civil War, however, this was certainly not the case in the United States. The final scene of Herman Melville’s Confidence Man perhaps best captures the hazard-laden landscape of commercial exchange that characterized antebellum US society. In the scene, the story’s protagonist – the confidence man – observes an older gentleman trying to discern if some bank notes he acquired in St. Louis were genuine or not through the use of a “counterfeit detector.” Frantic to determine if a particular bank note is authentic, the man becomes increasingly weary and uncertain. “I don’t know, I don’t know… there’s so many marks of all sorts to go by, it makes it… kind of uncertain.”² As Mihm suggests, “the old man – whether because of his failing eyesight or a more metaphorical blindness – never determines whether the bill is counterfeit or not, and the novel ends on this note of uncertainty.”³

Melville’s story illuminates the complex and confusing path budding capitalists were forced to traverse due to the blurred line between genuine and counterfeit bank notes when making even simple transactions. One factor contributing to this complicated path was simply the sheer number of local banks that issued demand notes. Even if the note was issued by a legitimate bank, determining whether a bank note was genuine or fake involved far more than simply looking at certain design features and rates of discount in terms of specie was constantly in flux; if unskilled in the trade, a person had little choice but to take the note.4 Additionally, few banks had sufficient specie to redeem all of the notes placed in circulation – simultaneously weakening confidence in banks and bankers and blurring the legal status of counterfeiting operations in the eye of the general public to the point that former president John Quincy Adams suggested that the only difference between a bank director and a counterfeiter … was that the counterfeiter gave “evidence of superior skill and superior modesty. It requires more talent to sign another man’s name than one’s own and the counterfeiter does at least his work in the dark, while the suspenders of specie payments [are] brazen in the face of day, and laugh at the victims and dupes, who have put faith in their promises.”5

click image to enlarge

The intersecting rhetoric of banking and counterfeiting raised questions that struck at the very core of the capitalist system in the United States. “Counterfeiting… was only part of a much larger problem. Notes might be genuine, but the bank that issued them might be unable – or unwilling – to redeem them.”6 Much like Melville’s confidence man, counterfeiters understood well that confidence was both essential and fragile in the developing capitalist system in the United States. “At its core, capitalism was little more than a confidence game.”7 In a system where value rested on an endless series of private and personal transactions predicated on paper promises, counterfeiters and capitalists alike thrived. As the line between the real and the counterfeit became increasingly indistinct, counterfeiters became “ghosts in the machine of American capitalism, simultaneously reflecting and questioning the values that lay behind the unrestrained pursuit of profit.”8

Due to the federal government’s weak authority and the fact that both authentic and counterfeit currency essentially rested on lies about the construction and meaning of value in antebellum US society, the illegality of counterfeiting was often outweighed by the entrepreneurial ambitions of many American’s seeking to climb the socioeconomic ladder. In the years prior to the Civil War, a counterfeit could pose as genuine and vice versa while the US government could do little to control this highly volatile environment. One attempted contemporary solution was to regulate the bank-note engraving business – the ultimate consequence of which resulted in the nation’s “first business to achieve the vertical and horizontal integration characteristic of the modern industrial age” – the American Bank Note Company.9

click image to enlarge

The monopolistic consolidation of the bank note engraving industry during the mid-nineteenth century in the US was not – however – sufficient to stem the threat to commercial growth posed by counterfeiting. Only the fiery trials of the Civil War would invigorate the federal government to the point of being capable of effectively combating the deeply entrenched tradition and general public support of counterfeiters as merely shrewd American capitalists laboring to make a “quick buck.”

With the introduction of greenbacks, the US government had a potent piece of propaganda that simultaneously conveyed a message of national unity and underwrote the military campaign to reconstitute the Union.10 Inextricably linking the country to its paper money, greenbacks produced the confidence in currency that had previously depended on individual decisions concerning the authenticity and value of one of a multitude of “obsolete” bank notes. Where counterfeiting had once been tolerated – even lauded – the practice now posed a direct challenge to federal authority. The dual policy of centralizing the country’s money supply and ensuring its integrity through the creation of the Secret Service dealt a killing blow to counterfeiters, solidifying the authority of the nation-state and securing confidence in US currency to something which was at once abstract and solid: trust in the nation.11

Although counterfeiting experienced a brief revival during the 1930s, the difficult financial climate of the Great Depression also prompted the passage of the Gold Reserve Act of 1934, removing gold as the foundation of the money supply in the United States and effectively completing the nationalization of US currency initiated during the Civil War. This state of affairs was by no means inevitable and surely would have seemed foreign to nineteenth-century bankers and counterfeiters alike. In place of an environment which required people to make snap judgments regarding the honesty and integrity of bank notes proffered by complete strangers for the simplest transactions the production of paper money was now firmly in the grasp of the federal government, backed solely by the public’s confidence in the nation.12

Simultaneously invisible and ubiquitous, our “little slips of green paper pass from hand to hand, emblems of our faith, trust, and perhaps most important of all, our confidence in both our country and its currency.”13 By tracing the complicated and intersecting history of bankers and counterfeiters in antebellum US society, we are able to consider the important role played by currency in the evolution of capitalism in this country and the solidification of the nation and – perhaps more significantly – begin to understand the multifarious origins and trajectories of our national identity.

It is compelling to consider that – not long ago – the act of counterfeiting currency scarcely held the same aura of criminality it does at the present date. Operating as members of capitalism’s underworld, counterfeiters – for good and ill – proved as invaluable a group of players on the stage of US economic growth and development during the antebellum era as did bankers. As we continue to reflect upon the awesome transformations of US society set into motion by the US Civil War, consider the significant impact of those nineteenth-century capitalists – bankers as well counterfeiters – who shaped the appearance and meaning of our currency. We work for our money, obsess over it, collect it, spend and save it, but we seldom call into question its authenticity or value. What, then, is the value of our money? The answer to that question is complicated and – with luck – will oblige us to consider more thoughtfully who determines worth and what our collections mean. Look carefully: history is on every note (especially the counterfeit ones).

¹Much of the discussion in this article is based on the excellent study of the parallel story of counterfeiters and capitalists in antebellum-era US society in Stephen Mihm’s, A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States (Cambridge: Harvard University Press, 2007), 1.
² Herman Melville, The Confidence-Man: His Masquerade (1857; New York: Modern Library, 2003), 213-214.
³ Mihm, 5.
4George Macesich, “Counterfeit Detectors and Pre-1860 Monetary Statistics,” Journal of Southern History 27 no. 2 (May, 1961): 229. New-Yorker, 5 August 1837, 315.
5Mihm, 9.
6Mihm, 10-11.
7Mihm, 12-14.
8Mihm, 303.
9Mihm, 306-307.
10Mihm, 340.
11Mihm, 373.
12Mihm, 374.

Articles List