The following is the April Fools Day article for 2010. As you read it and (probably) chuckle at the “far-fetched”-ness of it all, remember that counterfeiting is a serious problem and the North Korean printing presses are the real deal.
The Federal Reserve is meeting in an emergency session this morning as it has been revealed that 30% of the more than $1 trillion China holds in dollar reserves could possibly be counterfeit. The news is already severely diluting the value of the U.S. dollar, as well as further straining a relationship with China that is already filled with tension. The news comes as a blow to the U.S. at a time when Moody’s warns that a downgrade to the country’s AAA debt rating could be imminent. The Fed is in a closed door meeting right now, and President Obama and Timothy Geithner, the Treasury Secretary, are also involved — a rarity since the executive rarely meets with the Federal Reserve board in such sessions. Clearly, this is a matter of some grave importance.
North Korea suspected as the source of counterfeit bills
North Korea is the suspected source of counterfeit bills. The country has been reportedly producing fake U.S. dollars, and this has already been affecting the currency market, as more dollars circulating contributes to inflation, and lowers the value of the dollar. Indeed, the presence of these bills in the system may be why the greenback has struggled against the euro and pound recently.
China has had an increasingly cozy relationship with North Korea. Indeed, the fact that Chinese trade has been helping North Korea serves to explain why some sanctions against North Korea have been offset to some degree. China’s share of North Korea’s overseas trade rose to 73% from 2008 to 2009. It is no real mystery, then, of how China ended up with counterfeit dollars. These dollars could then be used to purchase U.S. Treasury bonds.
The bonds are a major way for the U.S. to fund its spending. The fact that a large number of these bonds might be purchased with money that is counterfeit is causing some consternation — especially since there are suspicions that the Chinese knew that they were using counterfeit money. Indeed, reports from top secret Chinese memos indicate that using the money was part of a plan to amass large dollar reserves in order to have more leverage over the U.S. by being able to threaten the so-called “nuclear option” when the U.S. tries to dictate policy. China, as expected, denies that any amount of its dollar reserves are counterfeit, and insists that even if they are, the country’s leaders could have no knowledge of it.
World financial markets in turmoil
The news has the world financial markets in turmoil. In currency trading, the value of the dollar has plummeted so much as to boost the sterling all the way to the $2.50 level, and the euro to the $2.00 level. (The euro is getting additional help from the fact that OPEC, upon hearing the news, announced that it will now sell its oil in euros.) The possibility that a significant portion of the world’s supply of dollars could be counterfeit has destroyed confidence in the world’s de facto currency, and financial markets are rushing to assimilate the news. The mass uncertainty is causing equity markets around the globe to plunge. Gold has rocketed through the $1,500 level, and many are predicting $2,000 gold soon as investors hurry to invest in something tangible. Oil is on shakier ground, but the switch to euros is expected to help support higher prices in the near future.
These changes, with the dollar virtually worthless,and hyperinflation already beginning, come at a time when the global economy is still in a delicate position, and the entire global economy is likely to plunge into a depression that will make the recent financial crisis look like nothing. At least, it would if this were all true. Fortunately, it’s not true at all. Happy April Fools’ Day.