NK-Supernotes.Presentation
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The document discusses whether North Korea's production of counterfeit US currency has financed its nuclear weapons program. It presents the research question and relevance of studying supernotes, which are high-quality counterfeits. The methodology section outlines different analytical approaches used to evaluate competing hypotheses about the relationship between supernotes and North Korea's nuclear arms. Tables and findings imply that supernotes have partly financed the nuclear program by providing some illegal funding, though not sole or direct responsibility.
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NK-Supernotes.Presentation
- 1. North Korean Supernotes: Nuclear Arms Financed By Counterfeit Currency Thesis Defense prepared for the UTEP Intelligence and National Security Studies program Michael Yatskievych - Spring 2014
- 2. Introduction Research Question: Is North Korean production of counterfeit US currency responsible for the advancement of North Korea’s nuclear program? Relevance: The study of supernotes may aid in retarding or ending North Korea’s atomic mission. Originality: Specialized academic knowledge of North Korea is limited and subjective.
- 3. Methodology & Literature - 1 Intuitive Method (Synthetic Psychological Function, Top-Down/Satisficing, Qualitative): Simon and Parikh Analysis of Competing Hypotheses (Structured Analysis, Ground-Up, Quantitative): Heuer, Gigerenzer, and Jøsang &Pope Systematic Investigation (Combination of above): Heuer, PARC, Khatri & Ng ChoosinganAnalyticalMethod
- 4. Methodology & Literature - 2 Hypotheses and Evidence -Less is more, WYSIWYG, GIGO: Heuer, Gigerenzer, Jøsang &Pope Why Does North Korea Need Supernotes? -Juche and Songun -Crippled Economy -Sanctions, Humanitarian Aid Failure, and Cash-Only Society Alternative perspectives Bender, Chanlett-Avery, Elich, Hall, Nanto, Smith InformationManagement
- 5. Summary of Findings and Implications 16.656 4 1 Supernotes are NOT Responsible for DPRK Nuclear Arms Program Supernotes are DIRECTLY Responsible for DPRK Nuclear Arms Program Supernotes are PARTLY Responsible for DPRK Nuclear Arms Program WeightedInconsistencyScore INCONSISTENCIES- SUPERNOTES AND DPRK’S NUCLEAR ARMS PROGRAM
- 6. Conclusions ACH is a superior tool, but beware… North Korea is responsible for manufacturing supernotes and will engage in more illicit activities. Additional Considerations: - Recent History - Economic Sanctions - Agriculture and Energy Dependency - US-DPRK hetero-norm relationship Research Obstacles
- 9. Sources - 1 Albright, David. Peddling Peril: How the Secret Nuclear Trade Arms America’s Enemies. Free Press, Institute for Science and International Security. New York. 2010. Bender, Klaus W. “Supernotes: Das Geheimnis der gefaelschten Dollarnoten.” Frankfurter Allegemeine. 1 August 2007. Chanlett-Avery, Emma and Rinehart, Ian E. “North Korea: US Relations, Nuclear Diplomacy, and Internal Situation.” Congressional Research Service. 13 September 2013. Coe, Andre J. “North Korea’s New Cash Crop.” The Washington Quarterly. Vol. 28, Issue 3. Summer 2005. Davenport, Kelsey. “UN Security Council Resolutions on North Korea.” Arms Control Association. March 2013, http://www.armscontrol.org/factsheets/UN-Security-Council-Resolutions-on-North-Korea, (accessed 10 November 2013). Elich, Gregory. “North Korea and the Supernote Enigma.” Global Research. 7 May 2008, http://www. globalresearch.ca/north-korea-and-the-supernote-enigma/8919 (accessed 10 December 2013). Ford, Glyn. North Korea on the Brink. Pluto Press. Ann Arbor, Michigan. 2009. Gigerenzer, Gerd. Gut Feelings: The Intelligence of the Unconcious. The Penguin Group. New York. 2007.
- 10. Sources - 2 Haggard, Stephan and Marcus Noland. “Follow the Money: North Korea’s External Resources and Constraints.” Peterson Institute for International Economics, 2008. Haggard, Stephan and Marcus Noland. “North Korea’s External Resources and Constraints.” Korea Economic Institute and the Korea International Institute for Economic Policy, (2008), http://www. keia.org/sites/default/files/publications/Haggard_Noland1.pdf (accessed 10 December 2013). Haggard, Stephan and Marcus Noland. “Sanctioning North Korea: The Political Economy of Denuclearization and Proliferation.” Asian Survey. Vol. 50, No. 3 (May/June 2010): 539-568. Hall, Kevin G. “US Counterfeiting Charges Against N. Korea Based on Shaky Evidence.” McClatchy Newspapers (10 January 2008), http://www.mcclatchydc.com/2008/01/10/24521/us-counterfeiting- charges-against.html (accessed 10 December 2013). Heuer, Richards J. Jr. Improving Intelligence Analysis with ACH. Center for the Study of Intelligence for CIA. 1999. Heuer, Richards J. Jr. Psychology of Intelligence Analysis. Center for Study of Intelligence for CIA. 1999. Jǿsang, Audun and Simon Pope. “Analysis of Competing Hypotheses Using Subjective Logic.” CRC for Enterprise Distributed Systems Technology at the University of Queensland Australia (2005), http:// www.cs.umd.edu/hcil/VASTcontest06/paper126.pdf (accessed 10 December 2013).
- 11. Sources - 3 Kan, Paul R. and Robert M.Collins. “Criminal Sovereignty: Understanding North Korea’s Illicit International Activities.” US Army War College Strategic Studies Institute (March 2010): 1-45. Kaplan, David E. and Mark Madden. “The Wise Guy Regime.” US News and World Report. Vol. 126, Issue 6 (15 February 1999): 36-40. Khatri, Naresh and H. Alvin Ng. “The Role of Intuition in Strategic Decision Making.” Human Relations. Vol. 53, No. 1 (Jan. 2000): 57-86. Nanto, Dick K. “North Korean Counterfeiting of US Currency.” Congressional Report Service Report for Congress (2009): 1-26. Nanto, Dick K. and Liana Sun Wyler. “North Korean Crime-for-Profit Activities.” Congressional Report Service Report for Congress (August 25, 2008): 1-21. North Korea: An Overview of Sanctions. Office of Foreign Assets Control. US Department of Treasury (September 15, 2010), http://www.treasury.gov/resource-center/sanctions/Programs/Documents/ nkorea.pdf (accessed 10 December 2013). North Korea. CIA World Factbook (April 6, 2011), https://www.cia.gov/library/publications/the-world- factbook/geos/kn.html (assessed 1 May 2013).
- 12. Sources - 4 Parikh, Jagdish. Intuition: The New Frontier of Management. Oxford and Cambridge, MA: Blackwell, 1994. Powell, Bill. “The Sopranos State.” Time Magazine. Vol. 170 Issue 4, July 2007. Rose, David. “North Korea’s Dollar Store.” Vanity Fair (August 5, 2009), http://www.vanityfair.com/politics/ features/2009/09/office-39-200909?printable=true (accessed May 2013). Royce, Edward R. “Gangster Regime: How North Korea Counterfeits United States Currency.” Office staff report to House Foreign Affairs Committee chairman Tony Lantos, 12 March 2007. Simon, Herbert A. “Making Management Decisions: The Role of Intuition and. Emotion.” The Academy of Management Executive. Vol. 1, No. 1 (Feb. 1987): 57-64. Smith, Hazel. Hungry for Peace: International Security, Humanitarian Assistance, and Social Change in North Korea. Washington D.C.: United States Institute of Peace, 2005. The Use and Counterfeiting of United States Currency Abroad, Part 3. Washington D.C.: Report to Congress from Secretary of the US Department of Treasury, September 2006. Treasury Sanctions Bank and Official Linked to North Korean Weapons of Mass Destruction Programs. US Department of the Treasury (11 March 2013) http://www.treasury.gov/press-center/press-releases/ Pages/jl1876.aspx (assessed 10 December 2013).
- 13. Sources - 5 Smith, Hazel. Hungry for Peace: International Security, Humanitarian Assistance, and Social Change in North Korea. Washington D.C.: United States Institute of Peace, 2005. The Use and Counterfeiting of United States Currency Abroad, Part 3. Washington D.C.: Report to Congress from Secretary of the US Department of Treasury, September 2006. Treasury Sanctions Bank and Official Linked to North Korean Weapons of Mass Destruction Programs. US Department of the Treasury (11 March 2013) http://www.treasury.gov/press-center/press-releases/ Pages/jl1876.aspx (assessed 10 December 2013). Trimble, Meridee Jean. “US Policy Options Toward Stopping North Korea’s Illicit Activities” (masters thesis, Naval Postgraduate School at Monterrey, California, December 2007), 1-91. Yu, Alan. “All About The Benjamins: US Introduces New $100 Note”. The Two-Way, National Public Radio (7 October 2013), http://www.npr.org/blogs/thetwo-way/2013/10/07/230179216/all-about-the- benjamins-u-s-introduces-new-100-note (accessed 10 December 2013).
Editor's Notes
- Research Question: Is North Korean production of counterfeit US currency responsible for the advancement of North Korea’s nuclear program? Does North Korea have the ability to create supernotes? Does North Korea seek ulterior motives for creating supernotes, other than for the advancement of its nuclear arms programs? The aim of this thesis is to explore the influence of North Korean manufactured US currency, supernotes, with its emergent status as an international nuclear arms threat. More specifically, the research to be conducted will be to identify if North Korea is truly capable of engineering such high quality notes and reveal the degree of responsibility between supernotes and North Korea’s nuclear arms program. In attempting to reach this aim the application of ACH will delegate the incremental goals in meeting the following objectives: the development of multiple hypotheses in an attempt to explain a supernote-nuclear arms program link, assessing evidence with verifiable sources, providing a diagnostic weighing hypotheses against evidence, and refining the evidence for inconsistencies and sensitivity. Relevance: The study of supernotes may aid in retarding or ceasing North Korea’s atomic mission. No studies on this subject, employing Analysis of Competing Hypotheses, are readily available It is the aim of this research to initially determine if North Korea is truly capable of engineering such high quality notes and if a definitive supernote-nuclear program link exists. Furthermore, although not the intent of this thesis, by studying the supernote-nuclear links additional motives for the replication of US currency are also found; of which, include: the funding of other illicit activities to further fund the regime, facilitate in placating the growing upper-crust of North Korean society (AKA Court or Palace Economy), and disrupting of regional economies greatly dependent on the US dollar. Originality: Specialized academic knowledge of North Korea is limited and subjective: This research will identify the consequences of shady enterprises, namely supernotes. Provide a forecast as to how to mediate relationships between supernotes and WMD proliferation. The fact that the North Korean supernote-nuclear dilemma is a relatively new occurrence the availability of grounded theory is non-existent as such as situation has not previously occurred. In attempt to reach this aim the application of Analysis of Competing Hypotheses will delegate the incremental goals in meeting the following objectives: -The development of multiple hypotheses in an attempt to explain a supernote-nuclear program link. -Assessing evidence with verifiable sources. -Provide a diagnostic weighing hypotheses against evidence. -Refine the evidence for inconsistencies and sensitivity. The use of ACH Computer Software: Furthermore, to aid in the rejecting of less than ideal hypotheses the use a computer program, ACH 2.0.5, developed by Palo Alto Research Center (PARC), in collaboration with Richards J. Heuer, will be employed, so as to minimize user error in the fabrication and analysis of the hypotheses-evidence matrix. Furthermore, by using this computer program, the amalgamation of qualitative and quantitative analyses will be addressed. ACH is designated as a structured method that adheres to a deliberate scientific method of assessment, yet with the application of ACH 2.0.5 the merger of qualitative and quantitative measures are combined to stimulate systematic investigation (remember this part to be mentioned again, in the next slide ‘Intuition and ACH’).
- Intuition and ACH- Preliminary Methodological Selection, or which method is best? The application of structured analytical methods for complex intelligence analysis is a method of contention within intelligence agencies, where many analysts argue that traditional intuitive processing is still the superior technique. -What is Intuitive Analysis? Definitions of Intuition and its uses: Intuitive processes evolve from long experiences and learning and consists of a mass of facts, patterns, concepts, techniques. Intuition is not the opposite of rational rigorous analytical thought, but rather a sophisticated form of reasoning honed over years of experience. This “synthetic psychological function” amalgamates fragmented data and experience into an integrated picture. Intuition’s inherent unconscious and complex nature is a holistic representation of reality transcending rational thought automated in a succession of smooth and quick bursts, compressing years of experiences and knowledge into split seconds. – Simon, Herbert A. Making Management Decisions, p. 58-60. (p. 52 thesis) Intuition is drawn without conscious thought, from an internal reservoir without rationality and without understanding of how answers are derived. – Parikh, Jagdish. Intuition: The New Frontier of Mgmt, p. 38. (p. 52 thesis) A lengthy history of non-structured intuitive approaches is considered the norm in the intelligence community. However, examples where intuition failed and comparative analytical methods were not used include Pearl Harbor in 1941, 9/11 terrorist attack in 2001, and US misjudged Iraq’s WMD program in 2003. ACH was not used, confirmation bias was rampant, alternative hypotheses were not tested, negative evidence was ignored To identify better what is intuitive analysis, is to understand what it is not. “Reflective surveying of all alternatives and the listing of pros and cons are carefully weighed to provide a range of possibilities that can be systematically explained so as to reduce uncertainty and minimize analytical biases that would otherwise distort the inquiry process and collection of evidence. Such is not the case with intuitive analysis, where a ground-up approach is discounted in lieu for a top-down method; with intuition, a satisfysing explanation is most commonly generated prior to the gathering of critical evidence. Intuition is the intelligence of the unconscious, without thinking, where the satisficed hypothesis is likely to work in the situation. – Gigerenzer, Gerd. Gut Feelings: The Intelligence of the Unconscious, p. 4, 17, 19. (p. 51 thesis) -What is ACH? Not all questions have definitive answers and in the absence of certainty ACH helps differentiate between plausible answers, while objectively and systematically explaining the most likely explanation by disproving hypotheses that are the least consistent when assessed with the evidence. ACH’s adherence to a thorough process is appropriate for critical or controversial issues when analysts cannot afford to be wrong. Although there are no guarantees when determining a correct solution to prevent a potential calamity, ACH does however ensure an enhanced process of analysis via a series of steps to aid in the deterrence of common analytical hazards while simultaneously leaving a record of evidence applied in the decision making process and how this evidence was interpreted. – Heuer, p. 36, 37. (p. 46 thesis) Intuition vs ACH -Three Contrasting Elements between Intuition and ACH (Heuer, p. 8-15, 108, 109.) (p. 54 thesis) 1. Analysis starts with a full set of alternative possibilities, rather than with a most likely alternative for which the analyst seeks confirmation. This ensures that alternative hypotheses receive equal treatment and a fair shake. 2. Analysis identifies and emphasizes the few items of evidence or assumptions that have the greatest diagnostic value in judging the relative likelihood of the alternative hypotheses. In conventional intuitive analysis, the fact that key evidence may also be consistent with alternative hypotheses is rarely considered explicitly and often ignored. “Mind-sets tend to be quick to form but resistant to change...new information is assimilated to existing images.” As analysts form ideas they are biased in favor to continually seeing that idea; the mind-set or expectation concerning a certain phenomenon is used to mold future phenomena. 3. Analysis of Competing Hypotheses involves seeking evidence to refute hypotheses. The most probable hypothesis is usually the one with the least evidence against it, not the one with the most evidence for it. Conventional analysis entails looking for evidence to confirm a favored hypothesis. “We tend to perceive what we expect to perceive”; meaning that, by human nature, greater amounts of unambiguous information is needed to recognize unexpected phenomena. Perception is not only influenced by the content in which it occurs, but analysts are also predisposed and pays particular attention to an unconscious list of information and organizes this data due to past experiences, professional training, and cultural and organizational norms. This tendency of perception of expectations is the chief inhibitor of non-biased research. Which method is the superior choice: intuition or ACH? As is often the case within the intelligence community, the information available is typically ambiguous and incomplete, which requires a research method that validates an appropriate process of analysis. ACH addresses a complex problem through a process of well-reasoned, analytical judgment. Based on the basic understandings of cognitive psychology, decision analysis, and scientific method ACH employs an analytical method for issues that demand cautious evaluation of alternative explanations of past, present, and possible future events. Furthermore, ACH aids in the minimization of cognitive limitations that inherently makes intelligence analysis intricate and problematic. By providing a paper trail of evidence represented with a visual display, or matrix, the component parts of the analytical problem, and how they relate to each other, helps the analyst deal with compounded issues that may otherwise seem overwhelming. Conventional intuitive analysis tries to confirm a favored hypothesis without validating a non-biased process of hypothesis generation and elimination; whereas, with ACH any hypothesis that can’t be refuted needs to be taken seriously. Applying intuition seeks the most likely solution for a complex issue with available information from the point of view of whether or not it supports this answer. Contrary to intuitive analysis, where evidence is gathered after generating the most probable solution, ACH follows the fundamental precept of scientific method by rejecting or eliminating hypotheses, while tentatively accepting only those hypotheses that cannot be refuted. The most likely hypothesis is the one with the least evidence against it, not the one with the most evidence for it. This simple switch in perspective forces the analyst to ask questions and seek evidence that would not otherwise be considered -Heuer, Improving Intelligence Analysis with ACH, p. 36, 37. (p. 56 thesis) Analysts opting not to use a methodology based on a process-oriented approach will often work intuitively to satisfy the most likely explanation and then work backwards, where the ‘correct’ explanation is the first one that is consistent with the evidence. The satisficing approach consequence is that numerous explanations can be consistent with the evidence and, unless every reasonable alternative is considered, an incorrect conclusion may be derived. Another frequent problem with using the satisficing strategy includes the failure to generate appropriate alternative hypotheses. Furthermore, application of satisficing tends to support conclusions that are often not thoroughly interpreted from multiple facets. -Jǿsang and Pope, Analysis of Competing Hypotheses Using Subjective Logic, (University of Queensland, 2005), p. 2 (p. 57 thesis). Systematic Investigation The application of ACH 2.0.5 the merger of qualitative and quantitative measures are combined to stimulate systematic investigation via weighted inconsistency scales; credibility of referenced sources, relevance of provided evidence, and multiple alternative hypotheses. The combination of these factors yield in a numeric representation of rejected hypotheses from each other, providing for not only a decision of which hypothesis is the best fit when analyzed, but also by how much when compared to other hypotheses. By further studying the specific numerical weight of inconsistency differentials even greater fine tuning of the applied evidence can be manipulated so as to better isolate lynchpin, or hypothesis driving key variables. -Heuer and PARC Overwhelming evidence demonstrates that intuition is fraught with cognitive biases; yet it is also argued that intuition’s similarity to rational analysis is merely that both are based upon perceptions and assumptions that are not necessarily accurate and correct. However, the use of intuition is central to all decisions. In consideration to rational analysis, analytic processes cannot be used exclusively as analysts are always influenced by intuition, namely in data acquisition and interpretation. -Naresh Khatri and H. Alvin Ng, The Role of Intuition in Strategic Decision Making, (Human Relations, Vol. 53, No. 1, Jan. 2000), p. 61. (p. 53 thesis) How ACH will be used in this study: This study identified two sets of hypotheses to be analyzed. The first was a qualifying analysis of ACH to prove that North Korea has to capacity of manufacturing supernotes and the second analysis that assessed the degree of supernote-nuclear arms involvement. 8-step ACH outline: 1. Identify the possible hypotheses to be considered. Use a group of analysts with different perspectives to brainstorm the possibilities. 2. Make a list of evidence and arguments (including assumptions and logical deductions) for and against each hypothesis. 3. Enter hypotheses and evidence into a matrix. Assess the consistencies or inconsistencies of each item of evidence with each hypothesis. There is an option to assess the Credibility and Relevance of each item of evidence to determine how much weight it should have in the analysis. 4. To refine the matrix, reconsider the hypotheses, identify gaps in the evidence that may need to be filled to refute hypotheses, check the consistency of your evidence ratings, solicit critical input from other analysts. Identify and compare different types of evidence, with a special focus on the most diagnostic evidence. 5. Compare your own conclusions about the relative likelihood of the hypotheses. If they are not similar, figure out why and adjust accordingly. 6. Do a sensitivity analysis. Consider how your conclusions would be affected if key evidence or arguments were wrong or subject to a different interpretation. Double check the validity of key evidence and arguments that determine the outcome of your analysis. ---What is incomplete and misleading? 7. Report conclusions. Include discussion of alternatives that were considered and why they were rejected.---What is your contingency plan? 8. Identify milestones for future observation that may indicate events are taking a different course than expected.---How to improve ACH? What additional information would be helpful? --------------------------
- Hypothesis and Evidence: Less is more Although the amount of information in regards to the preponderance of academic and government information on supernotes is hard to come by, other vital sources of information that are paramount in determining the potential North Korean counterfeit threat and its link to the manufacturing and proliferation of nuclear technologies and armaments are available. However, determining the most relevant information that influences the need for supernotes can be vast and therefore requires selective judgment from the analyst, where only the information that is entered into ACH can potentially yield an applicable result. Should the wrong information, or the absence of necessary evidence and/or hypotheses, be entered into the ACH process the ultimate result will more than likely be invalid. WYSIWYG (what you see is what you get) and GIGO (garbage in, garbage out) The application of intuitive satisfysing includes the failure to generate appropriate hypotheses and tends to support conclusions that are often not thoroughly interpreted from multiple facets. Intuitive analysis fails to acknowledge diagnosticity of the evidence and its relationship between hypotheses differentiation, an absence of evidence-hypotheses cross-fertilization. Judging the relevance and value of evidence to determine possible outcomes demands a formal model that not only minimizes analytic biases, but also addresses the diagnosticity of evidence by not just eliminating predispositions, but also limiting the amount of evidence. -Josang and Pope, p. 1-2. (p. 58 thesis) Intelligence analysis, similar to other professions requiring detail oriented data analysis and management, must identify the most relevant items from frequently a vast array so as to make judgments or estimates that can be verified for accuracy. For example, a physician observes their patient and can make note of a large list of data that aids in making a medical diagnosis, however, a large multitude of that information may not be critical in the formulation of proper treatment. Rather, like the intelligence analyst, the physician uses their specialized knowledge to develop hypotheses that would explain the patients’ symptoms, conduct tests to collect additional information to test their hypotheses, and ultimately make a diagnosis. Data collection and management is focused narrowly on pertinent information. An anecdote to better elaborate the case of the physician having to make the proper decision for treatment without demanding a barrage of tests to obtain a proper diagnosis, requiring only the most critical information, involves a young boy and his preventable, yet untimely death. The story is as follows, from psychologist and decision making expert Gerd Gigerenzer: A hospital admitted a young boy named Kevin, who was pale, withdrawn, and was drastically underweight for his age. He refused to eat and had constant ear infections. His father moved out of the house, and his mother, who was often out “partying,” sometimes missed feeding him altogether or tried to force-feed him jarred baby food and potato chips. A young doctor learned of the child’s history and took charge of the case; he felt uncomfortable having to draw blood from the emaciated child and limited any invasive tests, but rather provided the child with a more caring environment, where the child began to eat and his condition improved. By merely attending to the most critical indicators that were responsible for the boy’s ill health the young doctor provided a simple diagnosis with a promising prognosis. However, the young doctor’s superiors, unconvinced by his insistence to justify treatment without medical protocol, demanded that a team of specialists investigate Kevin ailments and develop a refined diagnosis to find the cause of the tiny boy’s illness. Over the course of only a few weeks, Kevin was subjected to a barrage of tests: CT scans, barium traces, biopsies, countless blood tests, lumbar punctures, ultrasounds, and many others. Yet, despite the vast array of tests, the results were inconclusive. Furthermore, Kevin, fell into deep anxiety under the stresses of these tests and relapsed into poor health. He stopped eating again and to counter his absence of appetite a medical specialist placed Kevin on a special intravenous feeding regime while resuming testing. Kevin’s apprehension to these medical procedures proved to be overwhelming and he soon died without yielding any medical cause of death. Although Kevin was spared no test and volumes of results were recorded, yet no diagnosis was composed. -Gigerenzer, p. 20, 21. (p. 60 thesis) It can be argued that the process executed by the doctor in the evaluation and treatment of the young boy was a structured method, however, unlike the remainder of his cohort the choices made in the selection of diagnosing the patient are abridged to require only the tests that are necessary. On the other hand, the counter can also be argued that the choices made by the fledgling doctor were that of intuition as the knowledge acquired from studying in medical school made have not precisely provided the necessary knowledge in making a definitive decision in regards to the patients diagnosis, but rather motivated the doctor with a flash for course of action targeted by feeling and impulse. Although this may be true, it is the age of the young doctor that weakens the argument that intuition is the preferred tool as his young age has prevented the young doctor from obtaining an extensive depository of specialized knowledge. Why Does North Korea Need Supernotes? Primary: The counterfeiting of hard US currency stimulates the North Korean economy and has a compounding effect to produce more illicit moneymaking programs that further stimulate the North Korean economy and contribute to the development and proliferation of the country’s weapons and nuclear arms. Key words: Juche (national self-sufficiency) and Songun (military first policy) Secondary: DPRK’s destitute and fractured economy is made possible by the loss of financial supporters, the need to support a growing elite class, and enduring unforgiving agricultural and climatic difficulties. North Korea’s economic climate is not favorable to gain self-sustaining strength as the country imports more goods than it exports and has billions of dollars in trade deficits. Tertiary: International unrest by aggravating regional economies that are highly dependent on the US dollar. Economics -North Korea is has more than $12 billion in current debts.: (p. 9-10 thesis) -Fall of Soviet Union, 1991. -CIA worldfactbook, -Klaus Bender, Supernotes: Das Geheimnis der gefaelschten Dollarnoten, p. 3 -David Rose, North Korea’s Dollar Store, p. 5. Chongryon, North Korean national loyalists: pachinko, prostitution, and more. (p. 10-11 thesis) -Max Fischer, North Korea is Losing a Crucial Source of Income: Koreans in Japan, p. 1. Palace or Court Economy: growing elite class, top 1%, responsible for more than a third of North Korea’s economic expenditures. (p. 11-12 thesis) -Andre J Coe, North Korea’s New Cash Crop, p. 75. -Paul R. Kan and Robert M. Collins, Criminal Sovereignty: NK’s Illicit Activities, p. 21. Droughts, Floods, Agricultural Distress, and Weak Infrastructure (Youngbyon and 1994 Agreement Act violation) p. 12-13 of thesis Illicit Activities bring in more than $1 billion/year and is responsible for at least 1/3 of GDP. (p. 16 of thesis) -CIA worldfactbook -Haggard and Noland, p. 5-6. -Trimble, p. 60. -Coe, p. 79 -Powell, p. 44-48. What is the dollar amount of supernotes in circulation?---Inconclusive (p. 17-18, 23, 39 of thesis) -Trimble = $10 million/year, p. 19-20. -Nanto and Wyler, $15-20 million/year, p. 3. -Hall (Secret Service quote)= $50 million, 1989-2008 -Yu (Secret Service quote)= $66 million/year to date, p. 2. -Bender = $250 million/year, p. 1. -Rose = $2 BILLION/year, p. 9 (because in 2007 North Korea purchased enough Fourdriner paper to print $2 bill.) How supernotes are made?---Components of supernote fabrication (p. 27-28 thesis) This currency reproduction operation has been labeled as the most sophisticated in the world, as described by the US Secret Service. The counterfeit bills are manufactured using similar devices and methods employed by the US Bureau of Engraving and Printing. Supernotes, just like authentic US currency, are produced on a special intaglio press so that their intricate design is raised above their surface; microprinted features, 1/42,000th of an inch high, found on real dollars are reproduced exactly on counterfeit ones. The counterfeiting production materials used to create the supernotes also includes high-tech equipment from Japan, paper from Hong Kong, and ink from France. -Kan and Collins, Criminal Sovereignty, p. 13. -Rose, North Korea’s Dollar Store, p. 1. -Ibid., p. 6. -Kan and Collins, Criminal Sovereignty, p. 13. For example, DPRK has a $10 million intaglio printing press, the same used by the US Bureau of Engraving and Printing. The Bureau of Engraving and Printing uses Giori intaglio presses for the engraved portions of its bank notes, and an offset press for the background colors; supernotes use the same technology. The raised ridges caused by intaglio printing is a delicate effect that ordinary counterfeiters can’t duplicate. -Kaplan and Madden, The Wise Guy Regime, p. 36. -Elich, North Korea and the Supernote Enigma, p. 2. Other components used by both DPRK and US include the paper, which is made from southern US cotton exclusively by Crane Dalton, and the top-secret reflective safety ink formula, made by French company Sicpa., -The Mystery of the Supernotes (Düsseldorfer Institut für Außen- und Sicherheitspolitik, 2010), p. 2. -Klaus W Bender, Supernotes: Das Geheimnis der gefaelschten Dollarnoten. (Frankfurter Allegemeine Zeitung, 2007, p. 4. -Royce, Gangster Nation, p. 11. Known customers for illicit activities include: Syria, Libya, Burma, Taiwan, Peru, Pakistan, Egypt, UAE, Yemen. (p. 19-20 of thesis) -Chanlett-Avery, p.5. -US Dept of Treasury -Glyn Ford, p. 159. The Result of a Fractured Economy Sanction Failure (p. 29-32 thesis) 1994 Agreed Framework Non-proliferation treaty of 2003 Sunshine Policy 6-party talks Executive Orders House Resolutions United Nations Security Council resolutions North Korea’s repeated violations of almost every imposed order, resolution, and sanction is comparable to sweeping dust under a rug; disregarding the issue will not make it disappear. (p. 32 thesis). Not only is North Korea breaking sanctions with illegal manufacturing and trade, but is also ignoring imposed sanctions DPRK is acquiring additional profits by acting as “straw-purchasers” for rogue nations. For those nations that are under international scrutiny for potentially dangerous acts or sponsoring of terrorism, DPRK has exhibited willingness to acquire lengthy lists of goods in exchange for intellectual property and services, but primarily money. Therefore, it can be assessed that diplomatic mandates, embargoes, and sanctions do not work, as rogue nations will forgo these protocols. -David Albright, Peddling Peril: How the Secret Nuclear Trade Arms America’s Enemies (Free Press, Institute for Science and International Security, New York, 2010), p.160. (p. 30 thesis). Although monitoring systems are used to detect and address the violations of these sanctions by North Korea have been described within the latest resolution, there is no protocol to implement further disciplinary measures other than seizing and/or destroying contraband material. (In regards to UNSC res, but Obama EO’s do have criminal monetary fines and imprisonment) - Kelsey Davenport, UN Security Council Resolutions on North Korea (Arms Control Association, March 2013) http://www.armscontrol.org/factsheets/UN-Security-Council-Resolutions-on-North-Korea (accessed 10 November 2013). (p. 36 thesis) Cash Only Society Due to its terrible credit rating North Korea’s trade is conducted on a cash basis. The designator of “terrorist nation” excludes DPRK from contact with the US financial system. Only a handful of businesses are willing to accept the well-known risk that DPRK has defaulted on numerous loans and trade. DPRK’s currency is largely non-transferable between nations, “so imported goods are bought and sold for hard currency.” One of the reasons for North Korea’s reliance on cash transactions is that DPRK bank accounts are believed to be dispersed in various off-shore accounts so as to prevent the freezing of all North Korean monetary funds. DPRK’s faulty credit record and illicit activity history makes for a society where people tend to transact largely in cash, which in itself is not illegal, but in this market, it is in fact often the only way. -Elich, p. 9 (p. 14 thesis) Alternative Perspectives Sanctions don’t work The predominant paradigm that is currently being exercised is to make North Korea submit to greater international powers by adhering to directives and imposed sanctions until the totalitarian Kim regime is dissolved or DPRK’s nuclear initiative is permanently halted, thus alleviating the international community from not only nuclear threats but also the illicit activities that accompany. Possible economic incentives to end North Korea’s dependence on supernotes and funding its nuclear program -Normalizing Diplomatic Relations by easing sanctions to open greater links of communication to negotiate trade agreements and more humanitarian aid. -Chanlett-Avery and Nanto. The North Korean Economy: Leverage and Policy Analysis p. 110-112 -Humanitarian Aid is beneficial by creating greater transparency and building a report of trust: “Ice Breakers” to bridge the gap between humanitarian need and economic reconstruction -Hazel Smith. Hungry for Piece. p. 214 (p. 32 thesis) North Korea cannot afford to make supernotes Multiple sources claim that the possibility for North Korea to effectively produce supernotes is an impossibility due to its economic restraints. As the production cost to manufacture supernotes is exceptionally high, it can be assumed that DPRK does not have the financial capital to engage in counterfeiting operations. Furthermore, it can also be argued that due to North Korea’s diplomatic track record, it does not have the ability to procure the necessary hardware to print supernotes. According to a US Secret Service source from Kevin Hall, $50 million worth of supernotes were ceased between 1989-2008, which is less than the amount for a new Giori printing machine. For example, Nigeria recently opened its second printing plant in Abuja at a cost of more than $135 million for hardware alone. Furthermore, North Korea may not have the technical expertise to produce the notes. According to the Swiss Bundeskriminalpolizei, "…its [North Korea’s] printing presses date back to the 1970s, North Korea is today printing its own currency in such poor quality that one automatically wonders whether this country would even be in a position to manufacture the high-quality supernotes“. Therefore, according to the evidence provided, the possibility of DPRK producing supernotes can also be invalidated as North Korea lacks the financial means, as well as, the lack of talent and material resources. -Elich p. 10 and Hall p. 3 (p. 39 thesis) It is believed that North Korea purchased an older Giori model printing press during the 1970s, which could produce $50 million in about 5 hours. Additionally, according to German banknote specialist Klaus W. Bender, the rate at which North Korea has kept pace with the modifications made to US engraving plates since 1989 is difficult to explain, as these alterations to bill design are an expensive process that does not fit within DPRKs economic means: “The counterfeiters immediately implemented each and every change to the 100-dollar bill.” The gravure of an intaglio printing plate requires many months intricate handwork and demands tens of thousands of dollars per plate; for security reasons, this craft is a highly-confidential process. -Elich p. 10 (p. 40 thesis) Indicators may disclose that North Korea may in fact not be responsible for creating supernotes; these factors include economic limitations, lack of printing hardware and material, the absence of technical talent, and the scarcity of financial incentive. Yet, the presence of supernotes is an undeniable reality. Therefore, if North Korea cannot be held liable for counterfeiting US currency, one must question who is responsible for the manufacturing and distribution of supernotes. According to currency expert Klaus Bender, the CIA is one such entity that could be held accountable for manufacturing supernotes. Covert funds for black operations are produced by a press in a city just north of Washington, D.C.; the CIA then conveniently blames the supernote-dilemma on Pyongyang. -Bender, p. 5. (p. 41 thesis),
- Matrix One Review After tabulating the data into the matrix the results yielded scores of -14.242 for Hypothesis 1, H1, that North Korea has not printed high quality US currency and -2.414 for Hypothesis 2, H2, the contrast alternative to H1. As the score for H1 is considerably farther from zero than H2, it can be assessed that H2 had more tabulated inconsistencies and fewer consistent scores in its hypothesis column, The large disparity between hypotheses strongly suggests that the provided evidence indicators has yielded in a definitive difference between the hypotheses. Hypothesis number 2, H2, is the most reasonable hypothesis. The similarities of the evidence can be grouped into categories of relevance, of course the most important being evidence numbers E1, E2, and E3, which acknowledge that the mechanical hardware and additional components to make supernotes is most vital in ensuring supernote production. The absence of any of these evidence factors would immediate negate North Korea’s capacity to print supernotes. Other indicators that could be acknowledged as less important include E9 and E4, ‘does DPRK have the engineering talent,’ and ‘can DPRK afford the machinery to replicate the printing process of authentic US currency.’ Although these factors are important in counterfeiting, the assessment yielded a consistent marking for the E4-H1 heading, as the relative importance of acquiring the necessary funds to purchase supernote quality counterfeiting machinery is less relevant than actually having it. Furthermore, state funded black enterprise has more expendable funds for grand operations that would otherwise be impossible for private non-state actors. An inconsistent marking can be found in the E9-H2 heading, as it was reasoned that the procurement of the physical hardware and printing material is more difficult to obtain than a skilled money fabricating specialist, therefore the low relevance marking. As each of these evidence factors are evaluated, the most defining evidence that would prove as to whether or not North Korea has been printing supernotes lays upon its possession of machinery to make counterfeit bills. These are the hypotheses driving key variables, or lynchpins. Without these variables North Korea would be unable to create supernotes. However, the variable that could also be identified as another lynchpin, but not as dynamic as compared to E1-3, is factor E7, supernotes are a catalyst for the propagation of additional illicit activities. It can be argued that without the stimulus of supernotes the cycle of acquiring additional monetary funds from state sponsored illicit activities could not be collected as quickly, and thus preventing an expedited mission of nuclear arms development. From an alternative perspective, should the other hypothesis be true, where North Korea is not producing supernotes, the evidence must be confounded for evidence factors E1-E3. Although some reports claim that the hardware currently possessed by North Korea to manufacture supernotes are obsolete and unable to create counterfeit bills overwhelming evidence from multiple sources of various types proves the contrary. The possibility that North Korea has not, and is not currently, manufacturing supernotes is a possibility and should not be discounted. However, due to the preponderance of sources reporting that differ from the perspective that North Korea has not been printing supernotes serves as a strong motivator for the hasty development of DPRK’s nuclear arms program. Matrix Two Review After tabulating the data into the matrix the results yielded scores of -16.656 for Hypothesis 1, H1, that supernotes are not responsible for the financing of North Korea’s nuclear arms program, -4.0 for Hypothesis 2, H2, that supernotes are directly responsible, and -1 for Hypothesis 3. As the score for H1 is considerably farther from zero than H2 or H3, it can be assessed that H2 had more tabulated inconsistencies and fewer consistent scores in its hypothesis column. The large disparity between H1 versus H2 and H3 strongly suggests that the provided evidence indicators has yielded in a definitive difference between hypotheses. Hypothesis number 3, H3, is the most reasonable hypothesis. The most instrumental and relevant groupings includes evidence numbers E8, E10, and E12; these are the lynchpin or hypothesis driving variables. These indicators express direct involvement with state managed illicit activities of the highest caliber and demonstrate that supernotes are an effective vehicle to perpetuate the cyclic funds generation to finance a quickly maturing nuclear threat. However, should evidence indicators E8, E10, and E12 prove to be misleading the most justifiable explanation would be that government managed black enterprises fail to exist within North Korea; if it were to be proven that supernotes are not responsible for DPRK’s nuclear programs development then the accompanying behavior of illicit activities would more than likely also fail to exist. Evidence indicators E1, E2, E3, E4, and E7 share a common premise that North Korea’s fractured economic status is crippled due to a combination of large trade deficits, subjugation to years of austere environmental conditions that ruined its already flailing agricultural harvests, and loss of monetary sponsors, primarily Soviet Russia after 1990. The result of such economic crises has made for a broken relationship with the globe, as the international community perceives North Korea to be too great of a financial risk to be worth investing, thereby creating a cash driven economy. Economists agree that the combined financial failures of North Korea are exacerbated with its pursuit to maintain its Juche and Songun policies, E5. Due to its adherence to Juche and Songun and policies North Korea denies itself the means to legitimately foster fair business trade in lieu for nuclear arms development, it is actively breaking international trade sanctions and arm treaties, as demonstrated in E9 and E13. Cross-fertilization of evidence-hypotheses analysis demonstrates that the generation of supernotes cannot solely support the monetary demands of North Korea, but rather acts as a facilitator acting as a cog in the illicit money making machine to advocate its ‘military first’ policy is ultimately partly responsible for the financing of its nuclear arms programs. Although highly unlikely, in the event that North Korea is not producing supernotes and that its nuclear program is receiving no benefit of such illicit activity it is always advised that a contingency be addressed to acknowledge how lynchpin indicators can create for this type of scenario. In order for North Korea’s nuclear program to be independent from the influences of supernotes would necessitate that North Korea abstain from engaging in evidence indicators of high relevance, specifically halting its reliance on state sponsored illicit acts to procure funds to stimulate its GDP. In simpler terms, no supernotes means no nuclear program. However, for North Korea to support a nuclear program without the benefit of supernotes it would have to sacrifice more than just the counterfeit money. To absolve the nation of its deep trade deficits would demand that the forfeiting of its illicit money generating activities so as to better garner the international trust of global business. Furthermore, the ideological premise of self-containment must also be sacrificed as well but for all this to occur would insinuate a regime change as too many factors must be adulterated to make way for the slight possibility of advocating a possibility of envisioning H1 to come to fruition. It is much more likely, according to weighted inconsistency scores, that supernotes are directly responsible for the financing North Korea’s nuclear program than having no responsibility at all. The possibility that North Korea’s nuclear program is directly financed by supernotes, H2, would demand reciprocal stipulations of evidence indicators when compared to H1. Instead of attempting to garner the trust of the international community with appeasement so as to create a characteristic of nuclear responsibility, H2 would contrast by intensifying its production of supernotes and simultaneously incurring greater relations with rogue nations with heightened trade of military arms and technical fissile expertise, thus further violating internationally imposed sanctions and treaties, and in doing so would also make North Korea even more far-removed and isolated from the international community.
- ACH is a superior tool But it is complicated and takes a long time when compared to using only intuitive processing. Systematic analysis proved that amalgamating structural analysis with intuition facilitated in the inquiry process. ACH stimulated and guided in greater inquiry generation, to methodically evaluate evidence and hypotheses. This development of new insights about the same issue in question inspired alternative perspectives, which in turn fueled intuitive processing to propagate further systematic analyses: the use of intuition with ACH aided in raising additional questions that were not initially considered. The intuitive process for this research was aimed primarily for evidence collection, where critical data was collected should it have an impact on the judgments about the hypotheses. This portion of the ACH process is the least scientific, that is until the evidence is weighed when analyzing hypotheses. Therefore, it has been found in this research that the primary limitation for ACH lays in its creative and intuitive demands for hypotheses development and evidence gathering. Without initially entering the proper appropriate data the result will be skewed or completely false. For example, the milestone provided in Matrix 1 revealed that without lynchpins E1-E3 North Korea would not be able capable of producing supernotes. In the event that DPRK does not have such counterfeiting capacities then it should not have the hardware and material; this encourages that the analyst use creative and intuitive means to seek evidence that may justify such a belief, however, if no such evidence is found then the substantiation of the most valid hypothesis choice is suspect. The balance between structured analysis and creative judgment with intuition creates a systematic approach that must be exercised with caution as the results yielded, despite efforts to minimize cognitive biases, are dependent on the data entered: garbage in-garbage out. The payoff from ACH comes from its analytical process, not from the precise probability calculations for each hypothesis. North Korea will engage in more illicit activities to generate more revenue to fund its atomic mission. North Korea is a growing nuclear threat that is compromising international diplomacy and security. This self-imposed isolated nation has a tenuous relationship with the international community where its continuous saber-rattling is keeping the world walking on diplomatic egg shells. Its mission to expedite the development of a nuclear arms program has yielded exhaustive measures to inhibit the further advancement of North Korean nuclear weaponry, primarily through the application of sanctions. However, the implementation of greater economic restrictions has urged North Korea to venture into clandestine ventures to finance its frail economy. By engaging in illicit acts to acquire greater monetary funds to support its Songun policy the production of high-quality counterfeit US supernotes have proved to be a powerful catalyst in fulfilling DPRK’s nuclear objectives. High quality counterfeit US currency is a catalyst aiding in further growth of illicit state managed crime, as well as nuclear arms development. Unfortunately, halting North Korea’s manufacturing of supernotes would only retard but not cease DPRK’s atomic mission, as the ACH evaluation has demonstrated that counterfeit US money is only partly responsible for the financing of its nuclear program. But with so many unknown factors about DPRK it is especially challenging to rationally and systematically to develop an objective forecast as to what North Korea will do next. Four considerations to improve future research Recent history It can be broadly assumed that the number of offensive occurrences involving military confrontations, diplomacy violations, or arms testing and trading is increasing with more saber-rattling and diplomatic agitation therefore, creating a heightened air of unease with feelings of a greater possibility that North Korea will engage in military encroachment of Seoul or in a regional nuclear strike, thus prompting the possibility of global thermonuclear war. As historical indicators of offensive nuclear strikes are limited only to the incidences that occurred during WWII using North Korea’s past to dictate its future would prove to be unreliable. There is no existing model or theory to compare with North Korea. According to its history North Korea may have an increased number of offensive incidences, however, it is to be questioned that the production of supernotes is relevant in this increase or vice versa. 2. Economic Sanctions The second consideration further addresses the effectiveness of imposing sanctions upon North Korea. Increased sanctions imposed upon North Korea is prompting in DPRK’s production of supernotes, therefore accelerating the development of North Korea’s nuclear program. Decades of embargoes and international sequestration has yielded the argument that further prohibitions will prove to be ineffective. For more than 60 years Washington has tirelessly advocated that placing sanctions upon North Korea will provide enough incentive to encourage the regime to modify its behavior . The gravity of this consideration is substantial as history has demonstrated that habitual sanctioning has not yielded any benefit in regards to the diplomatic strengthening of DPRK with the international community, but rather the opposite. At the same time, it could also be argued that as a nuclear disaster, made responsible by DPRK, has not yet happened, therefore, the sanctions imposed upon North Korea are effective in its ability to retard the development of a North Korean nuclear threat and prevent a nuclear strike. 3. Agriculture and Energy Dependency The third consideration continues upon DPRK’s financial crisis by branching into its foreign energy and agricultural dependency from other nations. WWII comparison between the US and Japan. The Japanese imperialistic occupation of northern French Indochina yielded in an American embargo in 1940 prohibiting the exchange of metal and oil. Later, in 1941, the freezing of Japanese national assets placed further strain on the Japan economy. The result was an immobile nation that was unable to survive unless deceitful measures were implemented. Similar to WWII era Japan, current North Korea is a nation with comparable predicaments: an energy crisis, as a country that does not have sufficient petroleum reserves; and an agricultural crisis, as a country without sufficient mechanical farming power. Supernotes can be identified as a catalyst by acting as a life-support system preventing North Korea from a more rapid death by trade attrition. 4. US-DPRK hetero-norm relationship The final consideration identifies the hetero-norm relationship between the US and DPRK, where the existence of North Korea is dependent on its rivalry to the United States. North Korean apprehension to the US is paramount for the survival of the ‘Great Leader’ and his land. This portion of considerations can be divided into two parts: Juche and Songun, and CIA denial and deception. A. North Korea’s ‘self-reliance’ and ‘military-first’ policies are contrary to US political philosophy. Without such a contrasting motif between the two countries the DPRK national identity would cease to exist, therefore the need for North Korea to contradict is inherent for its domestic survival. The increased discrimination between the nations is demonstrated by North Korea’s rushed efforts to amass a nuclear arms stockpile, which perpetuates the survival of the dictatorial war-machine. B. The second portion of these final considerations involves the presence of the CIA’s possible manipulation of supernotes so as to create the premise that North Korea is creating supernotes. This is a matter of high relevance, but is not found to be frequently discussed as the credibility from the sources are moderate at best and cannot assure analytical confidence, at least from an open-source perspective, therefore, this subject was not added to the list of evidence on Matrix 2. CIA denial and deception is the best fit for a wild card when comparing the previous considerations that were raised after using ACH. While in the guise as North Korea the CIA could be creating supernotes to fund agency projects, therefore, should the CIA wish to continue to receive unaccounted subsidies it would be in the CIA’s best interests to maintain the perception that North Korea and the US have been and are currently still at odds with each other. This would also entail that the economic and agricultural misfortunes, as well as the human rights violations that are ubiquitous to North Korea, were made responsible by the CIA. The possibilities of a CIA cover-up is possible, just not probable. Research Obstacles ACH demanded an overabundance of discrete judgments that did not easily fit a particular evidential weight. For example, to consider whether the CIA is directly, partly, or not responsible for supernotes funding North Korea’s nuclear program could fit into every category. In such a situation the analyst would have to seek additional evidence that is more specifically aligned with the demands of the hypotheses, but is often unavailable. ACH is aimed to minimize cognitive dissonance, yet as the analyst generated hypotheses and searched for evidence, while exercising analytical restraint by maintaining a brief list of only the most critical information, invited analytical bias. Analysts exercise more judgment in deciding whether or not the newly found piece of evidence to be worthy of comparative evidence-hypothesis weighing, which again echoes the problem addressed previously, cognitive bias. Although ACH can study and explain past, present, and future events the evidence used in the process is static, like a photograph in time. Also, slow, time consuming and cumbersome when presented with larege batches of data.