Published by EH.NET (January 2008)

Stephen Mihm, A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States. Cambridge, MA: Harvard University Press, 2007. ix + 457 pp. $30 (cloth), ISBN: 978-0-674-02657-5.

Reviewed for EH.NET by Jane Knodell, Department of Economics, University of Vermont.

Stephen Mihm, Assistant Professor of History at the University of Georgia, has written a fascinating and original history of bank note counterfeiting in the antebellum U.S. Mihm draws on a wealth of innovative primary historical materials to identify the names, locations, and business methods of those who made their livelihood within the “counterfeit economy.” He has also written a cultural history of money during the “market revolution” of the antebellum period. Here, Mihm explores contemporary ideas, sharply contested at the time, about what kind of money was “real.” Mihm argues that the line between lawful and illegal money was wide and blurry, as, indeed, was that between capitalism and the counterfeit economy itself. Economic historians are apt to be more satisfied with Mihm’s history of the counterfeit economy than with his interpretation of its meaning and significance.

Counterfeiting flourished, according to Mihm, at the country’s northern and western geographic and political borders, and during the years following the closures of the First and Second Banks of the United States in 1811 and 1836, events which triggered sharp increases in the number of state-chartered and unincorporated banks. State-chartered banks, and to a much lesser extent private banks, issued their own currency; barring the occasional issue of large-denomination Treasury notes that assumed some of the functions of money, none of the demand for money was met with fiat money. Mihm believes that counterfeit notes comprised a “significant” share of the bank currency in circulation, and that “every bank note had its counterfeit counterpart,” quantitative claims that are hard to evaluate. The pervasive uncertainty about the value of a stock of bank currency that was issued by hundreds of different banks made counterfeiting possible and profitable. Counterfeiting subsided after the Civil War, stymied by the nationalization of the currency and the determined prosecution of counterfeiters by a new federal agency, the U.S. Secret Service.

Mihm shows that counterfeiting was organized along the same principles as legitimate business, and involved, like the circulation of legal bank money, networks connecting different cities and regions. In the 1810s and 1820s, the center of counterfeit production was the small town of Dunham, Quebec. The technology of bank note production in this early period allowed counterfeiters to manufacture their ware deep in the woods using technology accessible to wheelwrights and blacksmiths. Counterfeit notes were distributed using a network of couriers to wholesalers and dealers in eastern cities, with dealers typically paying $10 “real,” meaning legal, money for $100 of counterfeit money. As the notes moved further down the retail chain, they finally ended up in the hands of “shovers,” marginalized individuals who were expert in the art of passing counterfeit notes into the hands of retail merchants, restaurateurs, and petty entrepreneurs.

Local law enforcement efforts were generally ineffectual at shutting down the counterfeit economy. However, the theory of free banking as developed by Laurence White (1984) predicts that in a competitive money regime, banks will invest in assets that enhance their reputation, including the production of more intricately designed bank notes to frustrate counterfeiting. As Mihm carefully details in one of the book’s strongest chapters, bank note production was mechanized in the 1840s and 1850s, resulting in more elaborate, finer-detail bank notes. However, the mechanization of bank note engraving actually facilitated counterfeiting by reducing the number of dies required to produce very many different varieties of bank currency. There were various ways that counterfeiters could get hold of the dies (such as buying them from failed banks’ liquidators), and once they did, they could produce bank notes which were virtually identical to those commissioned by the banks themselves.

This is all original, well-documented historical research, and it is the solid core of Mihm’s book. But sprinkled throughout Mihm’s history of the counterfeit economy are some claims and interpretations that go too far, at least for this reviewer. At times, Mihm seems to agree with Hezekiah Niles, early-nineteenth-century banking journalist, that there was no “real difference … between a set of bank directors … and a gang of fair, open, honest counterfeiters” (p. 8). Niles’s theses on money captured the views of many, such as the hard-money Jacksonians, that bankers’ promises to pay “real money” (specie) in exchange for their bank notes were fraudulent, since they held only a fractional specie reserve against these notes. In such a world, the value of a bank note, counterfeit or legitimate, was purportedly nebulous, and ultimately depended on whether A, to whom a bank note was offered in exchange, had confidence in B, who offered it in exchange. Counterfeit detectors, according to Mihm, were not very helpful in discerning which notes were good and which were not. Mihm concludes that “at its core, capitalism was little more than a confidence game” (p. 11) ? hence the title.

This conclusion, that the acceptability of bank notes as “real money” boiled down to a highly contingent confidence game, places too much emphasis on the person-to-person circulation of bank notes. The acceptability of bank notes was also, and more significantly, established through their circulation in redemption networks organized by banks, discussed in Redenius (2007). Notes that fell outside of these networks were bought and sold in bank note markets organized by dealers, which Gorton (1996) argued were informationally efficient (work that Mihm cites but does not engage). That professional “shovers” generally avoided trying to pass counterfeit notes on banks and bank note dealers suggests that it was possible, at least for banks and dealers, to make and enforce meaningful distinctions between good, bad, and unknown bank notes.

Putting aside the analogy between capitalism and a confidence game, economic historians, particularly financial historians, will find much to learn from Mihm’s beautifully written book. We have always known that counterfeiting was a problem in the antebellum economy, but we didn’t know very much about who produced the notes, who circulated the notes, and why law enforcement was relatively ineffectual in bringing counterfeiters to justice. Mihm’s book contributes significantly to our knowledge, and also challenges us to think differently about legitimate and illegitimate money issuance in nineteenth century U.S. economy and society.


Gary Gorton, “Reputation Formation in Early Bank Note Markets,” Journal of Political Economy, vol. 104, no. 2, 1996.

Scott Redenius, “Designing a National Currency: Antebellum Payment Networks and the Structure of the National Banking System,” Financial History Review, vol. 14, no. 2, October 2007.

Lawrence H. White, Free Banking in Britain: Theory, Experience, and Debate, 1800-1845 (Cambridge: Cambridge University Press), 1984.

Jane Knodell is an Associate Professor of Economics at the University of Vermont. She recently published “Rethinking the Jacksonian Economy: The Impact of the 1832 Bank Veto on Commercial Banking,” _Journal of Economic History, September 2006, pp. 541-74. Her new research explores the economic factors determining the growth and location of unincorporated banks in the U.S. between the closure of the Second Bank and the formation of the national banking system.