If today the United States legalized counterfeiting, what would be the effect on the economy? The counterfeit must look authentic to be legal, thus requiring some skill.
The initial effect would be great inflation, likely hyperinflation, devaluing the US dollar.
Some counterfeiters have had extensive operations, running in the tens or hundreds of millions of dollars. Legalizing these operations would likely lead to a great increase in the number and extent of these operations.
Having more and larger "counterfeiting" operations, or under the proposed law, simply additional printing presses, would cause the US to lose all control over its monetary policy.
Something close to this happened to the Somali shilling after the central bank collapsed around 1991
- counterfeiters concentrated on the largest denomination 1000 Sh.So. note
- the value of these notes fell to the physical cost of producing quality counterfeit notes, about 4 US cents per 1000 Sh.So. by 2008
- large transactions required a prohibitively large number of Somali notes and so foreign currency notes were used instead