Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

May 23, 2007
By: Kevin Drum

SUPERNOTES....From the "minor curiosity" file: A report from Switzerland, the acknowledged masters of banknote printing, concludes that it's unlikely that North Korea is the source of the counterfeit "supernotes" that have been circulating around the world for the past few years. But there's also this:

For years, analysts have wondered why the supernotes — which are detectable only with sophisticated, expensive technology — appear to have been produced in quantities less than it would cost to acquire the sophisticated machinery needed to make them....."What defies logic is the limited, or even controlled, amount of 'exclusive' fakes that have appeared over the years. The organization could easily circulate tenfold that amount without raising suspicions," says the Swiss police report, which also says Switzerland has seized 5 percent of all known supernotes.

Moreover, it noted that the manufacturer of the supernotes had issued 19 different versions, an "enormous effort" that only a criminal organization or state could undertake. The updates closely tracked the changes in U.S. currency issued by the Federal Reserve Bank.

That is odd, isn't it? The production of fake notes is far too low to cause any economic damage to the U.S., and whoever's doing it is apparently operating at a loss. You'd have to be deranged to set up a massive counterfeiting operation that (a) had no effect on your target and (b) lost money in the process.

Which, come to think of it, points the finger back toward North Korea, doesn't it? Maybe Kim Jong-il doesn't care if the operation makes money as long as he still has some American cash to buy his goodies with.

Kevin Drum 12:05 AM Permalink | Trackbacks | Comments (47)

Bookmark and Share
 
Comments

You'd have to be deranged to set up a massive counterfeiting operation that (a) had no effect on your target and (b) lost money in the process.

Yes.

Which pretty much entails that the analysis that was done, and the assumptions it employed, were just flat out wrong.

Posted by: frankly0 on May 23, 2007 at 12:16 AM | PERMALINK

Kevin? Maybe Kim Jong-il doesn't care if the operation makes money as long as he still has some American cash to buy his goodies with.

[The notes] "appear to have been produced in quantities less than it would cost to acquire the sophisticated machinery needed to make them..."


Posted by: anonymous on May 23, 2007 at 12:20 AM | PERMALINK

what is the effect of the notes? Shutting down some banks who do business with N. Korea, right? That points the finger more towards those who would like an excuse to do that...

Posted by: cedichou on May 23, 2007 at 12:26 AM | PERMALINK

One possibility (pace Vernor Vinge's Rainbows End): whoever's doing it wants to have the bills available as an economic weapon at some point --- so what they're doing now is weapons tests...

Posted by: "Charles Dodgson" on May 23, 2007 at 12:29 AM | PERMALINK

I think I agree with frankly0's analysis. Somewhere along the line, a serious error of analysis has been made, and it seems likely that it's ours and not theirs.

Posted by: NBarnes on May 23, 2007 at 12:35 AM | PERMALINK

Or, Cia is doing it to finance covert ops.

Posted by: David Triche on May 23, 2007 at 12:36 AM | PERMALINK

What does it say about American technological prowess that even our money looks like crap when compared to some phony Korean knockoffs? Kinda like Chrysler vs. Hyundai.

Posted by: lampwick on May 23, 2007 at 12:38 AM | PERMALINK

Which, come to think of it, points the finger back toward North Korea, doesn't it? Maybe Kim Jong-il doesn't care if the operation makes money as long as he still has some American cash to buy his goodies with.

That's just dumb. Even if they had the technology, DPRK access to money supplies or currency markets would be limited to say the least. Also, it's highly unlikely other Asian tigers would play along, even as proxies.

Sorry, but the usual suspects are typically whiteboyz just like yerself.

42° 20' N 44° 00' E

32° 6' N 34° 47' E

55° 46' N 37° 40' E

25° 45' S 28° 14' E


South Ossetia. Tel Aviv. Moscow. Pretoria.

Posted by: davy duke drum on May 23, 2007 at 12:42 AM | PERMALINK

So:

1:

The Korenas did it but not to make money out of it. Just for the hell of it.

OR,

2:

The US did it, didn't care about loss of any money because they didn't want to undermine the $, only embarass Korea.

Reality? Believability?

Right!

Posted by: notthere on May 23, 2007 at 12:50 AM | PERMALINK

The answer is obvious.

The Swiss are responsible.

Posted by: Disputo on May 23, 2007 at 12:58 AM | PERMALINK

What organization spends a ton of money to try to avoid reality?

Your modern GOP. It must be them.

Posted by: craigie on May 23, 2007 at 1:14 AM | PERMALINK

I recall reading that the North Koreans don't even print their own currency, and that it's been questioned whether they are competent to do so.

They are a very backward country that's been cut off from sophisticated electronics technology.

Meanwhile, Western governments already have plenty of advanced, high-quality printers, as well as access to paper identical to the paper used to print bank notes on. If an intelligence agency runs into trouble getting the legislature of its host country to fund certain operations, or it doesn't want the money to be traced, counterfeiting must be a tempting option.

If it's US intelligence, the last thing they want to do is cause damage to the US economy. They just want deniability. And if they can blame Dear Leader Kim, all the better.

Posted by: Joe Buck on May 23, 2007 at 1:42 AM | PERMALINK

I wouldn't be surprised if China is the guilty party. After all, they have sophisticated technology (mostly gleaned from Western corporations who do business there), and are amoral enough to do something like this for leverage. If push ever comes to shove over Taiwan, something like this could cause a lot of damage to the U.S. economy. Obviously they don't want to roll it out fully... yet.

Posted by: Josh G. on May 23, 2007 at 2:24 AM | PERMALINK

Whatever happened to those "error" stamps the CIA secretary bought at the Post Office?

Posted by: Richard W. Crews on May 23, 2007 at 2:25 AM | PERMALINK

What davy duke drum said.

I'm sorry, Kevin, but the "It doesn't make any sense, therefore the North Koreans are behind it" argument is childish.

Posted by: Alan Bostick on May 23, 2007 at 2:34 AM | PERMALINK

Might just be some other counterfeiting organization, and they shut down the print runs for reasons of caution when they saw, to their surprise, that they'd been discovered and the US was making a high priority out of it (though misidentifying the culprits). After all, once the US had shut down NK access to the international financial system, it would've sounded alarm bells if the counterfeits STILL kept turning up. Maybe they figure they lie low until the heat is off, then start printing again.

Or, alternatively, maybe this is a false flag operation at 3 degrees of remove, just like the fake Nigerian uranium documents produced by Romanian forgers and fed back to the US via CIA and the ODC -- all created by hints we'll never know about, dropped by agents of security services or the VP's office to discreet and well-connected black marketeers, that technology could be made available to those willing to create an excuse for financial action against NK.

Of course, that would prove the existence of a second gunman in Dallas. But I'm getting ahead of myself here.

Posted by: mattsteinglass on May 23, 2007 at 4:05 AM | PERMALINK

"appear to have been produced in quantities less than it would cost to acquire the sophisticated machinery needed to make them..."

Unless they were able to acquire the sophisticated machinery without using hard currency. For example, trading weapons for it. Then it would make sense for the North Koreans. It would be a way of converting non-negotiable weapons or whatever into negotiable US dollars.

Until the commodities boom of recent years, it was not unusual for poor commodity countries to run their mines at a loss because they needed the foreign currency. They paid their costs of operation in local currency and sold the copper or whatever for dollars. The fact that commodity exporters (Zambia for instance) were wiling to do this drove commodity prices very low.
I am not saying the North Koreans did this, just that there would be some sense to it if they did.

Posted by: Kevin Rooney on May 23, 2007 at 5:48 AM | PERMALINK

Does this show that the Federal Reserve's printing tolerances are wider than it thinks? Perhaps they are real dollars. Think about it - they're really, really close to real ones, that's the point, right? But they're not appearing in numbers enough to make it worthwhile, so they're probably not counterfeit unless [really weird theory here].

William of Ockham sez they're genuine notes at one end of the error distribution.

After all, why would any secret service want to use *fake* notes? It would be a glaring giveaway. You have to postulate an agency with great technical expertise...and no money at all.

Posted by: Alex on May 23, 2007 at 6:17 AM | PERMALINK

Sounds incompetent enough for bush to be running it.

Posted by: merlallen on May 23, 2007 at 6:26 AM | PERMALINK

I think it is either space aliens or the Bush family behind this - same thing.

Posted by: The Conservative Deflator on May 23, 2007 at 6:39 AM | PERMALINK

Alex,

The Federal Reserve does not print currency. The Bureau of Engraving and Printing, a divison of the Treasury Department does. They are not the same. The Fed pays new money into circulation and retires and shreds old currency when it is worn. They are the fiscal agent for the U.S. Treasury. That is all.

Posted by: Paul Volcker on May 23, 2007 at 6:43 AM | PERMALINK

I'm sorry, Kevin, but the "It doesn't make any sense, therefore the North Koreans are behind it" argument is childish.

Yeah, we all know that if it does't make sense, it must be the Bush Adminstrtion behind it . . .

Posted by: rea on May 23, 2007 at 6:54 AM | PERMALINK

Does this show that the Federal Reserve's printing tolerances are wider than it thinks? Perhaps they are real dollars...William of Ockham sez they're genuine notes at one end of the error distribution.

Very good point, Alex. Or, going at it from the other end: maybe whoever is printing the notes really is printing a vast number - enough to make the operation profitable - but most of his fakes are completely undetectable. We're only spotting the 5% (or whatever) of poorer-quality fakes at one end of his error distribution.

I don't know enough about banknotes to know whether these notes can be definitely identified as fake. Logically, you can't definitely say something is real - it could just be a really good fake.

Posted by: ajay on May 23, 2007 at 7:52 AM | PERMALINK
William of Ockham sez they're genuine notes at one end of the error distribution.

Which is trivially disprovable if the suspected counterfeits have duplicate serial numbers.

I greatly doubt that counterfeiters go to the trouble to cycle through serial numbers in their print runs. Why should they? There's almost no gain.

As to "who"? The economic argument only makes sense if the printing facility is purchased for the exclusive purpose of creating counterfeit bills.

I think it's far more likely that facilities with legitimate purposes have been used covertly for counterfeiting, perhaps without the knowledge of their owners, and the number of bills is limited by "what they can get away with".

If you want to know what kind of facilities should be under suspicion: chip fabs. Sure, they're $10B+, but they have the photomicrolithography needed for really, really good counterfeits. And someone else pays for them.

I don't think that NK has any chip fabs. China, Taiwan, SK, Singapore, Malasia, Indonesia, Mexico, San Jose, on the other hand....

Posted by: Grumpy Physicist on May 23, 2007 at 8:02 AM | PERMALINK

Or, going at it from the other end: maybe whoever is printing the notes really is printing a vast number - enough to make the operation profitable - but most of his fakes are completely undetectable. We're only spotting the 5% (or whatever) of poorer-quality fakes at one end of his error distribution.

Bingo.


Posted by: semper fubar on May 23, 2007 at 8:19 AM | PERMALINK

As ethical employees of the US government they probably also tear up one real bill for every conterfeit they print. Korean freighter. Meet 40 tons of paper.

I always wondered why they didn't put a little more effort into framing Saddam.

Posted by: B on May 23, 2007 at 8:47 AM | PERMALINK

Sounds like a threat to me. Or a big fat blackmail note. Knowing whether it was profitable would involve a little more knowledge.

Posted by: Bob Jones on May 23, 2007 at 8:51 AM | PERMALINK

Sounds like a threat to me. Or a big fat blackmail note. Knowing whether it was profitable would involve a little more knowledge.

Posted by: Bob Jones on May 23, 2007 at 8:51 AM | PERMALINK

Besides North Korea, the only country crazy enough and able to do this would be the U.S.A.

Unless vast and profitable quantities are circulating undetected (e.g., the holders don't want to render their U.S. currency worthless by identifying it as fake).

Posted by: Realmoney on May 23, 2007 at 8:56 AM | PERMALINK

If the Swiss have identified several small faulty attempts then can't we assume the counterfeiting operation finally got it right and the result is undetectable?

Posted by: Milton Deemer on May 23, 2007 at 9:03 AM | PERMALINK

Question: we know that they have circulated a small number of these notes -- do we have any indication that they haven't *produced* a very large number of notes, and are holding them in reserve? Maybe I'm paranoid, but I wonder if dumping a huge quantity of sophisticated fakes on the market at once (perhaps in different parts of the world) might really hurt the dollar. So maybe it's a terrorist attack in the works.

Or not.

Posted by: carlton on May 23, 2007 at 9:08 AM | PERMALINK

In order to understand how this could happen (a rogue state producing near-perfect counterfeits), you have to understand the printing process behind currency production. heavy intaglio presses are rare, but technologically simple. the hard part is reproducing the engraved printing plates, which is quite feasible if a small army of engravers is laboring away, and reproducing the substrate, also not all that difficult (US currency is printed on cotton-based stock).

What I'm saying is given enough resources and time, anyone could produce high-quality counterfeit US notes, because even with the recent changes (which have unusually NOT been applied to the $100 note; you'd think that would be the first priority after the $20 instead of screwing around with $50 and $10 notes) there is no statute of limitations on older versions of US currency. The contemporary $100 note is along with the $1 and $5 notes the easiest to counterfeit and will be legal tender for the foreseeable future unless there is an unprecendented recall and exchange. This is why I have long suspected that NK is behind these "supernotes". It would be an intensive task for them to do so, with little return unless there's a hugehoard of these notes waiting to be unleased. That would be pretty destabilizing to put it mildly.

Posted by: 42 on May 23, 2007 at 9:56 AM | PERMALINK

You'd have to be deranged to set up a massive counterfeiting operation that (a) had no effect on your target and (b) lost money in the process.

Deranged, ineffective and money-losing? Well then the source is obvious, isn't it? It's George Bush.

Posted by: Stefan on May 23, 2007 at 9:57 AM | PERMALINK

Hell, you know it's Microsoft.

Posted by: cld on May 23, 2007 at 10:04 AM | PERMALINK

It would have to be an incredibly huge hoard to destabilise anything. Cash makes up a very small fraction of the total money supply.

Posted by: Alex on May 23, 2007 at 10:37 AM | PERMALINK

Perhaps the vast majority of these nearly-impossible-to-detect counterfeits have not been detected. Perhaps the counterfeiting makes economic sense for the counterfeiters after all.

Posted by: tom on May 23, 2007 at 10:46 AM | PERMALINK
That is odd, isn't it? The production of fake notes is far too low to cause any economic damage to the U.S., and whoever's doing it is apparently operating at a loss.

Or, more likely, given the sophistication needed to detect them, the distribution is such that the vast majority haven't been detected and the estimates produced of how many were made are way low.

Or most of them haven't been released at all yet, just a small sample with a carefully hidden trail to evaluate the ability of the authorities to detect them.

Posted by: cmdicely on May 23, 2007 at 10:59 AM | PERMALINK

If your technology is good enough to be practically undetectable, aren't you going to be motivated to go the extra mile and be actually undetectable?

Posted by: cld on May 23, 2007 at 11:09 AM | PERMALINK

To expand on my theory, has the degree of scrutiny recently gone up, or has the technology of detection improved?

Posted by: Alex on May 23, 2007 at 12:17 PM | PERMALINK

I think I saw a program on PBS last year that said the majority of the supernote detection has been by experienced money handlers who noticed very subtle differences in the paper - even the majority of bank employees can't tell the difference, and even under a microscope the engraving is pretty much indistinguishable.

Posted by: Hillary on May 23, 2007 at 12:28 PM | PERMALINK

When this story first surfaced in the Frankfurter Allgemeine in March, it suggested that the CIA might be involved in printing the notes--an allegation that McClatchy is apparently cautious about passing on. Anyway, with the difficulties involved in procuring the inks, threads, etc. (it's not just intaglio presses) from Europe, it seems unlikely that the North Koreans could muster the effort. It seems more likely the North Koreans are wittingly buying the currency at a discount or unwittingly receiving it from some bank, maybe Russia. Concerning the counterfeiting allegations, Banco Delta Asia had only one instance of counterfeit money deposited by the Norks--in 1994. Since then, they vetted large North Korean cash deposits at Hong Kong and Shanghai Bank. So the North Koreans have been handling some counterfeit currency--but the case for them manufacturing it has not been made. I've blogged this question in detail at China Matters.

Posted by: China Hand on May 23, 2007 at 12:30 PM | PERMALINK

I live in Switzerland and work for a Swiss bank. Don't believe what Swiss "experts" tell you. A Swiss expert is someone who knows how to tie their shoes. Honestly, I have never seen a group of people who were more intellectually lazy than the Swiss.

Secondly, if they cannot be detected, then who do they know how many there are?

Posted by: Michele on May 23, 2007 at 1:05 PM | PERMALINK

Which, come to think of it, points the finger back toward North Korea, doesn't it? Maybe Kim Jong-il doesn't care if the operation makes money as long as he still has some American cash to buy his goodies with.

How do they know that the number of bills in circulation is small?

but you are right. A country running at a loss, with no interest in accumulating wealth, using all its cash for weaponry. Wouldn't they make more money counterfeiting Chinese currency? They could buy U.S. currency in the black market, and probably run at a profit.

Posted by: MatthewRmarler on May 23, 2007 at 2:17 PM | PERMALINK

from the link upthread:

Probe Traces Global Reach of Counterfeiting Ring
Fake $100 Bills in Maryland Tied to Organized Crime in Separatist Enclave

By Peter Finn
Washington Post Foreign Service
Sunday, November 26, 2006; A01

The U.S. Secret Service and Georgian police are investigating an international counterfeiting operation that stretches from a separatist enclave in this former Soviet republic to Maryland, where fake $100 bills have been seized, according to senior officials and investigators here. The allegations are supported by American diplomats, U.S. court documents and a recent report to Congress.

From a printing press in South Ossetia, a sliver of land with no formally recognized government, more than $20 million in the fake bills has been transported to Israel and the United States, according to investigators. The counterfeit $100 notes have also surfaced in Georgia and Russia, officials said.

A spokesman for the U.S. Secret Service, in an e-mail message, declined to discuss the case "due to the sensitivities of the ongoing investigations and political considerations." But the joint report to Congress said the Secret Service "is currently investigating a scheme with ties to suspects in Israel, Russia, and the Republic of Georgia to produce counterfeit U.S. currency. The U.S. Secret Service has reason to believe this family of counterfeit notes is being produced in the Caucasus region," as the mountainous area encompassing parts of southern Russia and Georgia is called.

Posted by: drum is dumb on May 23, 2007 at 2:43 PM | PERMALINK

Clearly these were made by an alien/human hybrid who can change the molecular structure of any object through pure thought. He just needs enough money to live comfortably but doesn't want to raise any alarms.

Posted by: Mark on May 23, 2007 at 3:29 PM | PERMALINK

I believe this is clearly a for profit operation by organized crime. OC has both the means and the motive. My guess is a South American cartel. Could be another player with a $$ motive, but probably not ones with a polictical component - ex Israel/Lebanon - too many sugar-daddy nations around. No I think this is strictly a money maker. Brilliant too, if you can get to that level...travel the world and drop some serious coin at casinos and resorts worldwide!! Trace the origin? not likely!

China? Give me a break. They don't need fake currency to wage economic war on the US (regardless how much damage they might cause to themselves). They have over $1 Trillion of the real mccoy (bonds)!

Whoever it is has to have lots of free cash, but be willing to fly just under/above the radar.

Posted by: mezon on May 23, 2007 at 11:08 PM | PERMALINK

But WHY would the fake bills be better than real bills? Sounds like someone rubbing our faces in something-eg Chinese or those damn Canadians! Or a false-flag CIA operation.

Posted by: doug r on May 23, 2007 at 11:44 PM | PERMALINK




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly