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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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 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 $5000, 15 years imprisonment, or both, and the conviction rate on prosecuted arrests for counterfeiting is 98.9 percent. Much of the preceding article was excerpted from Your Money Matters ..., a new publication jointly produced by the Bureau of Engraving and Printing, the Board of Governors of the Federal Reserve System, and the Office of the Treasurer of the United States. For a free copy of Your Money Matters, write to: PueuCATIONS, Public Services Department, Federal Reserve Bank of Boston, P.O.Box 2076, Boston, MA 02106-2076. New England Update Annual Report T he Federal Reserve Bank of Boston's Annual Report 1990 is available to the public. For a free copy, write to: Publications, Public Services Department, Federal Reserve Bank of Boston, P.O. Box 2076, Boston, MA 021062076. page2 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Share the Wealth of Information! A reminder to all economic education councils and centers in the six New England states: If there's a new program, an upcoming event, or any other information you would like to share with our readers, just let us know. Send the information to: Editor, THE LEDGER, Public Services Department, Fed- eral Reserve Bank of Boston, P.O. Box 2076, Boston, MA 02106-2076. THE LEDGER is published three times a year - Fall, Winter, and Spring. Deadlines for each issue are August 1, November 1, and March 1 . Your Money Matters ... New and existing security features for your dollars' protection tlll$,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. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ~: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 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 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