The New Yorker of October 23 reports on the "Supernote," a perfect counterfeit $100-bill allegedly being used for economic terrorism. The Supernote had surfaced around 1990 and originated in the Middle East. It was no ordinary counterfeit. The workmanship was extraordinary. When a sample first arrived at the Secret Service's laboratory, a top technical analyst "examined it the way he has every other counterfeit note in the world, and called it genuine." Most alarming of all, the Supernote was so well engineered that it could fool currency scanners at the nation's twelve Federal Reserve banks. Today, the Supernote remains one of the longest unsolved counterfeiting cases in the modern history of the Secret Service, and it has begun to undermine international confidence in United States currency. The Treasury, taking its cue from the Federal Reserve, has a difficult time regarding counterfeiting, even on a very large scale, as a macroeconomic problem, because cash is a relatively small percentage of the total money supply. Wire transfers, checks, and credit-card transactions, after all, run into the trillions. Counterfeiting becomes significant to the Fed only if it undermines confidence in the dollar. Dozens of interviews with high-level insiders left the impression that the Federal Reserve and the Treasury don't fear the Supernote itself as much as they fear a confidence problem that might result if they publicly acknowledge it and countenance a large-scale investigation. (As one expert on international terrorism who has looked into the Supernote puts it, "If the note is that nearly perfect, it doesn't exist.") NOT_100 (30 kb in 2 parts)