"This chick's playing with Confederate money."
It is from Seinfeld. Elaine said that when was trying to convince Jerry that some girl had fake breasts. How to decipher it?
There is probably an interplay between the words 'silicone' and 'silicon'. Maybe the Confederate States of America had something significant in the Silicon Valley.
Has nothing to do with silicon or Silicon Valley. It refers to the fact that Confederate money became worthless after the Civil War. She is saying: just as Confederate money is not "real" money, so silicone breasts are not real breasts.
Towards the end of the American Civil War, the Confederate States' dollar became nearly worthless due to massive inflation (similar to the phrase "not worth a Continental", stemming from the Revolutionary War, or the more recent hyperinflation in Zimbabwe).
A simple explanation (thanks Alicja Z) is that it's this inflation that she was referring to.
Another possibility: Being so worthless, you could almost say that the money had become fake. She could also be implying that the fakes are worthless, or not as valuable, as the real thing. If Roger's comment is correct and she said "counterfeit", this meaning of "fake" becomes more directly true.
Silicon Valley wasn't part of the Confederate States: Texas is as far west as the states of the nation had gone by that time. So it's very unlikely that this is the intended meaning.
The intended term must have been "counterfeit money".
Although actress Julia Louis-Dreyfus did say "confederate money" in the actual episode, it's highly unlikely that the original script used that term. She probably delivered the line incorrectly.
Instead, the proper term would be "counterfeit money". "Counterfeit" describes a fake and fraudulent imitation of something else, something with real value, such as currency or an artwork. In context, "counterfeit" makes perfect sense in the scene, and would be a humorous way to describe fake breasts.
On the other hand, "confederate" doesn't make much sense at all in this context. Perhaps it's possible to devise a convoluted justification for writing the word "confederate" into this scene (as other answers here have attempted), but such explanations are really not very plausible.
So, "counterfeit" is the most appropriate word in the English language for the given context and "confederate" is similar-sounding but nonsensical in context. Therefore, the simple explanation is that the actress misremembered her line and substituted a similar-sounding word for the correct one. Another possibility is that the script itself contains an error, due to a flawed transcription or other mistake. Both explanations make more sense than "confederate money".
