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RESEARCH LIBR'\ ~Y
Federal Resen a oa, K

e

o St. Louis

r
Economic Education Newsletter

Federal Reserve Bank of Boston Vol. 17, No. 2 Fall1991

A Clear Difference
IN A SALOON NEAR THE CORNER OF BROADWAY
AND WALL STREET, A COUNTERFEIT FIFTY-DOL-

light, the strip cannot be reproduced in
the reflected light of copiers.

LAR BILL INCLOSED IN A FRAME HANGS UPON THE
WALL.

IT IS A GREENBACK, AND N INE PERSONS

OUT OF TEN WOULD TAKE IT FOR THE GENU INE
ARTICLE.

I NSPECTION UNDER THE MAGNIFYING

GLASS SHOWS IT WAS MADE WITH A PEN AND
INK, AND THE O

E WHO MADE IT MUST HAVE

BEEN AN EXPERT OF RARE ABILITY.

NEW YORK TIMES
APRIL

5, 1891

T HE GOVERNMENT IS PRINTING MILLIONS OF
SUBTLY CHANGED

$100

BILLS IN AN EFFORT TO

PREVENT COUNTERFE ITERS FROM DUPLICAT ING
C-NOTES W ITH ADVANCED, STATE-OF-THE-ART
COLOR COPIERS.

THE CHANGES - THE ADDI-

TION OF A TINY POL VESTER THREAD AND A
MICROSCOPIC LINE OF TYPE -WON'T BE NOTICEABLE UNLESS A PERSON REALLY LOOKS FOR THEM.

NEW

$50

Microprinting, the other security feature, is a microscopic line of type that
appears to the naked eye as simp ly
another fine line around the note's portrait. But closer examination through a
magnifier reveals that the "fine line"
actually consists of the words THE UNITED
STATES OF AMERICA printed repeatedly.
The lettersareonlysix- to seven - thousandths of an inch, about the same
thickness as the paper they're printed
on, and even an advanced co pier ca nnot reproduce them with sufficient clarity.

BILLS BEARING THE SPECIAL SAFE-

GUARDS ARE SCHEDULED FOR PRODUCTIO

BY

YEAR'S ENO .

AP WIR E SERVICE REPORT

j ULY 25,

1991

O

n July 25, 1991, Treasury Secretary
Nicholas Brady announced the introduction of secu ri ty enhancements
designed to further safeguard U.S. currency against counterfeiting. The two
features- a security thread and
microprinting - offer an added measure of protection against counterfeiting by advanced color copiers, scanners, and printers, but they are so subtle
as to be hardly noticeable.

The security thread is a polyester strip
embedded vertically between the left
edge of.the bill and the Federal Reserve
seal. The letters USA and the bill's
denomination (e.g., USA 100) are
printed on the clear plastic strip in an
alternating up-and-down pattern. Although it is easily seen when held to a

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The security thread and microprintingare
intended to augment existing cou nterfeit
deterrents, including: an intricate, weblike border and a lifelike portrait, both of
which are extremely difficult to duplicate; engraved plate printing that gives
new notes an embossed feel; and special
paper that is 75 percent cotton, 25 percent linen and embedded with red and
blue fibers (see sidebar, Your Money
Matters ... on page three).
These existi ng features, coup led with
the concerted efforts of the U.S. Secret
Service and other law enfo rcement
agencies, have effectively thwarted most
counterfeiters - especially large-scale,
professional operations. According to
government records for FY 1990, $66
million worth of counterfeit notes were
seized before being passed to the public, and another $14 million worth of
bogus bills were seized in circulation .
While that's not exactly pocket change,
it represents only a tiny percentage of
the $268 bi llion worth of genu ine U.S .
currency in circulation worldwide.
In recent years, however, the proliferation of advanced co lor copiers, laser

scanners, and digital printing equipment has begun to pose a new enforcement cha llenge. The dollar amount of
advanced copier and printer counterfeits doubled in just two years - from
$1 million in 1988 to $2 million in
1990 - and the problem cou ld worsen
as lower priced high-quality color copiers and printers become a standard
fixture in offices, franchise copy centers, and printing facilities .
According to some estimates, 1.7 million color copiers and 1.8 million color
printers will be in use by the end of
1994, and law enforcement officials
are concerned that widespread accessibility to the easi ly-operated high tech
eq uipment could trigger a sharp increase in "casual counterfeiting." People
who might never have considered a
"career" in counterfeiting might be
tempted to run off small quantities of
fake bills during the day for use at night
or on the weekend.
Casual counterfeiti ng is nothing new.
Small-time operators and a few wayward citizens have long tried to make
a li ving or supplement their income by
trying to make one-dollar bills look like
tens or twenties. Most of the time their
handiwork could easily be detected by
anyone who bothered to look. But
advanced color copiers, printers, and
scanners have begun to change all that
by making it possible for inexperienced
amateurs to produce good quality counterfeits.
Government officials began to address
the problem in 1978 when the United
States, Great Britain , Canada, and Australia formed the Four Nation Group to
study the potential counterfeit threat
from the copier and printer technology
advancements. After the Four Nation
Group issued its report in 1981 , the

Secretary of the United States Treasury
established the Advanced Counterfeit
Deterrence Steering Committee, which
was chai red by the U.S. Treasurer and
included representatives from the Federal Reserve System, the Bureau of Engraving and Printing, and the U.S. Secret
Service. The steering comm ittee studied
a number of measures before issuing its
final recommendations in 1986. Among
the options evaluated and rejected were
watermarks, which would have required
a complete currency redesign, and holograms, which proved too expensive
and too fragile to withstand simulated
circulation tests (fold ing, crumpling, and
chemica l soaks).
The printing of security-en hanced Series 1990 $100 notes began in April of
1991, and production of the Series
1990 $50 notes is scheduled to begin
by year's end. (Although they are being
printed in 1991, the new notes are
designated Series 1990 because that's
when the Secretary of the Treasury
authorized their printing.) By the
mid-1990s the security thread and
microprinting will appear on all denominations - with the possible exception of $1 notes, which are se ldom cou nterfeited. The $100 and $50
notes are being introduced first because they pose a greater risk of loss
from counterfeiting, even though counterfeiters have traditionally produced
larger numbers of bogus $20 and $10
notes.
When the security enhancements were
announced, Treasury and Federal Reserve officials repeatedly emphasized
that there were no plans for the recall or
"demonetization" of existi ng currency.
All olde r $100 notes will be replaced
when Federal Reserve Banks have ac-

cumulated sufficient inventories of enhanced $100 notes, but the older currency will continue to be legal tender.
(The same thing held true when large
denomination notes were retired from
circulation in 1969. Currently, the $100
note is the highest denomination in
active circu lation, but the old $500,
$1000, $5000, and $10000 notes are
still considered legal tender.)
Needless to say, changing the currency
is not something the government undertakes very often. The last significant
change came in 1957, after Congress
passed legislation (in 1955) requiring
that the phrase IN Goo WE TRUST be
added to all U.S. paper currency. Prior
to that, the last major change was the
192 9 downsizing of paper currency from
7.42 x 3.13 inches to 6.14 x 2.61 inches.
The authority to initiate currency
changes rests with both the Secretary of
the Treasury and the U.S. Congress.
Over the years, Congress has passed
legislation mandating the use of intaglio
printing (printing from an engraved
plate), inclusion of the motto IN Goo
WE TRUST, and the requirement that
portraits used for notes be of deceased
persons. But the recent security enhancements were adopted under the
auspices of the Secretary of the Treasury, who has had authority to determine the "form and tenor" of U.S. currency ever since national currency was
first issued in 1862.
At the present time, no further changes
to the currency are anticipated. Treasury officials seem confident that the
latest round of security enhancements
will adequately safeguard the integrity
of U.S. currency for so me time to come.

Nevertheless, some people will probably continue to try their hand at counterfeiting, and when they do they will
run up against the U.S. Secret Service,
which has a very long and impressive
record of foiling counte rfeiters. When
the Secret Service was created under
the U.S. Department of the Treasury in
1865, more than one-third of all U.S.
paper currency in circulation was counterfeit. Less than a decade later, counterfeiting had been sharply reduced,
and over the years the Secret Service
has become even more effective. In
1990, 139 domestic counterfeit plant
operations were suppressed, and the
overwhelming majority of counterfeit
notes were seized before ever reaching
the public.
One final note: Counterfeiting is punishable by a fine of up to $5000, 15
years imprisonment, or both, and the
conviction rate on prosecuted arrests
for counterfeiting is 98.9 percent.

Much of the preceding article was excerpted from Your Money Matters ...,
a new publication jointly produced by
the Bureau of Engraving and Printing,
the Board of Governors of the Federal Reserve System, and the Office
of the Treasurer of the United States.
For a free copy of Your Money Matters, write to:
PueuCATIONS, Public Services Department, Federal Reserve Bank
of Boston, P.O.Box 2076, Boston,
MA 02106-2076.

New England Update
Annual Report

T

he Federal Reserve Bank of
Boston's Annual Report 1990
is available to the public. For a
free copy, write to: Publications,
Public Services Department, Federal Reserve Bank of Boston, P.O.
Box 2076, Boston, MA 021062076.

page2

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Share the Wealth of Information!

A

reminder to all economic education councils and centers in the six
New England states: If there's a new
program, an upcoming event, or any
other information you would like to
share with our readers, just let us know.
Send the information to: Editor, THE
LEDGER, Public Services Department, Fed-

eral Reserve Bank of Boston, P.O. Box
2076, Boston, MA 02106-2076.
THE LEDGER is published three times a
year - Fall, Winter, and Spring.

Deadlines for each issue are August 1,
November 1, and March 1 .

Your Money Matters ...
New and existing security features for your dollars' protection

tlll$,c,n,ISU......U.-DtA
-AU.OdTl,,l'IMUC ..... -.U<

Federal
Reserve Seal
ISSUING FEDERAL RESERVE BANK. CODE
LETTER SAME AS FIRST
LETTER IN TWO SER IAL
NUMBERS.

A 9551719 7 A

Security
Thread

Serial
Numbers
Two SERIAL NUMBERS
DISTINCTIVELY STYLED
ANDEVENLYSPAGD. INK
COLOR SAME AS T REASURY SEAL. No TWO
NOTES OF SAME SERIES
AND DENOMINATION
HAVE SAME SER IAL NUMBER.

EMBEDOED POL VESTER
STRIP WITH REPEATED
USA 50 OR USA 100
IN AN UP - AND - DOWN
PATTERN. VISIBLE WHEN
HELD TO LIGHT . CANNOT BE REPRODUCED IN
REFLECTED LIGHT OF
COP1ERS. IN NEW SERIES
1 990 $50AND $1 QQ
NOTES.

LINES
ANO LACY, WEBLIKE
DESIGN DISTINCT AND
UNBROKEN.

Fibers
TINY RED AND BLUE FlBERS EMBEDDED IN PAPER.

Microprinting

Portrait

Treasury Seal

Denomination

"T HE UNITED STATES
Of AMERICA" PRINTED
REPEATEDLY ON SIDES OF
PORTRAIT. LITTERS TOO
SMALL TO READ WITHOUT A MAGNIFIER OR
FOR DISTINCT COPIER
REPRODUCTION.
IN
NEW SERIES 1 990 $50
AND $1 QQ NOTES.

L IFELIKE PORTRAIT DISTl NCT FROM FINE,
SCREEN-LIKE BACKGROUND .

SAWTOOTH

N o n's VALUE ON CORNERS SAME AS OVER
TREASURY SEAL.

I

f a person or a business rece ives a
• counterfeit bill, they assume the loss.
A counterfeit is never redeemable for
genuine currency.
• As of March 31, 1991 there was approximately $268 billion worth of U.S.
currency in circu lation worldwide. The
Federal Reserve estimates that $80-$11 0
billion actively circulates in the United
States, while $110-$160 billion is held
offshore or domestically held .

• In FY 1990, 36 percent of the dollar
value of counterfeit currency passed in
the U.S. was produced in foreign countries.


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~:A::a~~~T.INCTsE:~~

COLOR SAME AS TWO
SERIAL NUMBERS.

• Total counterfeit notes passed to the
public and seized before being passed
to the public in FY 1990:

$1

Passed

Seized

8,414

4,907

• On average, currency stays in circulation for the following lengths of time:

D, ,12v...
D, ,,,v,..
D, 112v...

6,486

51,690

$10

55,019

227,846

$20

173,531

799,632

-

llyra.

$50

23,053

160,759

-

81/2yra.

$5

$100

• In 1990, over 7 billion notes worth
about $82 billion were printed, at a cost
of 2.6 cents each. The security thread
and microprinting will add approximately two-tenths of a cent to the printing cost.

POINTS

2 yra.

397,546

• Currency goes through a complete
battery of durability and simu lated circulation tests, including crumpling, folding, washing, and various chemical tests
for resistance to substances such as dry
cleaning fluids, gasoline, and bleach .

• Thirty-nine other countries use some
variation of a security thread. Three
other countries-Australia, Canada, and
the Netherlands- use micropri nti ng as a
deterrent.
• The Federal Reserve currently has a
three-year supply of $2 notes. The last
printing was in 1977.
page3

Multi-Media
A New Multi-Media Package on the
Economics of Taxation

E

arli er this year, the Economi c Education Council of Massachusetts (EECM)
took part in a live teleconference on
Taxes in U.S. History, a new multi -media
resource package designed to introd uce
middle and junior high school stu dents
to the economics of taxation. The EECM's
George W atson, Norman Benson, and
Pat M alone organized M assachu setts'
partici pation in the nationw ide event.

Taxes in U. S. History w as developed
under the direction of the Joint Council
on Eco nomi c Education and the Agency
for Instructional Techn ology, with fund ing provided by the Internal Revenue
Service. The resource package incl udes
three videos for classroom use, a teacher
utilization video, a poster, and other
related print material s.
Each 20-minute classroom vid eo examines an important issue typically covered in U.S. history courses:
• "THEW HISKEY REBELLION: FIRST TEST OF
THE FEDERAL POWER ro TAX, 1794."

• "TH E PROTECTIVE TARIFF ISSUE, 1832."
• "FAIRNESS AND THE INCOME TAX, 1909."
A ll thr ee dr am at iza ti ons f ea tu re
yo un g characte rs w ho ex pl o re t he
ro le t axatio n pl aye d at crucia l jun ctures in U .S. hi sto ry.
The first segment, for example, revolves
around a contemporary high school student who bumps his head in a skateboarding accident and "wakes up" in 1794 at the
height of the Wh iskey Rebell ion. He
listens as fa rmers argue that a tax on
whi skey w ill un fai rl y burden them beca use their princi pal crop - corn - is often
made into whiskey. He also hears supporters of President W ashington speak of
the federal government's need to raise
revenue through taxation. By the time
the video ends, students have had an
opportunity to examine the historical
events that firml y established the federal
government's right to levy taxes .

native and effective. One focuses on
the co ntrove rsial Tariff of 1832 in an
effort to help students understand how
taxes influence economic behavior.
The oth er dramatization loo ks at the
issue of fa irness in taxati on by revisiting
the ea rl y twentieth century debate over
w hether or not to implement a federal
income tax .
According to Stephen Buckles, president of the Joint Council on Economic
Educati on, the creators of Taxes in U. S.
History sought to "make it easier for
teachers to do a first rate job of teaching
about taxes." H e ho pes it w ill also
crea te a "Tr ic kl e- up Effect" w hereby
"k ids will get exc ited and ta ke th e
mate ri als and co nce pts ho me to
t heir parents. "
For more info rmati on on Taxes in U. S.
History, contact your local or regional
office of the Joint Council on Economic
Education or call the Council 's nati onal
headquarters at (212) 685- 5499 .

Th e other two videos are eq ually imagi-

EECM Selects Watson as New
Executive Director

A

t its June meeting, the executive
committee of the Economic
Education Council of Massachusetts
(EECM) appointed George G.
Watson, Jr. to the position of executive director of the EECM. Watson
succeeds co-directors Norman
Benson and Carol McDonough, who
will continue to direct the Center for
Economic Education at the University
of Lowell.
Watson, a 1954 graduate of Amherst
College, received a Master of Arts in
Teaching degree from Harvard University in 1955 and a Master of Arts
in economics from Tufts University
in 1976. He is currently completing
his doctoral studies in the University
of Lowell's "Leadership in Schooling"
program .
From 1958 to 1990, Watson taught
history and economics at Winchester
(MA) High School. Since 1970 he has


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also directed the Center for Economic
Educationat Tufts University's Lincoln
Filene Center for Citizenship and Public Affairs. In that capacity he has been
involved in economic education research, curriculum development, and
the conducting of seminars, workshops, and courses for students and
teachers in the Greater Boston area.
Watson's goals as EECM director include :
• An expanded EECM Resource Center for use by Massachusetts teachers;
• Expansion of direct services to
school districts through the Joint
Council on Economic Education/
EECM Developmental Economic
Education Program (DEEP);
• An active Massachusetts Economics Teachers Association (META);

• An annual Economic Issues Forum
for secondary school teachers and
their students;
• An Economics Fair to identify and
showcase outstanding student
projects;
• An awards program for economics
teachers at all levels (K-Collge), and;
• A curriculum package for teaching
about the Massachusetts economy,
using materials from DEEP schools
as a starting point.
In related action, Patricia Malone,
who has managed EECM fundraising
efforts in the past, will continue those
efforts as EECM's assistant director.
She will also be involved in EECM
program efforts, especially in the
geographic area served by the University of Lowell Center for Economic Education .

page4