North Korea's High-Tech Counterfeit $100 Bills 528
ESRB writes "North Korea is apparently able to produce high-quality counterfeits of U.S. dollars — specifically $100 and $50 bills. It's suspected that they possess similar printing technologies as the U.S. and buy ink from the same Swedish firm. 'Since the superdollars were first detected about a decade ago, the regime has been pocketing an estimated $15 to $25 million a year from them. (Other estimates are much higher — up to several hundred million dollars' worth.)' The article also advocates a move to all-digital payment/transfers by pointing out both forms are only representations of value and noting it would cripple criminal operations such as drug cartels, human traffickers, and so forth."
Math Pedantry (Score:5, Informative)
The 2009 attempt to raise funds by devaluing its already pathetic currency revealed not only the country's fiscal desperation, but also the abuse Dear Leader was willing to inflict on his people. The won was devalued by 100 percent, which meant 1,000 won suddenly had the purchasing power of 10 won.
It appears they got the 100 to 1 ratio [businessinsider.com] correct but I don't see how this is a "devaluation by 100 percent." Such ambiguous language would normally lead me to believe that a devaluation by 100 percent means everything is completely worthless (with zero percent value left). Wouldn't the correct devaluation percentage be 99 percent? I guess I would have preferred the fraction or ratio comparison instead if that is indeed how listing devaluation by percentage works in economics. Perhaps they could use better phrasing like "reduced purchasing power of all your money to one hundredth of its original worth overnight." Furthermore, how would you not riot over your government doing something like that to you?
NPR podcast on the topic (Score:5, Informative)
There's an excellent Planet Money podcast on North Korea's illegal economy [npr.org].
In the podcast they explain how North Korea is able to sell their fake currency, as well as the other shady things their government does to make money. It's worth a listen if you're interested in the North Korean regime.
Re:Paper Money w/ Digital signatures (Score:2, Informative)
This is completely wrong.
Re:OOH! SCARY STORY! (Score:5, Informative)
Let us say this right, They want to remove paper money from the hands of U.S. citizens, going electronic will do nothing to stop large cash transactions around the world, they will just switch to British Pounds, or even Hondoran Limpira
Re:paying their due (Score:5, Informative)
North Korea has an estimated $20 billion debt. [wikipedia.org] That's debt, as in money _they_ owe to other people, mainly Russia. And that's after Russia forgave them for about another $8 billion. I don't think anybody owes North Korea any money, and even if they do it is far exceeded by the amount they owe everyone else.
Re:BitCoin (Score:5, Informative)
That's a misrepresentation of the process. You are describing the bailout loans. The debt created by the fed is in the day to day banking operation.
The fed prints money by depositing electronically into banks. The banks PAY the fed interest on the money. The banks don't deposit the money, this money is what banks use to loan you money. For instance in the form of a mortgage.
So bank shows fed a fraction of loan, fed loans bank dollar. Bank owes fed $1.01 (simplifying here). Bank loans $1 dollar to you and you owe bank say $1.05. The problem is that we've created $1 of money and $1.05 of debt. The 5 cents doesn't exist and therefore is impossible to pay back. So where do you get it? Well at some point it comes from the only place it can. Someone else borrowing another dollar from a bank who borrows from the Fed... So now we have $2 created and $2.10 worth of debt. If we pay the original $1.05 debt, there is only $0.95 money left to pay the new $1.05 debt.
Now scale this up to trillions of dollars. Basically the system works by continually creating an ever growing national debt (and no, I'm not talking about the governments debt). Now we justify this saying that those loans have to backed by goods, even if only a fraction of the loan so we must produce more and more goods to keep the cycle flowing. But the reality is that we can just assign the same goods a continually higher value and continue to create debt without limit. Not only can we, we will do so because we need higher prices to pay off our debts! Inflation creation at its best... and yet our interest rates our higher than our inflation rate... what that means is that our inflation rate is false. What does reporting a lower than reality inflation rate do? Well if you are the currency that the global currency exchange uses to benchmark other currencies against, it means you are stealing from the value of all the other currencies because they are valuing against your false inflation thereby giving you more goods for your currency than the currency is worth when you buy goods in their nation or pay debts.
The result of doing this for 80 years or so? Massive over consumption and over valuation of goods causing rippling global economic crisis... like the one we see now.
Re:Because wire transfers are never falsified.... (Score:4, Informative)
It's not a matter of botnets - the backbones of these systems use leased lines, they aren't on the internet. They only talk to the outside world through transactions, the only way to access the application or OS is physically walking up to the machine. That's why you need access to dozens of machines, you need to fake them all out simultaneously. Then, it's only a matter of time before the transactions are resolved and your fake is caught.
I once worked with software that queried a credit reporting agency. Their security was completely nuts, and all I was doing was querying credit scores. Think leased lines, short-timeout encrypted access tokens, multiple layers of transport encryption, custom transport layers with multiple transaction verification schemes. They also did some heavy-duty traffic analysis - if you did anything even slightly weird you'd get a mail asking what was going on. This is just for credit scores, now just imagine what banks have protecting money transfers.
Re:OOH! SCARY STORY! (Score:5, Informative)
Actually, as a followup to my previous post, if you want a specific recommendation, try the penfed platinum rewards card. no foreign transaction fee, no annual fee, 5% back on gas, 3% back on groceries, 1% back on everything else. You can also get a $250 sign up bonus at the moment. Although penfed is designed for federal employees, anybody can get in. If you don't have a qualifying relative, then the easiest way to get in is to make a small one time donation ($20, I think) to one of the military charities listed. I did years ago, and it's easily paid for itself 100 times over. They've got great car loan and mortgage rates.
Re:BitCoin (Score:5, Informative)
Economics is not a zero-sum game. Just because an addition 5 cents of debt has been created does not mean it's impossible to pay back. Presumably, people borrowing money at $1.05 on the dollar are planning to do something with it which will result in more than $1.05 of productivity. If you can't make at least $1.05 from the loan, then it makes no sense to take out the loan. Say you buy equipment with the loan which allows you to become more productive at work, You in effect make $1.10 off the $1 loan. You pay $0.05 extra back to the bank, and pocket $0.05 for yourself.
"But nothing new has been created!" That's right. But you're forgetting that there's also value in organization and distribution. A chicken farmer laments that his family has all the eggs they can eat, but only dirty well water to drink. His neighbor the dairy farmer laments that his family has all the milk they can drink, but only his vegetables to eat. They look at each other, and agree to trade a bucket of milk for a dozen eggs every day. The amount of eggs and milk being produced before and after the trade is exactly the same as before. No new materials have been created. But the due to the improved distribution, the value of those milk and eggs has increased. The standard of living and consequently the productivity of both farmers has gone up, even though they're producing exactly as much as before. Better distribution like in the above example will increase productivity without increasing the amount of goods in the world. Efficiency improvements will increase actual production for a given cost. Better organization can also yield increased net production without actually increasing production (e.g. decreasing crop losses due to vermin).
Money is just a token symbol. The actual currency being traded is productivity, we just happen to measure it in dollars because it's easier than bartering for everything. As the population and per capita productivity increases, the money supply must increase to keep pace or else you experience currency deflation. The value of a $1 bill would go up over time, meaning people could "make" money by stuffing it under their mattress instead of doing productive work, resulting in the economy stagnating. So to keep the economy thriving, the money supply should grow slightly faster than the economy (enough money needs to "printed" to match country's increased productivity, plus a little extra). And the way the government does this is by authorizing banks to loan out more money than they actually have. Creating money "out of thin air" to match the increased productivity of the nation's economy due to improved efficiency, organization, and distribution.
Where we get in trouble when people stop appreciating just how much a dollar is worth, and spending it on frivolities whose return in improved productivity does not offset the purchase price (or loan repayment). This typically happens in a bubble, when people become irrationally exuberant that they market will keep going up, and that they'll continue to make "easy money" indefinitely so it's ok to waste it. In terms of how you put it: