Archive for the ‘dollar’ Category

Lock, Stock & Money

Saturday, March 14th, 2009

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The idea of investing in stocks seemed like a bright prospect a few months back but now it sends shivers down the spines among prospective investors. Share investors have witnessed a tough time over the past six months. Investing in stocks or shares has always been a risky affair, but more so during the past few months as the stock prices went tumbling down, with a steep fall in the economy. Interestingly stock trading is not a new thing and its history can be traced back to the Romans, but the first company to issue stocks was the Dutch East India Company. They pooled in public investment and used it primarily for the building of ships.

Experts in the stock market claim that the one thing that is important for a person trading in stocks is his timing. Investors were quick to realize that they needed to be on the tip of their toes to trade effectively in the stock market. However in the olden days, not everybody had the time to keep a track on the stock prices on a daily basis, and that itself gave rise to a new profession- the Stock Broker. He kept a watch on all your stocks and helped you make a decision on what to buy and what to sell, and charged you a commission (called the brokerage) for his services.

With the advent of technology, the stock markets have seen a radical change over the years. Increasingly sophisticated broking software has not only made it easy for Stock Brokers to trade on the market, it has also meant that a newbie, with a little knowledge about the share markets can take a plunge. The internet has also made it easy for people to trade on stocks sitting at the comfort of their homes, with millions of dollars changing hands in a few milliseconds. Technology has made it possible for algorithmic trading to take place, wherein computer systems are programmed to buy or sell shares when a certain market condition is met.

As with all things related to money, the Stock Market has seen its share of financial scams amounting to millions of dollars. Among the various major scams that have hit the Stock Market hard, the earliest was in 1986 when Barry Minkow claimed to be building a multi-million dollar company and went public with a market cap of $200 million before being discovered that it was a mere scam. However the largest investor fraud ever committed by a single person amounting to a whopping $65 billion was the one orchestrated by Bernard Madoff. He introduced his Ponzi scheme, where instead of investing the money offered to him by his clients it was simply deposited to his business account in Chase Manhattan Bank.

A totally different form of stock scam came into picture in the form of the boiler room. A lot of people have been hit most by boiler room scams, where a smooth talking salesman calls up and tries to peddle worthless shares to unsuspecting customers. Police have called it the biggest threat to households, much bigger than credit card frauds. These are called boiler room scams because the people involved operate out of cramped office spaces with desks and telephones. Police have estimated that there are about 500 boiler rooms operating out of Spain, employing over 400 people. Other favourite Boiler room destinations are USA, Dubai, Berlin and France.

With the economy in recession, investors are thinking twice before plunging into the Stock Market. With statistical figures showing that approximately more than 50% of American households invest in the stock market, it is something that is still considered to be a good investment. It is just a matter of time before the Stock Market hits back with a vengeance. Better hold on to your money until then.

The $2 and $100 Bills-The Rarer Currencies

Thursday, March 12th, 2009

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The first two dollar notes were called United States Notes or “Legal Tenders”. They were issued by the Federal Government in 1862, featuring a portrait of the first Secretary of the Treasury, Alexander Hamilton. In 1869, Thomas Jefferson’s portrait started being used and the same portrait has continued to be used for all two dollar United States Notes and all two dollar Federal Reserve Notes. Monticello was first featured as the vignette on the back of the two dollar United States Note in 1928. Monticello was Thomas Jefferson’s estate in Virginia.

In 1976, in celebration of the United States bicentennial, a two dollar Federal Reserve Note was introduced. Thomas Jefferson’s portrait was still on the face but Monticello was replaced on the back by a vignette of the signing of the Declaration of Independence. This painting of the Declaration of Independence was painted by John Trumbull. The original portrayed forty-seven people, 42 of whom were signers out of the fifty-six on the Declaration of Independence. Because of a limited amount of space on the two dollar note, five of the forty-seven were left off. The most recent printing of the two dollar note was in 2003 and at this time there are no plans to redesign it.

The first one-hundred dollar notes were also called United States Notes or Legal Tenders. They were issued by the Federal Government in 1862 and they featured a vignette of an American eagle. Benjamin Franklin first had his portrait on the one hundred dollar note in 1914, the first series of these Federal Reserve Notes. The one hundred dollar note is the largest denomination of Federal Reserve Notes that are currently issued in the United States. The life span of a one hundred dollar Federal Reserve Note is 89 months on average. This is much longer than other denominations of currency since this is rarer and circulated less than they are.

In 1996, the one hundred dollar Federal Reserve Note featured large portraits, watermarks and color-shifting ink. The notes also included micro-printing, which is lettering so small that it is hard to replicate, on the front of the note. “USA 100” is written in the numbers located in the lower left corner and “United Sates of America” is in one line on the left lapel of Benjamin Franklin’s coat.

Since 1928, the vignette on the back of the one hundred dollar note has featured an engraving of Independence Hall, the former State House of Pennsylvania, in Philadelphia. Independence Hall is often called the birthplace of our Nation because inside is where the Declaration of Independence was signed and where the Constitution of the United States was drafted. It has been said that the man and women in front of the hall close to the building are embracing but there is no record of that. The hands on the clock on the hall are set to 4:10. There doesn’t seem to be any explanation as to why this time was chosen.

Facts About the One Dollar Bill

Wednesday, March 11th, 2009

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Did you know:

o that the 1st one dollar notes were issued by the Federal Government in 1862. They featured a portrait of Secretary of the Treasury Salmon P. Chase?

o that the first use George Washington’s portrait on one dollar notes was on the 1869 United States Notes?

o that the inclusion of “In God We Trust” on all currency was required by law in 1955. It first appeared on paper money in 1957, on one dollar Silver Certificates, and on all Federal Reserve Notes starting in 1963?

o that the first one dollar Federal Reserve Notes were issued in 1963. It had George Washington on the face and the Great Seal on the back? This remains unchanged.

o that of all the notes printed by the Bureau of Engraving and Printing, one dollar notes make up 45% of all currency made?

o that the life span of a one dollar bill is 21 months?

o that the face and back designs of all U.S. paper currency, except the backs of the one and two dollar bills were adopted in 1928?

o that George Washington is on the one dollar bill, Thomas Jefferson is on the $2, Abraham Lincoln is on the $5, Alexander Hamilton is on the $10, Andrew Jackson is on the $20, Ulysses Grant is on the $50, and Benjamin Franklin is on the $100?

o that notes of higher denominations, while no longer produced featured William McKinley on the $500, Grover Cleveland on the $1000, James Madison on the $5000, and Salmon Chase on the $10,000?

o Faceplate Numbers and Letters are the small numbers and letters that can be found in the lower right and upper left corners of a bill?

o In the left corner of the dollar bill is the Note Position Number? This consists of the Note Position Letter and a quadrant number. The Note Position Letter is followed by the Plate Serial Number. This identifies the plate the note was printed from. The Plate Serial Number for the back side of the note is in the lower-right corner.

o that bills that have a small “FW” in the lower right corner on the front of the bill indicate that the bill was printed at the Bureau of Engraving and Printing’s Western Currency Facility in Fort Worth, Texas?

All of these things contribute to what the dollar is today. You probably haven’t thought much about The Great Seal or the Note Position Letter and Plate Serial Number. If you take a closer look at that dollar in your pocket, you can trace it back to its exact location on the plate it was printed from. It may not be top on your list of things to do when you’re paying for your cup of coffee but someone could certainly track this dollar to its roots if they wanted to. Take a look, you might find something interesting yourself!

Currency Counterfeiting and Defacing-Be Nice to Your money

Tuesday, March 10th, 2009

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Title 18, Section 471 of the United States Code states that manufacturing counterfeit United States currency or altering genuine currency to increase its value is a violation punishable by a fine of up to $5,000 or 15 years imprisonment or both. Also in Title 18, Section 333 of the United States Code, defacement, mutilating, cutting, disfiguring, perforating, uniting or cementing together any bank bill, draft, note or other evidence of debt issued by any national banking association, Federal Reserve Bank, or Federal Reserve System, with intent to render such items unfit to be reissued, shall be fined and/or imprisoned for up to six months.


You can just as easily be imprisoned and/or fined just for possession of counterfeit money with fraudulent intent. All of these offenses are covered under Title 18 of the United States Code. Possession of counterfeit money is under Section 472 and is punishable by a fine of up to $15,000 and/or 15 years imprisonment. These sections in Title 18 regarding counterfeiting are clear and strict however they only cover paper money. The defacement section covers all money. Defacement of currency in such a way that it’s made unfit for circulation is under the jurisdiction of the United States Secret Service.

Regarding the counterfeiting of change, also covered in Title 18, is outlined in Section 331of the United States Code. It seems that there isn’t a big problem of counterfeiting pennies because pennies are not mentioned whatsoever in this section. However, anyone manufacturing a counterfeit U.S. count in any denomination above 5 cents (which also sounds like nickels aren’t included, just amounts above them) is subject to the same penalties as all other counterfeiters, that is a fine of up to $5,000 and/or 15 years imprisonment. Someone who is only altering, not manufacturing, a U.S. coin to increase its value, also according to Section 331, is a crime punishable by a fine of up to $2,000 and or imprisonment of up to 5 years.

Section 510 covers the forging, altering or trafficking in United States government checks, bonds or other obligations. If you were to participate in doing these things, you could face a fine of up to $10,000 and or 10 years in prison. Section 474 covers and prohibits the printing reproductions, photographs of paper currency, checks, bonds, postage stamps, revenue stamps and securities of the United States. Violations are punishable by a fine of up to $5, 000 and/or 15 years in jail.

We all know, especially in these hard times that sometimes money is scarce. People are losing their jobs and paying more for their homes, food and basic necessities. The more people counterfeit, the lower the value of our dollar drops. If this is something you were to come across, think of the consequences outlined here and think if using counterfeit money is worth the $2,000 to $10,000 fine and years of jail time is worth it. Chances are that you would rather stay in the position you are in than every try to counterfeit money!

Money Laundering – is it a common thing?

Monday, March 9th, 2009

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Money Laundering - by definition means to hide illicit income, or disguise it in a form that it no longer appears to be illegitimate. This can be done in a variety of ways. Money laundering can be as simple as stashing away illicit cash in a big bag, so that apart from the person hiding it, nobody else knows about it.  In the modern world however, criminals tend to lock up their illicit money in foreign banks, with less stringent bank laws, or hide it in the form of investment in a business, or discreetly purchase personal property.

Money laundering is a punishable offence by law. In October 2005, U.S congressman Tom Delay was charged with money laundering, forcing him to step down as House Majority Leader. In U.S the average prison sentence for Money laundering is six years.  In late December 2006, the Chinese authorities uncovered a five billion Yuan (633 million U.S Dollars) money laundering scandal, the country’s biggest ever. Apparently this scandal was only accidently exposed following a probe into false business registrations, raising fears over how money laundering can be easily concealed.

With the rise of global finances, money laundering has become easier than ever. Countries with bank secrecy laws are directly connected with countries with bank-reporting laws, making it easy to carry out anonymous transactions to deposit “dirty” money. Also, with recent technological advances, money can zip through two countries in a flash. Considering that an estimated 700,000 wire transfers occur daily in the United States moving well over $2 trillion, illicit wire transfers are easily hidden.

The advent of internet and electronic cash has made money laundering an easy affair, and extremely difficult to trace. DigiCash, a form of electronic cash introduced by an Amsterdam based company is said to be the most secure form of electronic cash available. It uses a technology called ‘blinding’ which makes it unconditionally untraceable, thus making it a boon for money launderers across the globe. Recently UK authorities busted a gang of international criminals trying to launder £229 million from a City bank by exploiting the high-tech security measures designed to protect money transfers.

That brings us to our next question. Is money laundering only used by individuals to hide their illegitimate money? Recently, the United Nations’ crime and drug watchdog has indicated that “dirty” money  made in the illicit drug trade has been used to bailout large banks in the global financial crisis, since it was the only form of liquid capital available. The amount of money involved in this bailout is said to be hundreds of billions, which could make this the largest money laundering operation in the history of the world.

While it is impossible to ascertain the statistics of money laundering, a frequently cited figure places it to be about 2-5% of the worldwide global economy. With no discreet data available for the statistics these are just mere guesses and the actual figures are estimated to be much higher. Money laundering is a huge problem, and although current money laundering laws apply to cyber laundering, their efficiency is rather limited.

The truth is that although Money laundering may not be a common thing now, technology has created the means and ability to launder money by use of completely untraceable digital currency, and the future may have something different in store for us.

The History of the Bureau of Engraving and Printing

Monday, March 9th, 2009

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The Bureau of Engraving and Printing can be traced back to August 29, 1862. It was a single room in the basement of the Treasury Building. Here, two men and four women separated and sealed $1 and $2 US notes which had been printed by private bank note companies. Now, there are about 2,500 employees working out of two buildings in Washington D.C. and a new building in Fort Worth, Texas. On April 26, 1991, the Western Currency Facility in Fort Worth had its grand opening.

Emma S. Brown was the youngest employee every hired by the Bureau of Engraving and Printing. She started working in 1865 when she was almost 11 years old. She had a physically –handicapped mother and an older brother who was the main bread winner for the family. He was a soldier with the 188th Pennsylvania Volunteers and was killed in action during the siege of Petersburg in July, 1864. Emma Brown’s Congressman gave her a political appointment to the Bureau of Engraving and Printing in the examination division. Ms. Brown was forewoman of the trimming section for 59 years before retiring on April 24, 1924.

1877 brought the need for a Plate Printer force which included a large number of experienced firemen who were formed into a Fire Brigade for the protection of the Bureau of Engraving and Printing property. Electric lighting was introduced to the Bureau in 1888; six years before a majority of the Bureau positions were placed under Civil Service. By 1908, all of the positions were under Civil Service. The printing of revenue stamps was taken over by the Bureau in 1876 and in 1894 they began printing postage stamps. During World War II, the Bureau overprinted stocks of regular currency notes that had certain distinguishing, identifying features which were shipped over for use in the Hawaiian Islands.

The Bureau of Engraving and Printing has printed currency for the governments of the Republic of Cuba, Siam, Korea and the Philippines. The Bureau was reimbursed by each government for all the work that was done. Denominations ranging from 1/5 cent Wine Stamp all the way to the $100,000,000 International Monetary Fund Special Notes were produced by the Bureau. There were many discrepancies in the stamps and currency. This opened an investigation and a tremendous amount of time into the research. Samples include:

• A man who insisted the portrait of Lincoln on the $5 bill must have been printed in reverse because Lincoln parted his hair on the left side, not the right. After much correspondence, several trips to museums and the Smithsonian Institute including a study of the Lincoln death mask all revealed that Lincoln’s mole and part were indeed on the same side of his face, on the right.

• On the Pony Express Stamp of 1941, many have insisted that the wrong saddle was on the pony.

• Some have said that on the Gold Star Mother Stamp of 1948 showed a Russian star.

• The Little America Stamp of 1933 had the continents on it that some would argue were misplaced.

• One man insisted that the word “Anniversary” on the 1952 Gutenberg Bible Stamp was misspelled.

In each of these occurrences and many more, the Bureau of Engraving and Printing proved conclusively that the designs depicted were correct.

Currency Counterfeiting - A global nemesis

Sunday, March 8th, 2009

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The history of counterfeiting traces itself to the history of money itself. Counterfeiting had started when money was in its most primitive stages. The ancient Greeks and Romans resorted to shaving down legal coins, reducing their value, and use the shavings to cast new coins. The advent of paper money led to the modern day counterfeiting. With potential ill–effects being as huge as bringing a whole nation down, counterfeiting has proved to be a nemesis among nations, and the punishment for this crime can be as extreme as death.

Apart from being a human crime, counterfeiting by itself has been used among various nations to destabilise the economy of an entire nation. Governments have used it to a great degree of success by overflowing the target nation with fake bank notes, causing the real value of the currency to crash. During, the Revolutionary War, the Government of England resolved to counterfeit to reduce the value of the Continental Dollar. The United States government took a similar course but the fake Confederate currency they produced was of a superior quality as compared to the real thing.

The most professional campaign of counterfeiting was conducted by the Germans in World War II. The Germans manufactured very convincing paper, and used the professional expertise of prisoners held captive in Sachsenhausen concentration camp, to produce the fake currency. The Bank of England managed to obtain some bogus German currency, and found the forgeries so good that it is said that the only way to distinguish it from the real thing was that the forged one was better.

In the modern days, counterfeiting has been used to promote and sponsor terrorism. The Central Bureau of Intelligence (CBI) in India has reported that rupee notes are supplied by the Pakistan government press, free of cost to Dubai-based counterfeiters who, in turn smuggle it into India. This money is later used for funding terrorist activities inside India, and is also reported to be the main source of funding for the recent Mumbai blasts.

With advances in technology, the quality of counterfeiting has improved drastically, making it difficult to tell the real thing apart from its counterfeit. It is claimed that the U.S dollar bills produced in North Korea, are the finest counterfeit banknotes, and are called Superdollars because of their high amount of detail and quality. However, with the advent of the Euro, there has been a substantial decrease in the amount of forged U.S currency.

Counterfeiters use various measures to produce replicas of the original currency. Devices can range from a simple colour photocopier to much technologically advanced printing techniques like those used at the national mint depending on the level of accuracy and detail desired. Counterfeiting has become more of a bother now than ever before as it is easier for small-time operators to pull it off. All that is required is a high-resolution scanner, a high-end colour printer and a personal computer system.

Considering the nemesis that counterfeiting has on the economy, the governments of various nations have taken a number of steps to combat it. Techniques like making intricate designs, using ink patterns that are hard to duplicate have been employed. US greenbacks were traditionally printed in two inks. Many nations print engraved money, which use specially engraved plates that are very difficult to replicate. Some countries also resort to coming up with new designs frequently.

Statistics for counterfeiting remain uncertain, as it is difficult for most people to recognize a forged currency unless they are trained to do so. Some estimates place the proportion of bogus currency in Western Europe at about 3%, but the ratio is much higher in less developed countries. The usual target for counterfeiting is the $100 bill, and many of the forgeries are very good.

With so many techniques applied by various nations, the truth is that until money is being printed, counterfeiters will exist.

Japan, Mexico, Australia and New Zealand’s Currency Falls

Friday, March 6th, 2009

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Japan’s yen will fall to 102 to the U.S.’s dollar as of tomorrow. The yen had been as strong as 87.12 to the dollar in January and has lost 8.8% since then. The forecast calls for the yen to fall 4% more in the next 3 months. Mexico’s peso has dropped 32% since September. The peso is 16th out of the top 16 most-traded currencies, showing the largest drop and the worst performance also since September. For the fourth week in a row, Australia and New Zealand’s dollars fell against the U.S. dollar. The dollars also fell against the yen. Australia’s economy shrank in the fourth quarter and grew less than expected in January. What is going on here?

Though misery loves company, I don’t think we (by “we” I mean the United States) would wish our economical woes on any other country. So is our economy falling because of the currency issues in foreign countries or are they failing because of our falling dollar and failing stocks?

Because the yen and other Japanese accounts are declining, their investors started and continue to purchase foreign securities. In February, the yen had its worst monthly drop in 13 years, and Japan’s overseas stocks and bonds rose to record numbers. At the same time, Japan’s Prime Minister Taro Aso’s disapproval rating also rose to record highs. Carry trades could have helped Japan borrow foreign currencies with low interest rates and invest in nations with high borrowing costs. Don’t think that the U.S. is safe because our big investors could start purchasing foreign securities also, starting this whole downward spiral.

Mexico’s peso fell 1.4% to the U.S. dollar after an announcement of the country’s currency commission regarding changes to the foreign-exchange auction system. Yesterday the peso was down another 1% to 15.39 to the U.S. dollar. The same currency commission said it will offer to buy $100 million worth of pesos a day in order to guarantee that the central bank’s projected foreign reserve accumulation is sold. Even high ranking Mexican officials say that this will not be enough to jump start Mexico’s economy and failing peso. Mexico is in a state just below panic at this time and if things continue falling, the U.S. is going to have to step in before this goes too far. Just like any other nation, the United States could end up like this at any moment.

Australia has an overall negative dynamic which will be the main issue pushing their dollar lower. The Aussie dollar fell from a value of 64.3 U.S. cents two days ago, to 63.9 U.S. cents yesterday. Even New Zealand is feeling the pain, their dollar falling from 50.2 U.S. cents to 49.8 cents yesterday.

The thing to remember is for one, we are not the only ones feeling this bite of economical downfall. Different countries are hurting to different extents and in slightly different ways, but we can all empathize because if we’re not there, we have been or know we will be. Besides focusing on rebuilding the United States’ economy, we have to remember that the world will follow. This is not the first time we have seen crises and it won’t be the last. Your best weapon in this battle is staying informed and using that knowledge to the fullest.

Libor and the Dollar

Thursday, March 5th, 2009

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Libor or the London Interbank Offered Rate, was introduced in early 1984 after it became apparent that an increasing number of banks were trading actively in a variety of relatively new market tools. The British Bankers’ Association (BBA) noted that these new tools notably interest rate swaps, foreign currency options and forward rate agreements, brought in more business and greater intensity to the London Interbank Market. However they were also worried that future growth would be hindered unless there was a standard introduced.

Hence, Libor was introduced as a standard and would become the British Bankers Association’s yardstick for interest swap rates.  This standard also incorporated the fixing of BBA interest settlement rates which became a part of the overall package officially known as the BAIRS terms – the BBA standard for interest swap rates. Ever since it was introduced, the Libor has been used as the official standard for calculating the rate of reference for the British Pound Sterling and other currencies including the US dollar.

Every weekday morning, as the clock ticks round to 11, a group of six people put together this world’s most important number. This number will later determine the day’s Libor rate or rather the rate banks charge when they lend each other money. To get a sense of the importance of Libor to the financial system you only have to look at the precautions that the team goes to make sure that the figure always gets published on time.

The group is equipped with an emergency evacuation office in Canary Wharf, London. They also have another permanently staffed office at a secret location outside London. Every team member also has a dedicated phone line in their home in case they are prevented from getting to the office, by an incident such as a terrorist attack. Nothing is allowed to come between Libor and the wider world.

However serious questions about the credibility of the Libor were raised, after a study released by the Wall Street Journal, revealed that banks may have downplayed borrowing costs they reported for LIBOR during the 2008 credit crisis. The immediate impact of this meant that banks could have created a false impression about their borrowing. By using the LIBOR to their advantage banks could create an impression that they could borrow from other financial institutions more cheaply than they could in reality. This meant that although the banks were suffering they appeared to be much healthier.

The BBA conducted an internal investigation, and announced that the LIBOR is definitely dependable and can be relied on even during the financial crisis. This was supported by other authorities including the Bank for International Settlements. It was also found that “Although the integrity of the U.S dollar LIBOR fixing process has been questioned by some market participants and the financial press, it appears that U.S. dollar LIBOR remains an accurate measure of a typical creditworthy bank’s marginal cost of unsecured U.S. dollar term funding”

As the U.S. government was set to propose more massive spending to help fight recession, the LIBOR for the U.S dollar increased even as the rate for Euros slipped to a record low. Analysts said that more government aid for the economy would keep dollar Libor rates on a mildly rising trend as the government would likely have to borrow more funds. Under such circumstances, banks do not want to lend out their spare liquidity because there is uncertainty - both about whether the bank will need the cash itself in coming months, and about the financial health of the borrowing bank.

As Libor measures the rates at which banks are prepared to lend to each other, it follows that it also determine the rate at which they are prepared to lend to their customers. It eventually goes on to set the rate of $360 trillion (£210 trillion) worth of financial products worldwide, ranging from mortgage rates to car loans. The big institutions are increasingly dependent on the central banks for cash and until this ends we’ll not see Libor rates falling.

So despite its daily fluctuations, it seems that the lack of trust between banks has rendered the market almost silent.But with the eyes of politicians, bankers and customers fixed on the daily Libor numbers, it seems unlikely that the attention on this world’s most important number will disappear.