ANA: Congressional Testimony
ANA
testified before the House Banking Committee on July 13, 1994. This testimony
may be retrieved from ANA's anonymous FTP site. This account is still in
the testing stage so please let me know if you encounter any difficulties.
ftp athena.csdco.com
name: anonymous
password: (any entry)
cd ana
get testimony.txt
Or you may request a copy to be emailed to you.
The following is the Heads or Tails article which will appear in the
August 1994 issue of The Numismatist.
HEADS OR TAILS
THE NUMISMATIST
AUGUST 1994
Are Redesign and Demonetization in Store for U. S. Paper Money?
"Improved technology...has now tipped the scales in favor of the
counterfeiter." -Robert J. Leuver, Former Director, BEP
United States paper currency, designed in the 1920s, is extremely
susceptible to counterfeiting. Except for the plastic security thread and
microprinting introduced in 1990, changes since its introduction have
been minor. Improved technology in the field of graphics, however, has
now tipped the scales in favor of the counterfeiter. U.S. currency is in
need of a dramatic overhaul. How such a change is implemented will
greatly affect the hobby.
If Federal Reserve statistics of several years ago are correct,
probably more than 60 percent of our currency resides outside the United
States. As a stable, international currency, the U.S. dollar is an
excellent monetary device for purchasing arms and drugs. The U.S. Secret
Service does an excellent job of monitoring and prosecuting
counterfeiters in this country. It is almost impossible, however, to
monitor counterfeiting of U.S. notes abroad. There is an excellent chance
that some high-quality counterfeits eventually will find their way into
the United States and be accepted by the Federal Reserve's sorting and
authentication equipment.
If counterfeiting is as serious as we have been led to believe by
accounts in the press and statements from members of Congress, then an
overhaul definitely is needed. In discussions of the problem, we hear
that if major changes are made in the design of our paper money, the
currency we have been using for some 65 years should be recalled or
demonetized.
No issue of U.S. currency has ever been recalled. Only the $10,000
gold certificate, series of 1900, has been demonetized. There are three
viable methods of implementing a changeover from the currency now in
circulation: co-existence, recall and demonetization.
Co-existence is a slow and difficult process. New currency would be
introduced in large quantities and allowed to circulate side-by-side with
the old, which would be culled and replaced during processing at Federal
Reserve Banks. Due to civil unrest and political considerations, many
people might not wish to exchange their old currency within a relatively
short time frame. As a result, old notes would be around for 10 or 15
years.
A recall would require anyone possessing old U.S. currency to turn
it in for the new issue within a defined period of time. The Bureau of
Engraving and Printing (BEP) would have to print and stockpile enormous
amounts of currency, and the Federal Reserve would have to develop a
monstrous plan for distribution and exchange in the United States as well
as abroad.
Demonetization is a radical procedure. The Federal Reserve Board
would have to declare the old currency valueless after a defined period
of time. In essence, this would amount to a recall. I am certain U.S.
government officials would wince at how a recall would affect
international relations.
If we assume the current wave of counterfeiting is more serious than
we have been led to believe, the executive and legislative branches of
the government must consider a recall or demonetization. As the former
director of the BEP, I seriously would consider these two options. They
are certainly extreme, but severe measures must be contemplated.
As the executive director of the American Numismatic Association,
the thought of both a recall and demonetization sends a chill through my
body. Numerous dealers and collectors have made a business and hobby of
U.S. paper money. Much of the U.S. currency sold by dealers and collected
by hobbyists has both an intrinsic and numismatic value. A recall and/or
demonetization would result in a serious loss of income or value to their
inventory or collection. There is no doubt that urgent action is needed
to deal with counterfeiting. The collecting community will be affected by
whatever decision is made.
(Opinions expressed are those of the author and do not necessarily
represent the views of the ANA or the editorial staff.)