Fake money

USA today Dec 23, 1999 Page 12A Small article 1 1/2" X 2" FAKE MONEY More than $50 Billion worth of fake US Dollars and Treasury notes were seized in a raid in the southern Phillippines. Police and U.S. Secret Service Agents raided the home of a suspected counterfeiter in Malaybalay.

I read somewhere that counterfeiting a countries currency and dropping it throughout the civilian population was a WW2??? war tactic for upsetting economic stability? I'm also wondering about possible cybercounterfeiting. $50 billion. That is a lot of fake money. Any more info/comments on this one?

-- robert j. (crandalls@cableone.net), December 24, 1999

Answers

Robert J.,

Yes - There's a lot of counterfeit U.S. currency popping up here in Central Ohio. According to a Bank One teller, the criminals are producing quite realistic fakes of the NEW bills that were just released - they're now able to copy the watermarks that are on the bills. They haven't mastered putting strips on the bills yet, but according to the teller I spoke with, that's just a matter of time...

The new counterfeits are so convincing, the only ways to tell a legit from a counterfeit is:

1. By using a laser scanner to find the strip inserted in the bill; or

2. Buying a counterfeit detector pen: (Mark on bill - if gold, ok. If black ink shows up - you've found a counterfeit.)

Foreign countries using this as a tool for economic terrorism - quite possible...

-- Deb M. (vmcclell@columbus.rr.com), December 24, 1999.

The best scheme for debasing currency was Operation Bernhard, an attack on the British paper currency by the Germans. For years after the end of WW II, the notes would show up. The fakes were excellent. Not sure how they were detected, I think it was the paper.

-- Mr. Mike (mikeabn@aol.com), December 24, 1999.

That must have been a mistake. That $50 Billion was being printed by a subcontractor for Kosky and the Federal Reserve. They better give it back or the banks might run out of cash!

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), December 24, 1999.

TECH32: Yeah, I caught that $50B coincidence too! Hmmm, well in a pinch, if bank withdrawals go ballistic next week, maybe that booty might be judged "good enough for government work", and parceled out to the banks!!

-- King of Spain (madrid@aol.cum), December 24, 1999.

I read yesterday (Worldnetdaily? Can't recall...) that the North Koreans stole a press *and* the formula for US paper, and were churning out mass quantities of *new* design hundreds, of such *good* quality that they had to *lower* the quality so as to make them the same as *real* hundreds. Apparently even experts have a hard time telling them from the real thing.

And yes, debasing the currency of an enemy *is* a wartime tactic, and *should* be considered IMO an act of war.

-- Ron Schwarz (rs@clubvb.com.delete.this), December 24, 1999.

Ron,

And yes, debasing the currency of an enemy *is* a wartime tactic, and *should* be considered IMO an act of war.

Why? We *already* have a fractional reserve where electronic wealth FAR AND AWAY exceeds our nations physical cash. Tell me please, how is introducing wealth to the economy in the form of cash any different or more dangerous than watching a stock you own 'create' wealth by doubling in value in a single day? Both create something from nothing. Both are accepted as if they were real. How is a car dealer (or the economy) hurt by accepting fake cash instead of a check (or even real cash for that matter) when buying a car?

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), December 24, 1999.

>Why? We *already* have a fractional reserve where electronic wealth FAR AND AWAY exceeds our nations physical cash. Tell me please, how is introducing wealth to the economy in the form of cash any different or more dangerous than watching a stock you own 'create' wealth by doubling in value in a single day? Both create something from nothing. Both are accepted as if they were real. How is a car dealer (or the economy) hurt by accepting fake cash instead of a check (or even real cash for that matter) when buying a car?

Tech32's lack of a basic knowledge of economics is truly breathtaking.

Explanation of the rhetorical questions: Money is a signal used by an economy to allocate scarce resources. When money moves from one place to another it indicates that something has become more or less valuable. When something becomes more valuable (because money is chasing it and the price goes up) it is a signal that more of that something should be produced so that the price can come down.

When a foreign government dumps money into our economy it does the following things. First, it screws up the signals. Second, it causes the price of everything to rise. Third, if that money is actually spent by that foreign government to acquire goods and services here, then there are fewer goods and services for everyone else.

Counterfeiting is stealing something from everyone who has money. It is a great way to screw up an economy.

-- Ralph Shnelvar (ralphs@dos32.com), December 24, 1999.

An excellent and very astute point ,Tech32. Hit the nail right on the head. Our present 'currency' is as counterfeit as it comes. It is not money at all. However, it is treated as money and we are forced to do so by law, even though it is NOT money.

There is absolutely NO difference in Joe blow going out and printing hundred dollar bills and spending them than there is for the Federal Reserve to do the very same thing.

We would all object to Joe Blow doing it and getting something for nothing, but say nothing at all when the Federal Reserve does it.

Federal Reserve Notes are NOT money and when you treat something like what it is NOT, then you will be in big trouble sooner or later. You can treat a tiger like a house cat, but you will soon get killed for it.

Our currency system is soon to collapse. And I say..."Thank goodness!"

Paul Milne

Clinton: "I did not have sex with that woman, Miss Lewinsky"

bks: "It was not overt lying. It was overgeneralization for rhetorical purposes."

-- Paul milne (fedinfo@halifax.com), December 24, 1999.

Ralph,

Please. I've taken economics courses and I know that in cash based societies (like they ALL were in WWII) fake bills could devalue the currency, cause runaway inflation, etc. And no two ways about it, it is stealing. *BUT* in our digital society, where most transactions take place WITHOUT cash, I fail to see how counterfeit money could do the same. As long as there is more electronic money than physical cash, what does it matter? Our dollars are no longer backed by Gold you know, which precludes someone from showing up at Fort Knox and trying to cash-out and bankrupt the Governemnt (more than it already is of course). I ask again, what does it matter it someone buys a car, or ten thousand cars, with fake cash? The car dealer gets paid. The guy on the production line gets paid. The guy who hauls the cars gets paid. In fact, it would make the car companies stock go UP thereby creating more wealth out of nothingness. Is it stealing? You bet. But what does it matter to the economy if the cash in circulation is issued by the Fed or printed by some crooks in Malaybalay? I mean, if there is two or even ten trillion dollars floating around electronicly in our national 'bank' computers, what does it matter if ALL the cash in circulation is phony? How is the economy harmed? You said: "First, it screws up the signals." You'll have to do better than that. What signals? Who's watching them and who cares? "Second, it causes the price of everything to rise." How so? If my stock portfolio doubles today and I engage in 'profit taking' how does that make everything more expensive for my fellow consumers? "Third, if that money is actually spent by that foreign government to acquire goods and services here, then there are fewer goods and services for everyone else" Perhaps temporarily, but like the example above, if I 'make' that money in the stock market, how is the effect any different? Besides, like the Doritos commercial says, they'll just make more (AND the stock price of their comany will RISE). Can you do a better job of explaining your position please? -TECH32-

-- TECH32 (TECH32@NOMAIL.COM), December 24, 1999.

I like where this thread headed.

It is why I posted this counterfeit thing in the first place.

I agree with all of you. The interesting thing here is that I think Tech 32 and Ralph are both right. Especially when their points converge.

Let me see if I remember all of this right.

If you follow the history of currency from 1932 when the Federal Reserve was establish to the present, you will see a pretty nifty conterfeiting operation at work as they eventually removed the gold and silver backing from behind the certificates. Certificates were currency that you could take in to a bank and get the real money for them, Gold or Silver. Pretty soon their telling us at the bank that the paper certificate is actually the money.

I don't have a problem with fiat currency. Like Tech32 says,who does it hurt? It has an advantage of accomodating the economic expansion of a large population, nor do I have a problem with government printing it to pay for their services instead of a direct tax levee. (income tax) Governments have always financed themselves using the seigniorage or profit after the cost of the metal and minting of a coin. With paper currency the profit is even larger, but it creates inflation, which is an equal tax (or theft) on everybody. It could provide all the money the government needs. In Rode Island they use to give citizen some of the excess profit from seigniorage back. They financed government and never payed a dime in direct taxes. Its like Ralph said, a foriegn invader could screw up the economy.

But thats not whats happening.

The Federal Reserve is not the Government. It's a private bank that buys paper currency at cost. Last I heard it was less than 2 cents per note. They loan it out at interest to us and to the government.

Electronic money is a bankers wet dream. They don't even have to printit. Just raise the interest rates to prevent inflation. Lower the interest rates to stimulate the economy.

Y2k has got to have them scared. When John Q Public comes to get his cash and finds out they don't even have enough counterfeit paper to give him, because their printing facilities are JIT, and only print fast enough to replentish the old bills, he might figure out that he's been robbed.Then wouldn't all hell break lose?

Do you think they are a little fighten upstairs?

It lends the money out at interest.

Electronic money is a banker dream. Lower the interest rates increase the money supply, risk inflation. As long as their computers keep working the thing can go out the roof.

But the inflation and interest keeps tightening the knuse around the taxpayer neck.

-- robert j. (crandalls@cableone.net), December 24, 1999.

Sorry, those last four or five lines fell out of context, somehow?

-- robert j. (crandalls@cableone.net), December 24, 1999.

TECH 32:

The goal is to maintain as constant as possible the ratio between the number of dollars in the economy, and the total wealth of that economy. A constant ratio means neither inflation nor deflation. The trick is one of timing and control. The timing comes in because dollars must be added or withdrawn sometime in advance of the actual economic growth or contraction. So dollar creation by the Fed requires accurate anticipation, and the future is hard to predict.

The control comes in, because the ratio cannot be maintained otherwise. If everyone is allowed to print up their own dollars, they will do so without regard to economic activity or prospects.

In any case, $50 billion is a drop in the bucket. That much money will keep the Federal government going for, oh, 15 minutes?

Rising stock values represent public *anticipation* of higher future values. If the future doesn't cooperate, the stock drops. But in that case, we never hear anyone around here pointing out the magical *disappearance* of money.

-- Flint (flintc@mindspring.com), December 24, 1999.

Your right the money doesn't dissappear it just gets diluted. Thats not good if you you don't spend it in a hell of a hurry.

-- robert j. (crandalls@cableone.net), December 24, 1999.

robert j:

You bring up a real good point. The fact that the amount of fiat paper money is far less than the amount of the electronic money digits was pure SLOPPINESS on the part of the Fed. Had they been more careful in carrying out their scam, they would have made sure that the electronic money was "backed" by paper money -- even if they had to introduce a $1,000 bill and keep the printing presses running 24/7. This would have at least minimized the ridiculous position of there being only $1.17 of actual cash available for every $100 of "money", to which bank runs could wreak havoc at any time.

This could have all been avoided if paper currency were backed by a defined amount of gold that was REALLY required to be there, and if banks could loan (real) money out only when locked in for the period of the loan, rather than the con game known as "demand deposit".

"Oh what a tangled web we weave..."

-- King of Spain (madrid@aol.cum), December 25, 1999.

Flint,

But that still doesn't explain how more CASH (real or not) can effect the economy? As long as physical cash remain less than it's electronic counterpart, how is it damaging?

Let's say for example that the Fed allowed BANKS to print cash for you on the spot when you ask for it. Instead of writing a check, people could use cash. Instead of using a credit card, they could use cash. Their account would still be debited. When the bank recieved the cash back in the form of a deposit either from you or a vendor they could just shred it or throw it in a vault to lend to someone else. It wouldn't matter. Nothing would change in the way business is conducted.

Now I understand about liquidity and if everyone took all their money out at once banks couldn't/wouldn't have the 'assets' to make mortgage loans, etc. But what does the ratio of PHYSICAL cash to ELECTRONIC cash have to do with it? When the bank makes a mortgage loan using money I deposited there as electronic bits, they are lending electronic bits to someone who is recieving electronic bits and who will pass those electronic bits on to the seller.

If all of this took place with cash how would the transaction be any different for ANYONEs books? If I deposit a big wad of cash at the bank and they lend that big wad of cash to someone else to purchase a home by giving the seller that same big wad of cash, how is the economy damaged? How does that house cost any more? How does that make the economy shrink or expand? Controlling inflation/deflation is still done the same way. They can still just charge the recipient of the loan more or less physical cash (ie. interest) to borrow that big wad in the first place?

So I ask again, how does counterfeit money damage an electronic economy????

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), December 25, 1999.

TECH32:

??? I didn't say anything about the *form* of the money. So long as the total amount can be controlled, it can be big round rocks with holes in the middle for all I care. Counterfeiting money has an economic impact only when the total value of the counterfeited money significantly alters the ratio between dollars (in whatever form) and the wealth of the economy. If the economy produced nothing but widgets and each widget cost $1, then to hold a constant price, we'd need to double the number of dollars if we produced (and consumed) twice as many widgets. If everyone with a printer started cranking out dollars (or everyone with a chisel started making big round rocks with holes in the middle), this effort might even reduce the number of widgets we created (everyone would be busy "making" money), but it would cause the number of dollars necessary to purchase a widget to rise drastically. And this is considered a Bad Thing, because it complicates long range planning.

-- Flint (flintc@mindspring.com), December 25, 1999.

King of Spain,

Maybe because they don't own any presses. The Treasury Dept. is the only ones allowed to print money to sell to the Fed. Thats one of those Gov. Jobs. one potata, two potata.......

-- robert j. (crandalls@cableone.net), December 25, 1999.

A few points: The Fed was created in 1913. Look in the Ecyclopedia Britanica under "the Great Depression" and look at the graph of the U.S. Debt. It skyrocketed in 1913, and hastn't looked back. We all owe the private Fed a lot of money. Money that they make us use. Money that they loan to banks for Prime Rate, money that the Fed Creates out of thin air.

The Fed does Repurchase Agreements and other things, like Adding Liquidity, that are very hard to understand. It's very complicated, but suffice to say, they counterfeit more than anyone.

Technically, if someone with 50 Billion decided to buy all the flashlights in the U.S., it would drive up the price, just as a stock. But todays world is fueled by the "wealth creation" of the stock market. Inflation is very high, if you take in to account things like houses. Appreciation of 25% and higher is occuring in some areas.

This is only possible because of the "counterfeit" value of the buyers 'stock portfolio. Loans are being made (counterfeit) on ridiculously high stock values (counterfeit), which then makes a house cost 25% more than last year.

In a 1.5 Trillion dollar economy, 50 billion is not much, but I say it does technically create inflation, or a devaluing of the dollar - just like all the other activities I mentioned. Our spending or purchasing power has diminished greatly under this ponzi scheme.

-- Gregg (g.abbott@starting-point.com), December 25, 1999.

That's right, it was 1913.

-- robert j. (crandalls@cableone.net), December 25, 1999.

Counterfeiting is stealing something from everyone who has money. It is a great way to screw up an economy.

Very true. Unfortunately, by far the biggest counterfeiter is ... the US Treasury/Federal Reserve! Their "money" is nothing of the kind, but is, well, a zero-coupon perpetual bond. Y2K will almost certainly be the catalyst that will unwind this fraud, but it would have come to grieff one of these days anyway, as fiat paper currencies always do. And that would be true even in the absence of the additional "fractional reserve" fraud.

-- Steve Heller (stheller@koyote.com), December 25, 1999.

Collective reply: Yes, I understand the nature of fractional reserve banking, I understand that our current currency consists of debt instruments rather than certificates of wealth... and, I have to presume that the *North Koreans* also understand these things.

So all that aside, we're left with a bit of an awkward question: *WHY* are the NKs counterfieting large quantities of US currency?

I can only think of two possible reasons: they're either printing it to *spend*, or, they're printing it to use as a form of economic warfare against us.

Upon reflection, I conclude that the latter explanation holds more weight, *even* when considering retched poverty of the NK state. It strains credulity to imagine them purchasing food, munitions, and other supplies on the world market using steamer trunks full of brand spanking new funny money, no matter *how* well it's made.

On the other hand, it's doubtless *easy* for them to sell it (at a substantial discount from face "value") to the Yakuza and other organized crime organizations, for the purpose of diluting the US currency.

Yes, yes, the US currency is "self-diluting", etc. Be that as it may, the end result will be catastrophic to the carfully balanced house of cards that comprises our economy. All the micro-management efforts of Greenspan will be for naught if the NKs in effect set up a wind machine aimed at the "house".

Will it eventually collapse under its own weight?

Maybe. Maybe even *probably*.

So what?

I'm going to die some day. Even so, if someone *murders* me, I'd like to 1) have him *prosecuted* for it, and 2) prevented from using "but he was going to die some day anyway" as a viable defense.

-- Ron Schwarz (rs@clubvb.com.delete.this), December 25, 1999.