[Dave Birch] I’ve been reading John Cooley’s book on counterfeiting Currency Wars, which is about various attempts to destabilise countries by forging their currencies. He talks a lot about North Korea’s “superdollar” forgeries and the like. He says at one point that there is a grey area between actual counterfeiting and the deliberate over-issue of fiat currency. This led me to reflect that the quantitative easing policy of the British government is likely to be reduce (by inflation) the value of the pound Sterling far more effectively than Hitler’s plans to bring Britain to its knee through counterfeiting in the Second World War:

Operation Bernhard was the name of a secret German plan devised during the Second World War to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes. It is the largest counterfeiting operation in history.

[From Operation Bernhard – Wikipedia, the free encyclopedia]

As an aside, one of my sons went on a school trip to Germany earlier in the year and actually visited the scene of this dastardly plot to sabotage Sterling, the Sachsenhausen concentration camp. If you are at all interested in this story, there’s an excellent film about it, The Counterfeiters. Now, think what the modern version of this might be: not counterfeiting physical money, but creating electronic money. What would Operation Berhard look like in 2009?

With all the thoughts about the future of money floating around at the moment, I couldn’t help but wonder whether a shift to electronic money for retail and person-to-person payments would make a modern-day Operation Bernhard easier or harder? I did think of one way to do it. What you would have to do is to instead of creating fake money, create some fake assets and then get the central bank to print new money to buy them with. That way, the currency has been debased but the money that you end up possessing isn’t “fake” because it was created by the central bank itself. Brilliant. It would be a cool idea for a book, but it could never work in real life. Oh, wait…

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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