Everybody knows that it costs the US government more than one cent to make a penny coin. To most people, that seems silly. I just realized it's not.

I mean, we're now heading into the era when things can be easily fabricated at home. You can now buy milling machines and 3D printers that are intended for the home hobbiest. It's only a matter of time until the capabilities of such machines improve to the point where you could forge an unlimited number of coins at home.

A US coin hasn't had inherent value since the country went off the gold standard. The US dollar, and by extension the coins and bills based on it, is an abstract representation of value. The true value of the dollar is based on the labor, production, and trade of the entities represented by the US government.

If producing a dollar's worth of coins costs a dollar's worth of materials and labor, then counterfeiting doesn't matter. Every time you make a dollar, you're actually producing a dollar of value. It's just like working for a living.

If producing a dollar's worth of coins only costs 85 cents, then the value of the dollar can be decreased easily by counterfeit coins. If making a dollar only takes 85 cents of materials and labor, then the dollar you produce only represents 85 cents of value. That's 15 cents of profit until the price inflation you're causing (and the government) catches up with you. Then, your dollar is only worth 85% (or less) of what it was. Good job.

Conversely, if producing a dollar's worth of coins costs 115 cents, then any counterfeiting actually drives up the value of the dollar. If your process consumes something, you are increasing the price of that thing (remember supply and demand!). (This is how paying workers below the value of their labor makes factory owners rich, but I digress.) You're increasing the value of the dollar with every forgery. Go for it.

2010.02.26 at 10:00am EST