Since this turns on a point of fact (or speculation thereon), I thought it would belong here instead of CS. But I might be mistaken.
Greenbacks is apparently the title of Will Smith’s next feature film. The plot, according to AICN, invloves hm dashing around the globe in order to shut down a counterfietting scheme that aims to destablizie the world economy.
IIRC, the value of all the actual US currency in physical circulation is tiny compared to the total value of dollars that exist only as numbers in a ledger. How much impact could an unchecked counterfietting operation really have? How many dollars’ worth would they have to print in order to have a noticable effect on global finance? Finally, is this a good plan for world domination?
I recall Ireland had a problem with counterfeit notes in the 1980s and just issued a new one. It was memorable for the phrase used by a government spokesman to explain why it was necessary - “the involuntary privatisation of banknote printing”. One of my favourites along with “unplanned landing.”
I’m not sure about anything else, but I have a vague memory that an increase in the physical cash supply often has a corresponding (and even greater) increase on the non-physical cash supply. Basically, if there’s more cash around, some of the people who’ve come into money will be putting it into banks. When banks have more money in the vaults, they can make more loans without going under their specific reserves limit.
I don’t know how the increase being counterfeit would affect the situation. Are these REALLY good fakes, or would people at a bank be able to spot the fake? That could destablize the economy in a different way… if there’s a lot of cash floating around, but nobody (except the banks) are really sure how much of it is good… and nobody really wants to take it to the bank to be sure. Less confidence in the american bank note.
I hadn’t considered the confidence angle; they’re supposed to be perfect duplicates, utterly undetectable. If NOBODY can tell the difference, then I think the confidence angle disappears, as there’s no fear that they wouldn’t be accepted at face value. However, if only the bank could tell, then I could see a dip in the popularity of US banknotes. Hmm.
Only a certain percentage of capital is supposed to be cash, so if a large (OK, very, very large) amount of superfluous cash started circulating, problems could occur. chrisk’s alternate problem is brilliant and perhaps is better because the audience would have to consider what they would do if faced with that situation, as opposed to too much world cash.
That being said, as long as it seems plausible within the world of the script, I’m OK with it. It is just a movie.
If the fake stuff is exactly, undetectably like the real stuff, then the effect will be the same as the national debt: inflation. We had double digit inflation back in the 70s and the world economy didn’t destabilize.
If, in fact, the economy of the entire world was destabilized, that would likely make it easier to gain control of a country–people would be unhappy and looking for a change–but it’s not clear how the counterfeiters would take advantage of this. The opposition party would be first in line to take control and attempt to restabilize things.
And we’re talking a huge amount of cash here. How are they going to get it in circulation? The government does it by buying aircraft carriers (big purchases) and by giving the money to folks on welfare (small payments to thousands). Maybe they plan to buy a few governments outright?
I seem to recall that the Nazis towards the end of the war were producing fake Sterling (Pound Notes and White Fivers IIRC)in an attempt to undermine the British economy.
Would the production of fake US Dollars actually destabilise the WORLD economy, or just the US economy?
Would the collapse of the USD bring down the value of Sterling, Euro and Yen?
I recall reading somewhere (can’t remember where, so no cite) that it’s estimated that as much as 50% of the US currency circulating outside the US may be counterfeit, a lot of it produced by the governments of countries such as North Korea. Anybody have any harder facts on this? If this is anywhere near true, then I suspect that you would need to dump fake bills in the billions to have any effect.
First, as others have noted, you would need a ridiculous amount of counterfeit currency. The US economy is just too huge. Theoretically, increasing cash or money supply, rather, would raise inflation, but this is assuming that those same bills changed hands rather than winding up in a bank (i.e. being used for purchases).
So, yes, raising the money supply and thus increasing the velocity (all thing being equal) will eventually destabilize the US economy. It will just take a whole lot of cash to do it.
Since we’re a global economy and since many markets are reliant on the US market, destabilizing the US market will cause a disruption globally, e.g. the Great Depression.
I, too, have read that North Korea counterfeits lots of US currency. Google the words “North Korea counterfeit” and you’ll have your hands full of cites. The way North Korea distributes their fakes is by handing it to their “diplomatic” staff. Anyone from DPRK who is allowed to travel outside the country pretty much de facto has enough party rank that they’re given diplomatic credentials. They smuggle it out in diplo pouches and then place it into bank accounts in Pacific Rim banks that don’t have aggressive counterfeit detection. They then phone home; someone in DPRK does a wire transfer that empties out the account (to an account in Switzerland? Korea? Who knows?) and turns the phony paper into “good-as-gold” ones and zeroes.
A few sources listed on Google suggest that Korea is being handed fake $100’s from Middle Eastern countries in exchange for missile technology. Since there are only about 3 countries in the Middle East that buy missiles from North Korea – and all of them have little love for the US – it’s anyone’s guess which of them is printing fake bills. It could be any of them and/or North Korea. This source even fingers Colombia.
Less confidence in the american bank note.