Libya is one of many nations that outsource currency production
The British government crippled Moammar Gaddafi's attempt to fund his faltering regime this week by impounding nearly $1.5âbillion worth of Libyan dinars, which had been printed under contract by a British firm. Wait, how many countries outsource their currency?
Half the world. Of all bank notes, 10 to 20 percent are printed by private companies, such as the Britain's De La Rue, Canadian Banknote Co., Giesecke & Devrient in Germany, and Crane, a printer working in Sweden and Massachusetts. Of the world's 171 currency-issuing authorities - there are more countries than currencies, because of the European Union and an economic union of West African countries - about 50 percent outsource some portion of their printing. Giesecke & Devrient, for example, prints currency for five dozen countries, and Canadian Banknote fills orders for 20.
Many governments don't talk about the practice, and the printing houses refuse to release their client lists. Singapore, Finland, Sweden, Bahrain and Qatar are known to outsource their printing. Controversy erupted in India last year when its outsourcing became public. The Philippines has ordered notes from abroad for years, with mixed results. In 2005, the French company Oberthur misspelled the president's name on some bills.
Smaller countries outsource their printing needs for economic and technical reasons. Bank note production is a niche business, and the machines required to make modern currency are expensive and rare. The smallest and cheapest printing systems available can produce a billion notes a year, so if a country needs fewer than that - and many do - they'd be wasting their investment. Some smaller countries choose to keep their printing in-house despite the inefficiency, for national security reasons. (More may do so after Britain's response to Gaddafi.)
Also, it's hard to keep up with constantly evolving anti-counterfeiting measures. Producers use robotic etching devices, inks that change their appearance in different lights and at different angles, laser marking and pixelated watermarks. The paper itself can be made of cotton, polymers, or a combination of the two and has metal and magnetic elements interwoven. Central bankers around the world can specify which of these products they want when they place an order. High-denomination currencies are usually the most expensive to produce, because they're low-volume and tend to be equipped with the most-stringent security measures.
The ordering process is tightly controlled, so don't try to order a shipment of vanity notes for the Bank of (Your Name Here). The printing companies can only take orders directly from the central banks. Not even a head of state can buy cash. His central bank must place the order.
Palmer is a freelance writer in New York who writes for Slate.