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North Korea's High-Tech Counterfeit $100 Bills
ESRB writes "North Korea is apparently able to produce high-quality counterfeits of U.S. dollars — specifically $100 and $50 bills. It's suspected that they possess similar printing technologies as the U.S. and buy ink from the same Swedish firm. 'Since the superdollars were first detected about a decade ago, the regime has been pocketing an estimated $15 to $25 million a year from them. (Other estimates are much higher — up to several hundred million dollars' worth.)' The article also advocates a move to all-digital payment/transfers by pointing out both forms are only representations of value and noting it would cripple criminal operations such as drug cartels, human traffickers, and so forth."
That's a misrepresentation of the process. You are describing the bailout loans. The debt created by the fed is in the day to day banking operation.
The fed prints money by depositing electronically into banks. The banks PAY the fed interest on the money. The banks don't deposit the money, this money is what banks use to loan you money. For instance in the form of a mortgage.
So bank shows fed a fraction of loan, fed loans bank dollar. Bank owes fed $1.01 (simplifying here). Bank loans $1 dollar to you and you owe bank say $1.05. The problem is that we've created $1 of money and $1.05 of debt. The 5 cents doesn't exist and therefore is impossible to pay back. So where do you get it? Well at some point it comes from the only place it can. Someone else borrowing another dollar from a bank who borrows from the Fed... So now we have $2 created and $2.10 worth of debt. If we pay the original $1.05 debt, there is only $0.95 money left to pay the new $1.05 debt.
Now scale this up to trillions of dollars. Basically the system works by continually creating an ever growing national debt (and no, I'm not talking about the governments debt). Now we justify this saying that those loans have to backed by goods, even if only a fraction of the loan so we must produce more and more goods to keep the cycle flowing. But the reality is that we can just assign the same goods a continually higher value and continue to create debt without limit. Not only can we, we will do so because we need higher prices to pay off our debts! Inflation creation at its best... and yet our interest rates our higher than our inflation rate... what that means is that our inflation rate is false. What does reporting a lower than reality inflation rate do? Well if you are the currency that the global currency exchange uses to benchmark other currencies against, it means you are stealing from the value of all the other currencies because they are valuing against your false inflation thereby giving you more goods for your currency than the currency is worth when you buy goods in their nation or pay debts.
The result of doing this for 80 years or so? Massive over consumption and over valuation of goods causing rippling global economic crisis... like the one we see now.
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Economics is not a zero-sum game. Just because an addition 5 cents of debt has been created does not mean it's impossible to pay back. Presumably, people borrowing money at $1.05 on the dollar are planning to do something with it which will result in more than $1.05 of productivity. If you can't make at least $1.05 from the loan, then it makes no sense to take out the loan. Say you buy equipment with the loan which allows you to become more productive at work, You in effect make $1.10 off the $1 loan. You pay $0.05 extra back to the bank, and pocket $0.05 for yourself.
"But nothing new has been created!" That's right. But you're forgetting that there's also value in organization and distribution. A chicken farmer laments that his family has all the eggs they can eat, but only dirty well water to drink. His neighbor the dairy farmer laments that his family has all the milk they can drink, but only his vegetables to eat. They look at each other, and agree to trade a bucket of milk for a dozen eggs every day. The amount of eggs and milk being produced before and after the trade is exactly the same as before. No new materials have been created. But the due to the improved distribution, the value of those milk and eggs has increased. The standard of living and consequently the productivity of both farmers has gone up, even though they're producing exactly as much as before. Better distribution like in the above example will increase productivity without increasing the amount of goods in the world. Efficiency improvements will increase actual production for a given cost. Better organization can also yield increased net production without actually increasing production (e.g. decreasing crop losses due to vermin).
Money is just a token symbol. The actual currency being traded is productivity, we just happen to measure it in dollars because it's easier than bartering for everything. As the population and per capita productivity increases, the money supply must increase to keep pace or else you experience currency deflation. The value of a $1 bill would go up over time, meaning people could "make" money by stuffing it under their mattress instead of doing productive work, resulting in the economy stagnating. So to keep the economy thriving, the money supply should grow slightly faster than the economy (enough money needs to "printed" to match country's increased productivity, plus a little extra). And the way the government does this is by authorizing banks to loan out more money than they actually have. Creating money "out of thin air" to match the increased productivity of the nation's economy due to improved efficiency, organization, and distribution.
Where we get in trouble when people stop appreciating just how much a dollar is worth, and spending it on frivolities whose return in improved productivity does not offset the purchase price (or loan repayment). This typically happens in a bubble, when people become irrationally exuberant that they market will keep going up, and that they'll continue to make "easy money" indefinitely so it's ok to waste it. In terms of how you put it: