The Mysterious Case of the Seized Bearer Bonds, Worth $134 Billion

I brought this story to your attention last week. Surprisingly, we have heard very little about this in the US media but the story is starting to gain traction in Europe and Asia. If these bonds are real this is a huge story. If these bonds are counterfeit this is a huge story. Whenever you are dealing with financial instruments worth $134 billion, something big and meaningful is going on. Could it be that an Asian central bank is trying to unload it's U.S. dollar based reserve before the dollar craters? I'm going to keep an eye on this story and will report anything I can dig up-stay tuned.-Lou

Mysterious Case of the Seized Bearer Bonds, Worth $134 Billion

by hrtrader

Sat Jun 13, 2009 at 03:50:09 PM PDT

The US media has been generally silent about $134 billion in bearer bonds seized by Italian police at the Swiss border. On June 8, AsiaNews reported:

Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.
Karl Denninger has been following the story, and it appears to be true that this vast sum was, in fact, seized.

It is a mystery why the story is receiving coverage in Europe and Asia, but not in the US. Rumors have been swirling about possible involvement of the Japanese, Chinese, and/or Korean governments, with the last being more likely if the bonds are counterfeit. Whether real or fake, the apparent fact of the smuggling raises all kinds of questions, with no easy answers. Mr Denninger applies his considerable intelligence to the matter, in Sherlock Holmes fashion:

You're not going to walk into a bank with $130 billion in bearer bonds and cash them. Nor are you going to sell a bond with a $500 million face value to someone without them authenticating it. They will be authenticated before you get one dime out of them - no matter who you think you're going to "give" them to.

So if they're fakes and you're "just screwing around", there is no reason to hide them. Nor is there any particular reason to have authentic and recent original bank documents in your luggage with them, as has been reported.

...Ok, who has $130 billion in bearer bonds? Remember, bearer instruments haven't been issued by the Treasury since 1982, when they became illegal to issue, at least to US institutions and residents (there was an exception carved out for Treasury instruments issued to non-US residents in 1985 - a time of high deficits) The answer to that question: it is rather unlikely that there remains $130 billion of legitimate US Bearer issuance outstanding anywhere - to anyone.
Denninger goes on to consider a number of possibilities, all unlikely, then quotes Holmes: "once you eliminate the impossible, whatever remains, however implausible, must be the truth."

Are we willing to assume that all the "issue" of Treasury bonds has been done "above board" as required by law. If Treasury has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn't want reported over the last, oh, say 10 or 20 years, then the following is about to occur: (graphic of sh*tstorm).

This is a fascinating story, assuming it's true. The Italian government can, by law, keep 1/3 of the amount as a statutory penalty for smuggling. In any case, there is something very strange going on, whether or not the bonds are real (which seems likely considering the difficulty in cashing a fake $500 million bond). What does seem likely is that someone was doing something underhanded with an enormous amount of money. But what?

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