Counterfeiting
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As soon as money was invented, counterfeiting followed soon after. Counterfeiting has been around for as long as money, and as money has changed, counterfeiters have changed with it. What used to be a relatively simple process has become a highly technical game of cat and mouse. Today, it's considered a crime in every country on earth, but of course that depends on what currency you're trying to counterfeit.

Learn more about counterfeiting and the perpetual game of trying to stop counterfeiters on this episode of Everything Everywhere Daily. This episode is sponsored by NerdWallet. When it comes to general knowledge and history, you know I've got you covered. But who do you turn to when you need smart financial decisions? If your answer is NerdWallet, then you're absolutely right. And if it's not, let me change your mind.

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Learn more at shopify.com slash enterprise. The story of counterfeiting really begins with the creation of coins that used precious metals as their base. Prior to that, in a world of barter, it was difficult to fake the things that you were trading. A fur was a fur and wheat was wheat. However, when people began to abstract value into easily tradable and scarce objects, counterfeiting began.

Some early civilizations used seashells as a form of currency, and there are examples going back at least 5,000 years of ivory, bone, clamshells, and stones being used to replicate much rarer seashells. Counterfeiting changed with the introduction of coins. With coins, the coin's value was in the amount of gold or silver in it.

The first counterfeiters figured out that you could create a similar looking coin with a similar weight by substituting a cheaper metal for the precious one. For example, you could create a copper coin and then add a thin coating of gold or silver on it to make people think it's the real thing. Counterfeiting was in effect fraud and theft. You would defraud the person that you conducted the transaction with, but you were also committing a crime against the state.

Almost every coin-issuing authority was a government of some sort. Having valid coins with the correct amount of gold or silver was necessary for a functioning economy. If people didn't trust the coins, commerce would slow down. Almost as soon as we saw counterfeiters, we saw laws against counterfeiting. The punishment for counterfeiting was often very severe, and it was considered to be, or on a par with, treason. The death penalty was often the punishment for counterfeiting.

People developed their own techniques for checking the validity of coins. One technique was to make a small cut in the coin to check to see whether the metal below the surface was the same. Another was to drop the coin to see what sound it made. Silver coins make a particular ring when dropped on a hard surface. This was not only a way to check against counterfeit coins, but also coins that had the silver content reduced when the state reduced the amount of silver in them.

And this is the origin of the term sound money. Sound money, aka valid coins, were those that made the right sound when you dropped them. While the creation of fake coins certainly did happen, there was another technique that was far simpler, coin clipping or coin shaving. Coin clipping wasn't counterfeiting per se, but it's close enough that it's worth mentioning. With clipping, someone just had to shave off a little bit of the metal in the coin.

You wanted to shave off just enough that the coin was still passable. You could then spend the coin at face value, but accumulate enough of the precious metal to later sell. Coin clipping was difficult to detect, so weights were often used to ensure that the coin contained the proper amount of gold or silver.

Coin clipping was taken very seriously. In 1690 in England, Thomas and Anne Rogers, a husband and wife team of coin clippers, were sentenced to death for coin clipping. And they didn't get a simple hanging. Thomas was drawn and quartered and Anne was burned alive. In fact, in 1789, the last person ever burned alive in England was Catherine Murphy, who was killed for the crime of counterfeiting.

One of the biggest breakthroughs in combating coin clipping was instituted by none other than Sir Isaac Newton. In addition to developing calculus and theories of gravity, motion, and light, he was also the head of the Royal Mint later in his life. In 1698, he implemented a process known as reading on coins made by the Mint.

Reading creates small ridges or grooves on the edge of a coin. If somebody tried to clip the coin, it would remove the ridges and you would quickly know if the coin was any good. While clipping is no longer a problem today because we don't have precious metal in our coins, reading is still done. The US quarter has reading edges and the British pound coin has writing on the edges as does the 2 euro coin. The advent of paper money changed counterfeiting because it made it much easier.

The first paper money appeared in China in the 13th century. The paper that was used for the money was made from a mulberry tree. The emperor literally stationed guards around mulberry forests so nobody would get access to the trees to make paper. However, it was ultimately in vain because there was a lot of counterfeiting with early paper money.

Paper money had advantages over coins. It was easier to carry and easier to make. And you couldn't clip paper money. I mean, you could, but it would achieve nothing. Paper money, however, had one big downside. It was much easier to counterfeit. Early paper money was nothing more than printed pieces of paper. If you could print something on paper, then you could make money just as easily as the government.

Unlike most printing, it was usually done with an engraved piece of copper, not a movable press, but that wasn't an insurmountable problem for a trained printer. Early paper money didn't have any fancy anti-counterfeiting techniques. They simply relied on deterrence by extreme punishments, just like those that befell Thomas and Anne Rogers and Catherine Murphy. While paper money had been around for centuries, it wasn't in common use until the late 18th and 19th centuries.

One of the first countries to heavily rely on paper banknotes was the newly created United States. The United States was a financial mess just before and immediately after they achieved independence. In order to raise money for the war effort, they issued a paper currency that became known as the Continental. The currency had a reputation for being next to worthless, and much of that reputation was due to counterfeiting.

There were counterfeiters on each side of the conflict. Some just wanted to make money, and some British loyalists considered it economic warfare. Moreover, in 1777, the British actually captured the paper that was used to make Continentals, and they made their own so they could flood the market. And they developed a large-scale counterfeiting operation. The fact that the printing on Continentals was so bad only made the counterfeiting easier.

Estimates are that between a third to a half of all continentals in circulation were fake. One of the leaders in the fight against counterfeiting was the printer Benjamin Franklin. He popularized the use of watermarks as an anti-counterfeiting technique. He also issued pamphlets warning the public against counterfeiting, and on the bills he printed, he would put the phrase, to counterfeit is death. Silver coins never went away, but banknotes became more common in the 19th century.

The United States had free banking in the 19th century where banks could issue their own currency, which could then be redeemed for gold or silver. By the start of the Civil War, there were 8,000 different types of paper currency in circulation, most of which was used only locally. In 1861, the United States issued the Greenback in an attempt to both standardize currency and to raise money for the war. Likewise, the Confederacy issued its own paper currency that was backed by nothing.

The American Civil War saw widespread organized counterfeiting by both sides. Each side conducted economic warfare by trying to undermine the currency of the other. It was largely successful, with both fake Confederate and Union notes flooding both economies. Immediately after the war, President Lincoln created a commission to address the problem of counterfeiting. One of the solutions was the creation of an agency to combat counterfeiting.

On the last day of his life, he signed the document which created the Secret Service. While most people think of them as a group that protects the president, their primary function is actually combating counterfeiting. The 19th century saw the first serious attempt at anti-counterfeiting efforts beyond a simple paper watermark. The biggest security features were the use of special paper and the development of high-quality detailed printing. It made counterfeiting difficult, but not impossible.

To make fake bills, you'd need high-quality paper and to duplicate the detailed metal printing plates that were used to make the notes. For most of the 20th century, this was the state of paper currency throughout the world. It wasn't until the 1980s that advanced anti-counterfeiting measures began making its way into paper notes. Over the last 40 years, a host of anti-counterfeiting measures have been implemented in money around the world, making counterfeiting exponentially harder.

The 1990 series of United States Notes were the first American bills to use these advanced techniques. One of the most common security measures is a security thread. Originally, this was literally just a thread that could be seen on a bill. Today, it's often a metallic or plastic strip embedded into the paper of the banknotes. This thread is often visible only under certain conditions, which is an added layer of extra security. Microprinting is another common security feature.

This is very small text that standard printers can't easily reproduce. The text is generally only visible under magnification. Most major world currencies now have what is known as a Euryon constellation. This is a collection of five circles, very small circles, that can be read by a scanner. If you try to use photo editing software like Adobe Photoshop with an image of a major currency, it won't let you open it.

It will detect that it's a banknote and it will give you an error message due to the Euryon constellation. Some notes have been printed with color shifting ink, which changes color depending on the viewing angle. This feature was introduced in currencies to provide an easily recognizable but difficult to replicate security feature. Likewise, holograms have also been added to some notes as they're difficult to reproduce. However, some countries have taken things a step further. The United States uses a special type of paper that's only made by one company.

However, countries such as Australia, New Zealand, the United Kingdom, and Canada have adopted polymer notes. Polymer notes last longer and also serve as an anti-counterfeiting measure because you can't easily print them. All of these measures have made it very difficult to counterfeit currency today. The multiple anti-counterfeiting techniques collectively make counterfeiting no longer something that somebody could just do with a printing press.

However, while counterfeiting is very difficult, that doesn't mean it is impossible, especially if you have the resources of an entire country. That is exactly what started happening in the late 1980s. A counterfeit United States $100 bill began appearing that was so good, it was almost indistinguishable from the actual thing. It became known as the Superdollar. The Superdollar was almost identical to the real $100 bill.

It had the same micro-printing, same security thread, same color-shifting ink, and watermarks. The exact origin of the super dollar has been a subject of considerable debate and investigation. Some evidence and allegations, particularly from the United States, has suggested that these counterfeit notes have been produced in countries like North Korea or Iran.

The U.S. government has accused North Korea of manufacturing these notes to bypass economic sanctions and generate income, an allegation that North Korea has denied. To fight the superdollar, the redesign of the $100 bill included advanced security features such as a blue 3D security ribbon, which are intended to be easy for the public to recognize but difficult for counterfeiters to replicate.

Counterfeiting will probably always exist to some extent, but it has become significantly more difficult to do over the last few decades. The anti-counterfeiting measures coupled with the reduced value of currency due to inflation plus an increased reliance on electronic transactions has made counterfeiting less and less attractive. The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Benji Long and Cameron Kiefer.

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