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."

Comments

BitCoin

[scorp1us]

It's the only way to prevent counterfeit money.
 

Re:BitCoin

[g0bshiTe]

Smoking them, gives entirely new meaning to hash collisions.

Re:BitCoin

[shaitand]

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.

Re:BitCoin

[Solandri]

What you posted is pretty much on the mark. The only part you're missing is:

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.

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:

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 talk

Re:BitCoin

[hey!]

The GP actually has it right. He's not describing the Treasury Department or Stimulus Bill bailouts, he's just describing one of the mechanisms by which money is put into circulation. The problem with your analysis is that you are talking like debt can be conjured out of thin air. It can't be. Debt is the result of a *trans*action, which has two sides; if there is income on one end, there's expense on the other; if there's debt incurred on one side, there's assets acquired on the other. The Fed cannot add to the economy's *total* debt by the mechanism the GP describes because a debt and an equal asset are conjured into existence *together*.

The "growing debt" you are talking about simply reflects this intrinsic double-sidedness of transactions. Suppose the economy doubles in size. If you want stable prices, the amount of dollars in circulation has to double. Because of the double-sidedness of transactions, that means the amount of debt on the Fed's books has to double; logically it amounts to the very same thing. There's no way to get more money into circulation without creating a corresponding debt on the central bank's books, unless you want to *give* it away. If you simply give money away when you need the money supply to contract, you have no choice but to *take money away* from people. The system of loans is sensible in that the disbursement and collection of money are built-in.

So what about that interest paid back to the Fed? Is that a problem? Well it is true that the interest paid back to the Fed *does* take dollars out of the economy, but that's the easiest problem in the world for a central bank to fix. It simply lends them right out again. But the numbers keep getting bigger. Isn't that heading for disaster? No, because the numbers keep getting bigger only if the amount of money in circulation grows, and that should only be done when the economy grows. If dollars are only traded for things of value, then ultimately those dollars have to make their way into the hands of people who've created new value. So what if the economy contracts instead of expands? Even easier. That interest payment takes currency out of the economy, which is just what you want.

This all seems a bit "through the looking-glass, but keep in mind that money has no *intrinsic* value; it's just a token we use to making trading things with *real* value convenient and flexible. I was advising a friend recently to sell a small factory he owns but has no immediate use for. In fact tying up his capital in this asset is slowing down his business growth. "Put the extra 6000 sq ft of facility in a more productive investment; when you've grown the business enough to need it, take that space out again."

It makes no sense to talk about "under" or "over-valuing" goods in terms of *currency*; it only makes sense to value *one* kind of good against *another*. In other words it makes no difference if your magic sword costs ten rupees or a hundred so long as everything else in the game is proportionately scaled. The only reason you want stable prices so that *future* goods are not undervalued (inflation) or overvalued (deflation) relative to things you could buy today.

The only way to ensure stable prices is to manipulate the money supply to parallel economic growth. Is the process of manipulating the money supply subject to abuse and fraud? HELL YES. So is *every other* power we grant the government, from passing laws or maintaining national defense.

Its a SWISS, not a Swedish firm

[Anonymous Coward]

The ink is made by a Swiss, not a Swedish company. What the hell is it with Americans that they confuse these all the time.

it's OK! it's just copyright infringement.

[Anonymous Coward]

Just like copying movies and music: NK haven't stolen anything. The US still has all the dollars it ever has. It isn't like stealing a car where that deprives the original owner of the car. It's more like *duplicating* the car while the original owner still has it.

So it's OK, according to Slashdot.

Repeat after me: "Cash Clears at Par"

[nweaver]

Why does cash still exist in widespread usage? It clears at par.

If someone wants to pay you $10, and they give you cash or a check, you get $10. If they want to pay with anything else, be it Paypal, Square, some other mechanism, etc, the payment processor changes some ridiculous fee that will range from $.10 to $.50 or who knows what higher.

"Clearing at par" is why cash and checks still exist, and until electronic transactions are not only convenient and easy, but ALSO clear at par, there will still be a huge role for cash and checks.

OOH! SCARY STORY!

[Jeremiah Cornelius]

We better move you all to traceable, trackable, revokable electronic money.

You thought your privacy hit the fan before? Wait til your every pfennig is nothing but a shifting index in the Federal Reserve database.

Re:OOH! SCARY STORY!

[fifedrum]

Absolutely right. They want us to compare the costs too. OK. The loss to NK, what, a few million a year? That's nothing compared to the cost of overhead, that is, the cost per transaction for these electronic records. Hell, look how much Visa sucks out of the economy every year.

Why don't we just reciprocate and counterfeit NK money? (I kid, I kid)

Re:OOH! SCARY STORY!

[cababunga]

I would rather not have to carry a suitcase full of money through the airport.

Rich people with their problems.

Re:OOH! SCARY STORY!

[Yvan256]

In fact there are three freely convertible currencies in the Galaxy, but none of them count. The Altarian Dollar has recently collapsed, the Flainian Pobble Bead is only exchangeable for other Flainian Pobble Beads, and the Triganic Pu has its own very special problems. It exchange rate of eight Ningis to one Pu is simple enough, but since Ningi is a triangular rubber coin six thousand eight hundred miles along each side, no one has ever collected enough to own one Pu. Nigis are not negotiable currency, because Galactibanks refuse to deal in fiddling small change. From this basic premise it is very simple to prove that the Galactibanks are also the product of a deranged imagination.

Re:OOH! SCARY STORY!

[LordKronos]

Actually, as a followup to my previous post, if you want a specific recommendation, try the penfed platinum rewards card. no foreign transaction fee, no annual fee, 5% back on gas, 3% back on groceries, 1% back on everything else. You can also get a $250 sign up bonus at the moment. Although penfed is designed for federal employees, anybody can get in. If you don't have a qualifying relative, then the easiest way to get in is to make a small one time donation ($20, I think) to one of the military charities listed. I did years ago, and it's easily paid for itself 100 times over. They've got great car loan and mortgage rates.

Re:OOH! SCARY STORY!

[PraiseBob]

Retailers feel, and rightly so I would estimate, that the cost of not accepting credit cards is too high.

I agree with you on this point. Retailers do feel that way.

If it really was sucking retailers dry like that, wouldn't they just choose not to accept the card?

That is like the argument that if taxes are too high, then nobody will open a business, with the end result being that 100% of businesses would close. In the real world, businesses accept the federal/state/local tax, and accept the visa tax.

Consider this though- My company (retail sales) pays more money to Visa in card fees than we pay to the government in taxes. The government provides roads, education for employees, police & fire emergency responses, laws and just general positive effects by not having anarchy. Visa provides .... access to the money people want to give us. Funny how Visa costs more.

How?

[SuperKendall]

Furthermore, how would you not riot over your government doing something like that to you?

Man, you really don't know anything about NK, do you?

Anyone trying would be shot. There's no press. Very little outside observation, almost none allowed in or out.

On top of that many of the people are very literally brainwashed to adore the countries leadership and accept blindly anything they say or do.

Re:Math Pedantry

[K. S. Kyosuke]

I wouldn't call it pedantry. I'd call it legitimately calling out the author for both having no apparent grasp of basic arithmetic, and likely being a moron.

I have it on good account that the article's author had been measured a Barbie Math Quotient of 73, as opposed to 100 for an average Barbie doll.