Re: Fix what's wrong

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Currency conterfeit is a non-issue in monetary policy. To begin with,
most reserves are not held in cash but in elctronic accounts with the
Fed or held in treasuries, which are not bought with cash but electronic
bank accounts.  It is extremely difficult to laundry cash in amounts
more than $10K, even with legit money, let alone counterfeits.
Counterfeits are a game for small time crooks, who pass twenty dollar
bills to unsuspecting consumers and the cost of such distribution is
very high, as much as $18 per bill. To be safe, the distribution has to
have a large number of impersonal disconnected transfers so that the
original counterfeiter cannot be traced. Most cash are routinely
returned to the treasury and replaced with new bill after a few years of
circulation, with the old bills burned. this includes dollar cash
outside the US, handled through foreign banks, or US banks with foreign
branches.

Counterfeits increase the cash supply by a small amount which actually
is good for a stagnant economy at this moment in time.  So the dollar
economy get more systemic benefit in the form of increased liquidity
from counterfeits than systemic cost from counterfeiting, since it cost
the US nothing to print dollars. Counterfeits do not increase the gold
the Fed has to hold. Most banks will accept counterfeit bills wihtout
question but will quietly notify the secret service for investigation.
Rejecting counterfeits over the counter will damage the fungibility of
the dollar. Counterfeiters know this. $400 in twentiy dollar bills will
weigh almost as much as an ounze of gold. Very few counterfeiters are
dumb enough to counterfeit thousand dollar bills, or even fifty or
hundred dollar bills.

ATM cash theft is a much more serious problem than counterfeits.

Henry C.K. Liu

James R. Olson, jr. wrote:

> At 09:00 AM 11/7/03 -0800, William B. Ryan wrote:
>
> > The dirty little secret of central banks in the
> > region, including Russia's, is that a large
> > percentage (perhaps more than two-thirds) of the
> > vault cash that forms the basis of their "reserves"
> > can never be repatriated to the United States,
> > because it didn't emanate from the United States in
> > the first instance, but the Bank of Iran.
>
>
> That seems high.  The information I found had estimates that 0.03 of 1%
> (0.0003%) of dollars outside the US were Iranian counterfeits.
>
> Perhaps if every bit of it was in reserves...
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