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Speculation on Possible $100 Bill Quality Control

December 7, 2010

Regarding the recently alleged large-scale $100 NCM printing error, there is a curious detail in a statement by an anonymous source to CNBC:

For now, the unusable bills are stored in the vaults in “cash packs” of four bundles of 4,000 each, with each pack containing 16,000 bills.

This seems to suggest that the alleged printing error was discovered very late in production (essentially after production), after the printed sheets of multiple bills had been cut into individual bills, then counted by machine, banded and wrapped. If the error had been discovered earlier, at any point before cutting and banding, why would the suspect sheets have been cut at all? Why would time and effort have been spent (cutting and packaging) a product known to be defective? The following statement from the same article provides a clue:

Because officials don’t know how many of the 1.1 billion bills include the flaw, they have to hold them … until they are able to develop a mechanized system that can sort out the usable bills from the defects. Sorting such a huge quantity of bills by hand, the officials estimate, could take between 20 and 30 years. Using a mechanized system, they think they could sort the massive pile of bills … in about one year.

This requires some elaboration. Though there are automated quality control and human inspection devices integrated into the printing presses at the BEP facilities in DC and Fort Worth, the alleged number of suspect bills strongly implies such devices were not able to detect this particular error. If those devices were able to be modified to better examine the suspect bills, running the uncut bills through those machines that are integrated into the printing presses would cost press time – time the presses would not be able to use to print the now-accumulating ‘orders’ for fresh banknotes from the Federal Reserve Banks. A hint as to the BEP’s production requirements:

During Fiscal Year (FY) 2010, the Bureau … produced approximately 26 million notes a day …

Therefore, the BEP may need to use stand-alone commercial banknote sorting machines, in order to keep the printing presses ‘available.’ Commercial banknote sorting machines can check for certain security features, overt and covert. It stands to reason that, with the assistance of their respective manufacturers, such machines could be used to perform ‘quality control’ on the billion suspect notes.

Commercial banknote sorting or testing machines, however, are designed to examine single notes at a time. They almost certainly cannot handle or check an uncut sheet of 32 notes. Therefore, to facilitate the automated examination of the billion suspect bills by the most readily-available machines, the printed sheets of 32 bills could have been cut into individual notes.

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