Question

Why, exactly, would Gaddafi have resorted to the printing press in early 2011?

Info

People sometimes talk about profitable companies as having a “license to print money.” Well, the British firm De La Rue actually does. In 1930, De La Rue, printer of items such as postage stamps, expanded into the money-printing business, producing banknotes for the then-government of China. Today it is the largest manufacturer of banknotes, producing the currencies of about 150 countries, from the United Kingdom to Fiji.

De La Rue’s business received some unexpected attention in 2011 when Muammar Gaddafi, the dictator who had ruled Libya from 1969 until 2011, was fighting to suppress a fierce popular uprising. To finance his efforts, he turned to seignorage, ordering around $1.5 billion worth of Libyan dinars printed. But Libyan banknotes weren’t printed in Libya; they were printed in Britain at one of De La Rue’s facilities. The British government, an enemy of the Gaddafi regime, seized the new banknotes before they could be flown to Libya, refusing to release them until Gaddafi had been overthrown.

Why do so many countries turn to private companies like De La Rue and its main rivals, the German firm Giesecke & Devrient and the French firm Oberthur, to print their currencies? The short answer is that printing money isn’t as easy as it sounds—producing high-quality banknotes that are hard to counterfeit requires highly specialized equipment and expertise. This is particularly true now that many countries are turning to banknotes printed of polymer, which are more durable and harder to counterfeit than paper money. In 2014, De La Rue was chosen to produce the next generation of British banknotes, the first ones to be made of plastic.

Actually, De La Rue has had its own problems with quality control: a scandal erupted in 2010, when it emerged that one of its plants had been producing defective security paper and that employees had covered up the problems. Nonetheless, many countries will surely continue relying on expert private firms to produce their currencies.

Answer 1

Need of money to finance war and protect his regime was perhaps the foremost reason for ordering printing of new currency .We all know wars/civil wars put a huge financial drain on the economy of a country, particularly for the government. In normal times the government can finance its expenditure through taxes and public as well as international borrowing. But in case of Gaddafi, since people of Libya and also the international community were against him, these channels of financing were obviously not available to him. Printing new currencies was the only option for him to pay his soldiers, buy new weapons and so on. Moreover in these times of war/uprising the currency value tends to depreciate fast, thereby in absolute terms more money is required to pay salaries, buy weapons and for day to day expenses. This also necessitates resorting to printing of currency.