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Thursday, December 29, 2011

Reading List: Moneymakers

Tarnoff, Ben. Moneymakers. New York: Penguin, 2011. ISBN 978-1-101-46732-9.
Many people think of early America as a time of virtuous people, hard work, and sound money, all of which have been debased in our decadent age. Well, there may have been plenty of the first two, but the fact is that from the colonial era through the War of Secession, the American economy was built upon a foundation of dodgy paper money issued by a bewildering variety of institutions. There were advocates of hard money during the epoch, but their voices went largely unheeded because there simply wasn't enough precious metal on the continent to coin or back currency in the quantity required by the burgeoning economy. Not until the discovery of gold in California and silver in Nevada and other western states in the middle of the 19th century did a metal-backed monetary system become feasible in America.

Now, whenever authorities, be they colonies, banks, states, or federal institutions, undertake the economic transubstantiation of paper into gold by printing something on it, there will always be enterprising individuals motivated to get into the business for themselves. This book tells the story of three of these “moneymakers” (as counterfeiters were called in early America).

Owen Sullivan was an Irish immigrant who, in the 1740s and '50s set up shop in a well-appointed cave on the border between New York and Connecticut and orchestrated a network of printers, distributors, and passers of bogus notes of the surrounding colonies. Sullivan was the quintessential golden-tongued confidence man, talking himself out of jam after jam, and even persuading his captors, when he was caught and sentenced to be branded with an “R” for “Rogue” to brand him above the hairline where he could comb over the mark of shame.

So painful had the colonial experience with paper money been that the U.S. Constitution forbade states to “emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts”. But as the long and sordid history of “limited government” demonstrates, wherever there is a constitutional constraint, there is always a clever way for politicians to evade it, and nothing in the Constitution prevented states from chartering banks which would then proceed to print their own paper money. When the charter of Alexander Hamilton's First Bank of the United States was allowed to expire, that's exactly what the states proceeded to do. In Pennsylvania alone, in the single year of 1814, the state legislature chartered forty-one new banks in addition to the six already existing. With each of these banks entitled to print its own paper money (backed, in theory, by gold and silver coin in their vaults, with the emphasis on in theory), and each of these notes having its own unique design, this created a veritable paradise for counterfeiters, and into this paradise stepped counterfeiting entrepreneur David Lewis and master engraver Philander Noble, who set up a distributed and decentralised gang to pass their wares which could only be brought to justice by the kind of patient, bottom-up detective work which was rare in an age where law enforcement was largely the work of amateurs.

Samuel Upham, a successful Philadelphia shopkeeper in the 1860s, saw counterfeiting as a new product line for his shop, along with stationery and Upham's Hair Dye. When the Philadelphia Inquirer printed a replica of the Confederate five dollar note, the edition was much in demand at Upham's shop, and he immediately got in touch with the newspaper and arranged to purchase the printing plate for the crude replica of the note and printed three thousand copies with a strip at the bottom identifying them as replicas with the name and address of his store. At a penny a piece they sold briskly, and Upham decided to upgrade and expand his product line. Before long he offered Confederate currency “curios” in all denominations, printed from high quality plates on banknote paper, advertised widely as available in retail and wholesale quantities for those seeking a souvenir of the war (or several thousand of them, if you like). These “facsimiles” were indistinguishable from the real thing to anybody but an expert, and Union troops heading South and merchants trading across the border found Upham's counterfeits easy to pass. Allegations were made that the Union encouraged, aided, and abetted Upham's business in the interest of economic warfare against the South, but no evidence of this was ever produced. Nonetheless, Upham and his inevitable competitors were allowed to operate with impunity, and the flood of bogus money they sent to the South certainly made a major contribution to the rampant inflation experienced in the South and made it more difficult for the Confederacy to finance its war effort.

This is an illuminating and entertaining exploration of banking, finance, and monetary history in what may seem a simpler age but was, in its own way, breathtakingly complicated—at the peak there were more than ten thousand different kinds of paper money circulating in North America. Readers with a sense of justice may find themselves wondering why small-scale operators such as Sullivan and Lewis were tracked down so assiduously and punished so harshly while contemporary manufacturers of funny money on the terabuck scale such as Ben Bernanke, Tim Geithner, and Mario Draghi are treated with respect and deference instead of being dispatched to the pillory and branding iron they so richly deserve for plundering the savings and future of those from whom their salaries are extorted under threat of force. To whom I say, just wait….

A Kindle edition is available, in which the table of contents is linked to the text, but the index is simply a list of terms, not linked to their occurrences in the text. The extensive end notes are keyed to page numbers in the print edition, which are preserved in the Kindle edition, making navigation possible, albeit clumsy.

Posted at December 29, 2011 18:29