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Podcast Transcript

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 is considered a crime in every country on Earth, but of course that depends on what currency you are trying to counterfeit. 

Learn more about counterfeiting and the perpetual game of trying to stop counterfeiting on this episode of Everything Everywhere Daily. 

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 thing that you were trading. A fur was a fur. 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. There are examples going back 5000 years of ivory, bone, clam shells, and stones being used to replicate the much rarer sea shells.

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. 

You could create a copper coin and then add a thin coating of gold or silver to it. 

Counterfeiting was, in effect, fraud and theft. You would defraud the person that you conducted the transaction with, but you also were 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 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 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. 

This is the origin of the term sound money. Sound money, aka valid coins, were those that made the right sound. 

While the creation of fake coins did happen, there was another technique that was far simpler—coin clipping or coin shaving. 

Shaving wasn’t counterfeiting per se, but it is close enough that it is 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 sell. 

Coin clipping was difficult to detect, so weights were 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 coin clipping team, were sentenced to death for coin clipping. 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 motion, gravity, and light, he was also the head of the Royal Mint later in his life.

In 1698, he implemented a process known as reeding on coins made by the mint. Reeding creates small ridges or grooves on the edge of a coin. If someone tried to clip the coin, it would remove the ridges, and you could quickly know if the coin was good. 

While clipping is no longer a problem today, reeding is still done on many coins. The US quarter has reeding edges, 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 one 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. You couldn’t clip paper…I mean, you could, but it would achieve nothing.

Paper money had one big downside: it was easier to forge. 

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, but that wasn’t an insurmountable problem for a trained printer.

Early paper money didn’t have any fancy anticounterfeiting techniques. They simply relied on deterrence by extreme punishments, just like those that befell Thomas and Anne Rogers, and Catherine Murphy. 

While paper money was 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 independence. 

In order to raise money for the war effort, they issued a paper currency 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 some 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 to flood the market. They developed a large scale counterfeiting operation. 

The fact that the printing on Continentals was so bad only made counterfeiting easier.

Estimates are that between a third to a half of all Continental notes 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 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 were only used locally. 

In 1861, the US issued the greenback in an attempt to both standardize currency and 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 side. 

It was largely successful, with both fake Confederate and Union notes flooding the economy. 

Immediately after the war, President Lincoln created a commission to address the problem. 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 the 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 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-counterfiting measures began making its way onto 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 just a thread that could be seen on a bill. Today, it is often a metal or plastic strip embedded into the paper of banknotes. This thread is often visible only under certain conditions which is an added an extra layer of security.

Microprinting is another common security feature. This is very small text that standard printers cannot easily reproduce. This text is generally only visible under magnification.

Most major world currencies now have what is known as a EURion constellation. This is a collection of five 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 is a banknote and will give you an error message. 

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.

Holograms have also been added to some notes, as they are difficult to reproduce. 

However, some countries have taken things a step further. The US uses a special type of paper that is 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, and 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 someone with a printing press can do. 

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 happened starting 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 US $100 bill. It had the same micro printing, same security thread, same color-shifting ink, and watermarks. 

The exact origin of Superdollars has been a subject of considerable debate and investigation. Some evidence and allegations, particularly from U.S. authorities, have suggested that these counterfeit notes have been produced in countries like North Korea and 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 denies.

To fight the superdollar, the redesign of the $100 bill, includes advanced security features such as a blue 3D security ribbo, 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 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, make counterfeiting less and less attractive.