Money/Counterfeiting
Counterfeiting money is a practice almost as old as making real money. In this modern context, the focus is on states counterfeiting other states' (paper) currencies, either directly themselves through the army or intelligence services, or through cut-outs like criminals, political front groups or militias of the 'freedom fighter' type.
Contents
Purpose
The main purpose is to destroy the other countries currency system, mostly in combination with regime change operations. If the target country's currency is worthless, it creates immense damage to the economy. Another function of counterfeiting is to create black funds that can be used to finance political front organizations and militias of the 'freedom fighter' type.
United States
Why is it that countries that are in the US cross-hairs so often experience hyperinflation? In times of economic difficulties, such as war or international financial sanctions, it is normal to experience significant inflation. But in the countries mentioned as examples below, inflation was off the chart, where money became worth less than the paper it was printed on.
Afghanistan
The CIA supplied the Mujahedin with at least 2 billion dollars in counterfeit Afghan money for transport and bribery during Operation Cyclone, the CIA support program for the religious guerrilla forces against Soviet and Afghan government troops in the 1980s. As a bonus, they got to fund these group on the cheap, where the target country suffer the inflationary consequences.[1]
Iraqi Helicopter Money
In 1992, the New York Times published an article with the headline «Fake-Money Flood Is Aimed At Crippling Iraq’s Economy« [2], which had some extraordinary revelations:
Iraq’s economy is the target of an American-led destabilization campaign to pour vast amounts of counterfeit currency into the country, Arab and Western officials here say.
The fake dinar notes are being smuggled across the Jordanian, Saudi, Turkish and Iranian borders in an effort to undermine the Iraqi economy, said the officials here who closely monitor the situation inside Iraq. Those officials said counterfeit dollars are being smuggled into Iraq in smaller quantities to further confound the banking system. The officials, who insisted on not being identified, said the countries behind the separate counterfeiting operations included Western nations, Saudi Arabia, Iran and Israel.
The fake currency has contributed to Iraq’s severe inflation problem, which is aggravated by the fact that the Iraqi Government is printing money at uncontrolled speed to pay inflated salaries and cover the costs of reconstruction.
A Saudi official, who insisted on not being identified, concurred with the reports, saying that «all borders are being used.»
The mention of Iran and Saudi-Arabia should probably be interpreted as blame shifting. This is clearly a CIA-tactic, and it is worth noticing that the target country, Iraq, already was under severe economic stress, because of sanctions totally cut of from the international financial system.
1992 was the second year of what would turn out to be a 13 year economic blockade of Iraq. The country’s gold and hard currency reserves dwindled fast. Unable to get new hard currency earnings, the government was forced to print money to pay for salaries and reconstruction in the aftermath of the First Gulf War (1991). So an inflationary situation already existed.
As can be seen from the NYT article above, this left the field wide open for the 'Western countries' counterfeit experts to move in and flood the country with fake money. Given the intelligence service’s long experience and massive resources, the bills would be of high quality, indistinguishable from the real bills in circulation. NYT continues:
Along with international economic sanctions against Iraq, those measures have had mixed results since the Persian Gulf war ended in February 1991. They have clearly helped weaken the economy to the point where the local currency could become worthless, and they have loosened Mr. Hussein’s grip on the people […]
On the other hand, the measures buttressed the assertion, shared by a rising number of Iraqi nationalists including Sunni Muslims and Christians, that the West and its allies will not be content with the removal of Saddam Hussein, but only with partitioning and destroying the country.
And further down in the article it is described outright what Yugoslav government ministers would hint at a few years later, claims brushed aside as outlandish:
Counterfeit money was dropped by United States helicopters in the southern marshland areas…
The Yugoslav hyperinflation
Steve H. Hanke, an US economic expert in the field of hyperinflation, with extensive experience working closely for the US government in many capacities, gives us several interesting anecdotes in his article with the title "Syria’s Other Problem: Inflation" [3] (Henke denies the veracity of the accusation):
«In October 1999, [Yugoslav] Minister for Information Goran Matic claimed that I was in charge of shipping huge quantities of counterfeit Yugoslav dinars into Milosevic’s Serbia, in an attempt to cause the dinar to collapse and inflation to soar.»
Yugoslavia experienced two peaks in hyperinflation, 1992-4 (peak 313 million percent) and a much smaller one in 1999. During the wars of secession, draconian sanctions were introduced and the country blocked from access to the international financial system. President George W. Bush declared Yugoslavia to “constitute and unusual and extraordinary threat to the national security «in May 1992, due to the civil war in recently independent Bosnia, where Yugoslavia (which now consisted mostly of Serbia) was accused of meddling.
The second spike came in 1999, during the Clinton-administration, when US/NATO was in full war drive to make Kosovo independent and attempt to topple president Milošević.
Yugoslav authorities were aware of the possibility of counterfeit money being smuggled into the country. An article in the Washington Post before the Kosovo war claimed [4]:
«[Yugoslav] government officials quietly and seriously discuss what the CIA might be up to further the Clinton administration’s goal of getting Milosevic removed from power. They wonder, for instance, if the agency might be airdropping counterfeit Yugoslav dinars to sow further turmoil in the economy.»
North Korea
This country hardly needs introduction as part of the «Axis of Evil;» one of the seven countries specifically singled out as a priority for regime change by the Pentagon. It experienced a severe hyperinflation in the years 2009-2011, leading to a currency reform.
Forbes magazine published an article in August 2017 by Richard Miniter[5], with the title «Bomb North Korea – With Its Own Money«. The articles seems to have been inspired by current thinking in the national-security apparatus.
The article suggests that if one dropped «phony North Korean won, like confetti, over every city and commune, the NK won would quickly collapse.» It would force the country and its inhabitants to do their business in foreign currencies, like the dollar or yuan. According to the article, the government had a flexible response to the last bout of hyperinflation in 2009-11, but as a result «today, more than half of transactions in the capital and at the Chinese frontier are in dollars or yuan.»
The article envisages the next bout of hyperinflation would lead to the government «turning a blind eye to the emerging market economy. Only this time, the dollarization and yuanization will spread from half of the economy to the whole of it.»… «Once weakened by hyperinflation followed by dollarization, the U.S. could target its few sources of hard currency.»…. «Quite simply, North Korea’s won would disappear as a medium of exchange. Dollars, yuan and other regional currencies will be used to settle nearly all accounts (certainly including payments to Pyongyang), making North Korea absolutely dependent on a consistent supply of outside money. This is leverage that the civilized world may use against it.»
As an interesting aside, with hints of what the military-security apparatus considers within the realm of the possible, the article also envisages a driving the global coal price down to below North-Korean production cost levels to damage its export earnings.
As a sign that this counterfeiting might be a continuous operation, UPI [6] reported in May 2016 in an intriguing notice:
A «massive pile of fake North Korean money weighed about 330 pounds [150 kg], and was found in a heap of wastepaper in south-western Seoul»… «The counterfeit bills were printed in 5,000 North Korean won denominations.»
This amount of North-Korean fake money would be useless in the South, and difficult to justify for financial gain by ‘normal’ counterfeiters. A reasonable explanation would be that it was part of a routine operation to smuggle fake money into North-Korea, somehow gone amiss.
Other possible US targets:
Zimbabwe
The Zimbabwean situation is a bit more unclear, but it fits the pattern. The country is declared an «unusually and extraordinary threat to the foreign policy of the United States», the country blocked from the international finanical system and the leader (Mugabe) duly demonized.
Zimbabwe experienced hyperinflation in the 2000s, (up to 79.6 billion percent a month). At the same time there were endless articles in Western media describing the alleged horrors of the process of land reforms. If one should identify one single issue that got Zimbabwe in the cross-hairs, it is the land issue. The economy was in the process of being restructured, from the old status quo, where 6000 (white) settlers owned most of the productive land, while 6 million (black) people lived on subsistence farms. This attempt to acquire land and distribute it to landless people alarmed Britain, the US and the financial world.
The country had an economy in transition and was vulnerable. As a first step, the country was sanctioned and blocked from international financial institutions. It could no longer take up loans to finance routine foreign trade. Export earnings went down, as a combination of several factors, among them the restructuring, drought and sanctions. The central bank had to print money, with a following inflation, to keep the government apparatus going. And here comes a possible opening for the counterfeiters, when their efforts had maximum impact.
The country had a fairly heavy inflation in the period from the late 1990s, but in the period 2008-9, it changes to a massive hyperinflation. It was accompanied by a large psy-op campaign in the world press, with endless talking down the Zimbabwean economy and African mismanagement. Of course, this reporting was hiding and spinning the effects of the sanctions and the foreign interference, blaming the vicitim.
Syria
Steve H. Hanke [7], in his article with the title "Syria’s Other Problem: Inflation"[8]: «The Syrian Deputy Prime Minister for Economic Affairs, Qadri Jamil, claimed that Britain, Saudi Arabia, and the United States were engaged in a conspiracy to undermine the Syrian pound by flooding Lebanon and Jordan with counterfeit Syrian pound notes.»
Venezuela
The country prints [9] its bills abroad, which gives Western intelligence services access to the printing plates. Counterfeit bolivares would be indistinguishable from the real thing. As in several of the other places, one can observe a massive campaign in the international press to highlight the inflation, and thereby further reduce faith in the currency.
France
Guinea
France used counterfeiting with great success to bring her recently independent colony Guinea to heel. In 1958, the country wanted to print its own money, but France flooded it with high quality counterfeit bills, making the local currency collapse. As a result, Guinea was forced to join the French-controlled CFA franc-zone.[10]
Germany
Operation Bernhard
During World War II, the Nazis attempted to implement a similar plan (Operation Bernhard) against the Allies. The Nazis took Jewish artists in the Sachsenhausen concentration camp and forced them to forge British pounds and American dollars. The quality of the counterfeiting was very good, and it was almost impossible to distinguish between the real and fake bills. The Nazis were unable to carry out planned aerial drops of the counterfeits over Britain, so most notes were disposed of and not recovered until the 1950s.[11]
The Future
With more and more of the financial system becoming electronic, currency forgery will also enter the digial era. 21 century opponents will suffer just as much as their 20th century counterparts from a destroyed monetary system.
