Private citizens now printing money too

Central banks are not the only ones printing money to help get through this financial crisis.  Private citizens are increasingly turning to the printing press to help alleviate their financial problems as well.  My translation of an article from Finanzas, a major Spanish finance website, explains.

A total of 413,000 counterfeit euro banknotes were withdrawn from circulation in the first half of 2009, representing an increase of about 17% compared to the amount recovered in the previous six months, as reported today by the European Central Bank (ECB ) in a statement.

The 20 euro banknote was the most counterfeited in the first half of 2009 and accounted for 48.5% of all counterfeits detected, followed by 50 euros (34%) and the 100 (13.5%).

Fewer counterfeit banknotes were of 5 to 500 euros (0.5%), the ten-euro (1%) and 200 euros (2%). The sum of these three  intermediate bills (20, 50 and 100 euros ) represented over 95% of all counterfeits.

The majority (over 98%) of counterfeit notes withdrawn in the first half of 2009 was detected in countries in the euro area, only about 1% in EU Member States outside the euro area, and  less than 0.5% elsewhere in the world.

he ECB explained that during the period under review there was no significant new classes of forgery, so the increase is due solely to a wider distribution of the types of forgeries. The level of counterfeiting should be compared with the number of genuine euro banknotes in circulation (a total of 12.5 billion during the first half of 2009).

However, the ECB recommends that the public to be vigilant with regard to the notes they receive in cash, because the more you’re familiar with the properties and features of genuine banknotes, the easier it will detect a counterfeit.

What this article does not address is who is counterfeiting and where. Back in May, I highlighted an article in the Economist which notes that counterfeiting is endemic in countries like Peru.  Certainly, almost half of the larger denomination coins I received when I was there were counterfeit.  I quickly learned to scrutinize these coins and reject fakes after counterfeits I was passed were rejected on several occasions.

But, in the EU, there i a counterfeiting problem now as well. In fact, there has been a movement afoot to reject notes issued in countries like Portugal, Italy, Spain, and Greece. If you try to pass a Portuguese note in Germany, you might find it gets rejected as many Germans do not trust those bills. While I look at the comments of Ambrose Evans-Pritchard about Europe digging its economic grave as hyperbole from someone who is a known Euro-sceptic, the counterfeiting problem is undermining trust in the Euro.  At a minimum, this does highlight the fact that the U.S. dollar is not destined for the reserve currency dustbin just yet, despite the obvious flaws of the global financial system.