CURRENCY COUNTERFEITERS HAVE ALWAYS BEEN WITH US

Counterfeiting of currency is probably as old as money itself. Author Stephen Mihm has written an intriguing and story-filled book on the American currency titled A Nation of Conterfeiters. He chronicles the history of counterfeiting through the centuries but concentrates on the crazy history of United States and how manty times we have suffered greatly because of the crazy “patchwork” of monies that we created early on. The framers of the American Constitution originally gave the federal government the right to coin money. But it seems the states took the privilege anyway and this obviously presented many serious economic problems. The right to make money—literally—was a privilege that bankers acquired when they obtained a corporate charter from one of the states. After depositing bonds or other assets with the state government a bank could commission an engraver to design and print bank notes. Though only a few banks issued notes in the 1790’s, the number of banks with notes skyrocketed in the next 75 years so that there were some 10,000 banks issuing notes. You can only imagine how much counterfeiting was going on.

During the Civil war this changed quite a bit. The North finally took charge of the currency for that part of the country. This stabilized and brought confidence to the regional economics, at least for a while. During this time there were many “crashes” because the money often became worthless in many states as banks often would refuse to accept them if they were not their own. Nations have used counterfeiting as a means of warfare too. The idea is to overflow the enemy's economy with fake bank notes, so that the real value of the money plummets. Great Britain did this during the Revolutionary War to reduce the value of the Continental Dollar. Although this tactic was also employed by the United States during the American Civil War, the fake Confederate currency it produced was of superior quality to the real thing.

During World War II, the Nazis attempted to do a similar thing to the Allies with "Operation Bernhard". The Nazis took Jewish artists in the Sachsenhausen concentration camp and forced them to forge British pounds and American dollars. The quality of the counterfeiting was very good, and it was almost impossible to distinguish between the real and fake bills. The Germans could not put their plan into action, and were forced to dump billions of the counterfeit bills into a lake. The bills were not recovered until the 1950s. There has been a rapid growth in the counterfeiting of Euro banknotes and coins since the launch of the currency in 2002. Even today we have a problem overseas that is serious enough that our bill designs have to be continually changed. The most serious problem is the $100 dollar bill. At the end of 2004, 66% of the identified official foreign exchange reserves in the world were held in United States dollars and 25% in Euros.