How Does Counterfeit Money Affect the Economy and Society?

It is well known that money is the most important thing that leads to the survival of an individual. But, what if the money you are holding in your pocket is fake? We have all heard about two most popular terms that are related to money, i.e. fake currency and counterfeit money. Both are quite similar but at the end, the only conclusion comes with this- it is a big crime in our society.

Since the creation of currency, there have been people who have tried to take advantage of the system by creating their own counterfeit versions. In fact, when metal money or coins were in the flow, counterfeiting was executed by mixing base metals, which are tin, copper, aluminum, lead, zinc, and iron – with gold and silver, the most important two metals which were largely used to make ancient denominations. This trend has become more refined when the paper currency has arrived. Apart from security, it has been also noticed that fake currency poses a huge socio-economic problem. Its impact on general crime in society is serious as more and more educated unemployed youth are attracted towards the counterfeit racket. Due to this, it has become a huge problem around the world.

In this digitalized world, we all know that the trend of cashless transactions has been increasing, but still, number of businesses and individuals are more likely than ever to lose money due to unintentional possession of counterfeit bills. The presence and use of counterfeit money in the market(s) can affect the economy. It is the worst thing that can happen to any country. For a clear understanding, here some of the points are mentioned which describes the counterfeit effects on the economy-

Black Marketing

Another popular term associated with the counterfeit money is black marketing. The black market is the ‘market’ where goods and services are sold in a way that is illegal or for goods and services that are illegal. Another argument against black markets is that because their participants don’t pay taxes, which gives rise to a heavier tax burden falls on law-abiding citizens.

Loss of Public Confidence

One of the greatest consequence of circulation of counterfeit money is public confidence. People tend to lose faith in the economy of their country and the money that they hold because they can’t recognize that which one is real or fake.

Non-reimbursement Policy

The non-reimbursement plan of banks occurs when banks reject the counterfeit notes and do not reimburse the losses. When the banks are aware of fake currency involvement in some significant business transactions, it is removed with immediate effect, but most of the time, the businesses do not get reimbursement for their money. This leads to heavy losses to them.

Currency Devaluation and Inflation

Fake currency circulates very swiftly in the market, and due to this the purchasing power of people increases and there is a rise in the demand for goods and services. When the supply doesn’t meet the high demand, increase in prices (inflation) occurs.


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