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Originally Posted by Matt L
Do you know what's inside that "pen thingy?"
Iodine. It turns black in the presence of starch. Since most amateur counterfeiters will use off-the-shelf starched paper, it will leave a black mark.
But there is an obvious problem here. James Randi has written about these pens before, and how they give business owners a very false sense of security, while enriching the pens developers. Supposedly, he often withdraws new twenties from the bank, starches them well, and puts them into circulation.
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That's pretty amazing, so if someone bleached a lower denomination note and reprinted it as, say, a $20 or $50 the pen would show it to be real. With so many security features built into modern U.S. currency I don't see how people can trust a pen that only tests for starch.