Counterfeit warning

Warning to economic citizens of South Africa: According to some media reports, there are counterfeit R200 notes doing the rounds in South Africa which are reportedly being manufactured in Lesotho. If you’ve tried to pay for groceries with a R200 note at Pick & Pay recently, you’ll know some retailers are taking it seriously by not even accepting R200 notes in payment for goods at all. 

But what’s the problem with using counterfeit money? Ignoring the physical character of the counterfeit vs. official money (i.e. different fonts, smiling cheetah vs. grumpy cheetah), what’s the difference between using counterfeit money vs. using official money in an economic sense? In other words, what are the economic implications of using counterfeit money?

Who are the winners and who are the losers of this counterfeit money circulating around the economy?

Take some time to think about this.

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According to some of these counterfeiting rumours there is in the region of R1 million worth of counterfeit R200 notes floating around the country.  R1 million is the equivalent of 0.00028% of the broad money supply. The broad Rand money supply of some R355 billion has been run entirely off the printing presses of the SARB over many years, most of it in the past 10 years. 

Just a quick bit of perspective: People came to trust government paper money when central banks were first created, because you could cash in your paper money for a very specific amount of gold. The reason is because gold is free market money and has been a global medium of exchange for some 6,000 years.  This meant that central banks could not print more money than it had in the value of gold with which to pay out claims.  In other words, money would’ve been counterfeited had the central bank not acquired gold before printing more paper notes.  If you follow this logic, you’ll realise that the SARB today is a naked counterfeiter, and is no different whatsoever, barring legislative, to so-called crooks in Lesotho printing R200 notes.

If counterfeiters profit from printing millions worth of R200 bills nearly free of charge, while others must work for their money, does the SARB not profit at the expense of others by doing exactly the same thing? Why, because the SARB has been given the lawful right to issue notes and coins, does it make citizens believe that this process is any less insidious?  What makes people believe that central bankers place the interests of their citizens above those of the government, for government appoints members of the monetary policy committee?