risk of loss and theft : from around 30 % in 2001 to some 53 % in 2004. it is often claimed that one of the reasons for the increase in currency in circulation is the growth of the shadow economy. it is important here not to confuse cause and effect : the shadow economy has not arisen because of the existence of banknotes and coins. rather, the shadow economy has its origin in various different factors and, among other things, is reflected in the use of cash and incidentally in cashless payments as well. increasingly, therefore, measures are also being taken at international level, including measures to prevent the illegal channelling of banknotes and coins into the legal economy. 1 furthermore, a shadow economy also exists in countries with high inflation rates where cash only plays a minor role as a “ value store ”. see the standards of the “ financial action task force on money laundering ”. 1 / 6 as i see it, however, the crucial cause of the unbroken demand for cash is the psychological factor, ie people ’ s preference for cash as opposed to cashless means of payment, such as credit and smart cards. in the abstract world of financial instruments ( including derivatives ), cash is “ physically tangible ” and serves as a firm anchor on which people can place their confidence in a currency – confidence which is based on a high level of security, data protection and, above all, price level stability. the confidence placed in a currency is ultimately dependent on its stability. however, people rightly expect their currency to provide not just security against depreciation but also security of the cash in circulation – in other words, banknotes and coins that are of good quality and, in particular, protected against counterfeiting. the eurosystem has therefore also identified this as a major core task of the central banks in its decision on “ establishing principles and objectives for the eurosystem ’ s role in the cash cycle ” ( governing council decision of 16 december 2004 ). while many are involved in fulfilling this task, the ( ultimate ) responsibility for this is borne by the central banks. in a similar way to price stability, where people talk about “ perceived inflation ”, it is likewise important when preventing counterfeiting to ensure that no “ perceived insecurity ” arises in the population. the bundesbank therefore attaches great importance to combating counterfeit money and pursues what might be termed a “ multi - dimensional ” strategy based on different levels. i would like to proceed

” combination of security elements allows the creation of new and more complex effects. registered intaglio overprints of silkscreen printed motifs, special offset printed patterns and diffractive foils can enhance the security of existing elements. furthermore, blind embossing of other printed features produces layered, variable images. nevertheless, for the next series of euro banknotes we need at least one new level 1 security feature that can be used by the ordinary citizen in everyday situations. for instance, there are the newly developed “ transparent window ” techniques which allow the authenticity of a banknote to be checked quickly by simply altering the background and without giving one ’ s business partner the impression of mistrust, as would certainly be the case if one were to hold up the banknote to the light to check the watermark. finally, efforts have been made to use new technologies areas and to adopt them for banknotes. one potential solution for the future would be eg to have banknotes with liquid crystal displays for a variable alternating display of digits and letters in combination with power generating devices ( for instance solar cells ). a liquid crystal display ( lcd ) could, for example, allow a hidden text or image to be revealed by simply touching the banknote. other potential areas of interest are “ nano ” and laser technology. i hope to have provided you with an insight into some interesting new aspects of this topic. i also hope to have fulfilled my other aim which was to give you the correct impression that counterfeit money really is a key issue for the bundesbank. despite all these measures, however, no hopes should be nurtured that they will provide a definitive solution to the problem of counterfeiting. the same principle applies as with weapons and defence weapons : the latest sword calls for the latest shield. or to put it within the context of today's day and age : the most modern missile calls for the most modern antimissile system. preventing and combating counterfeits remains an ongoing task for the central banks. self - explanatory function : clear and easy to understand without the need for extra information, eg colour shift inks ; self - verifying function : a hidden feature becomes visible through the “ verifier ”, a special device integrated in the banknote such as fresnel lenses or polarisers. 5 / 6 in the ancient world, the famous athen ’ s statesman pericles ensured the prevention of counterfeiting. at