Counterfeiters are printing them in China, and they are virtually indistinguishable from the ones that The Fed prints over on Blue Mound Road in Fort Worth.
This counterfeit money isn't backed by any commodity (gold, silver, etc.) and it could wreak havoc on our economy.
This is a genuine $100 bill.
There is almost no way to distinguish this one from the Chinese counterfeit one. It isn't backed by any commodity (gold, silver, etc.) and it could wreak havoc on our economy.
If you take either of these to a bank, you can swap them for 100 pictures of George Washington, or 20 pictures of Abraham Lincoln, or 5 pictures of Andrew Jackson. The bank will not give you any gold or silver in exchange for them. They are only worth what people think they're worth.
Chinese counterfeiters and Ben Bernanke are both paying their bills with worthless paper. All discussions of the new debt ceiling are fundamentally silly, because we've been paying our debts with worthless paper for about 35 years.
In the meantime, don't bother looking at your paper money very closely. All of it is fake.
13 comments:
Have you been to the gift shop over on Blue Mound Road?
For the life of me I can't figure out how they get away with charging significantly more than face value for a sheet of bills that they forgot to cut apart.
Federal Reserve notes aren't backed by nothing. They represent a liability of the Fed and therefore they have assets on the opposite side of their balance sheet. The assets they hold, though, include large amounts of government debt. It is the monetization of this debt which increases the likelihood of inflation, therefore eroding the value of the currency.
Counterfeit money has no assets at all backing them and have some marginally inflationary impacts depending on the volume. It's a game of Hot Potato to see which sucker gets stuck holding the phony bills.
But a genuine $100 bill will always be worth $100 worth of goods and services to the holder, eroded only by inflation. The inflation rate is still fairly low. I wouldn't wait until we got to Brazil or Argentina's inflation rate before sounding alarm bells, but we're clearly not there yet.
Money backed by gold can be counterfeited to. Commodity money ties up valuable and useful resources and doesn't permit necessary flexibility. It takes no less discipline to stick to a metal standard as a fiat money system. The government could always print more notes than it held in gold, knowing there wouldn't be a run on gold.
BTW, when China would accept only silver in payment for goods (like tea), it created a "silver sink" in Europe. They couldn't get enough silver to pay for their trade. The dearth in tea imports and high taxes and tarriffs created a black market for dangerous, highly adulterated tea-like products. This situation contributed to the two Opium Wars.
You had China which monopolized tea production, imposing tariffs, refusing imports, and demanding silver. Then you had Europe with a trade monopoly in the East India companies, hiigh taxes, and a gold/silver standard. What could possibly go wrong?
"Can you spot the difference between the genuine and the fake $100 bills?"
That's a trick question: there isn't any difference.
Here is the link to the fed's balance sheet. There are fewer federal reserve notes in circulation than you might guess - less than 1 trillion.
Balance sheet
There is more "currency" in the accounts of financial institutions: about 1.7 trillion.
The bottom of the page shows the collateral for the federal reserve notes consisting mainly of treasuries, but a fair amount of government guaranteed MBS. Ultimately the notes are backed by the full faith and credit of the government which, as our debt grows, will become less full and less faithful.
Nick,
Either party - The Fed, or The Fakers - can print all they want.
One has the full faith and credit, etc etc etc, and the other side doesn't. But their worthless paper still looks the same, doesn't it?
fake transcript at single place.
Fake Transcript
If I sell you a lump of iron pyrite claiming it is gold, and you believe it's gold, and a hundred people in transactions thereafter believe it's gold, then what does that say about gold as a medium of exchange?
What happens when, say, someone discovers a way to extract gold from seawater. This would be similar to the influx of gold into Spain from the American colonies. What happens to the value of gold and any currency backed by it? Did a central bank create the ensuing inflation?
The bottom line is that counterfeiting is not a valid criticism of fiat money, and commodity money is neither immune to fakery, debasement, inflation, or inefficiency.
Nick, commodity money is not immune to those problems, but fiat has them designed into the plan. They intend to inflate the currency without end, they intend to debase the currency. At least with a commodity based currency nobody is saying gold should be the currency simply because one group of people controls the entire supply and want to debase it while making themselves rich in the process. If a new supply of gold or whatever is discovered, so be it, but don't make something worthless valuable by threatening people with violence if they refuse to treat the worthless paper as something having value. That is really the only thing that makes FRN's valuable, violence, not choice. Either they are valuable because the government threatens violence to ensure you accept their paper as something of value or they are valuable because it is the only thing the government accepts as payment for their taxes which they force you to pay under the threat of violence, thus creating a demand for their paper that would not be present in a non-coerced environment, I think it is both and at the root of both reasons FRN's have value is institutionalized violence.
So.... Does it matter where our $100 bills are printed?
Allen,
You shot. You scored.
There is no difference between the bills because they are two pictures of the same real $100 bill.
All the tiny threads, smudges and wrinkles are in the exact same places in both pictures.
Precisely. Both of them are printed on identical paper, with absolutely nothing backing them up.
One day soon, Americans are going to wake up and realize that their dollars are made of paper.
It's gonna get scary.
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