Friday, June 19, 2009

Japanese Dumping $134.5 Billion in Bearer Bonds Using Smugglers in Italy? What?

Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear...Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit?...The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale....Suitcase with $134 Billion Puts Dollar on Edge, William Pesek, Bloomberg News, 6/17/2009

Readers are excused for not having heard of this astonishing story. The American MSM are not covering it. In the East, questions from the Asia Times netted a reassuring remark about trust in American bonds, and the simultaneous, if not related, resignation of the Prime Minister's brother as Internior Minister.

“We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano, 70, said in an interview in Tokyo on June 10 before attending a Group of Eight meeting of finance ministers starting today in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.” ...The Saga of the Bearer Bonds, Market Ticker (, 6/18/2009

Der Spiegel published a straighforward account of the arrest in Ponte Chiasso in northern Italy.

It is the largest smuggling scandal in history - or a brilliant forgery: Italian officials have listed on the Swiss border arrested two men who bonds with a nominal value of 134 billion U.S. dollars were having. The authenticity is verified, Italy hopes to have a huge cash injection.
Chiasso - On the border from Italy to Switzerland, the customs officials feel always on smugglers - but such a finding is the Italian financial police have not arrived at in a suitcase, presumably from the two Japan-born men carried with them, the official U.S. government bond papers with a nominal value of 134 billion U.S. dollars were discovered. This is from a press release issued by the Italian Guardia di Finanza out. The sum corresponds to almost 100 billion euros.
The two men were already on 3 June Italy by train to Switzerland on the road. A check at the border at Chiasso financial police discovered the papers under a false bottom in the suitcase. Both over 50-year-old men had the documents are not specified in the customs. According to the Financial Police will be at the 249 papers to U.S. government bonds with a nominal value of 500 million U.S. dollars each and ten so-called Kennedy-bonds to a billion dollars per act.
However, there is the case for many puzzling: The Japanese Embassy in Rome confirmed the arrest while the two men. The Bloomberg news agency reports, however, that has not yet clarified whether they are Japanese citizens. A spokesman of the Japanese Foreign Ministry in Tokyo said the agency, the Consulate in Milan is currently examining the currently available Berichte.Sind the debt problems of the Italian State solved?
There is also, what a coup the Italian customs officials succeeded: Either they cover the largest smuggling scandal in the history - or an exceptionally large fake. The Italian customs checks, according to their own information yet as to whether the documents are authentic.
This is so far, that the papers appear to be the first authentic and had a normal bank documentation was it. The online service, International Business News reports, however, that at least some of the documents were probably forged. Kennedy Bonds with a nominal value of one billion dollars it had in that form never existed, it says. Imagine the papers - or at least a part of it - as genuine out the men threaten penalties. In Europe it is forbidden to amounts in excess of 10,000 euros from a country run without the customs indicated. Should the two men will be punished, this would Italy an unexpected windfall involved. The state could be 40 percent of the total seized forfeited - a large part of the Italian debt problems would be solved. However, it is entirely unclear whether the government is actually in Rome on an unexpected financial injection can be happy. Nevertheless circulate in newspaper reports on how the money was. This could reduce the government deficit or reconstruction in the earthquake zone in the Abruzzi to be financed. (Translated from Der Spiegel, June 12, 2009. Article is not available in English online.)

Asia News ran some very serious stories on this on three occasions.

The story of US$ 134.5 billion in US government bonds seized by Italy’s financial police at Ponte Chiasso on the Italian-Swiss border...initially made it to the front page of many Italian papers, but not of the international press. Since yesterday though, some reports have published by English-language news agencies. And some commentators are starting to link the story to reports in US press dating back to 30 March...On that date the US Treasury Department announced that it had about US$ 134.5 billion left in...the Troubled Asset Relief Program (TARP)...At the same time, Japan’s Kyodo news agency has reported that the resignation of Japan’s Interior Minister Kunio Hatoyama might also be related to the Ponte Chiasso affair...There are many reasons to connect the Ponte Chiasso incident to the minister’s resignation...the men carrying the bonds had a Japanese passport....they were not arrested. Under Italian law anyone in possession of counterfeit cash or bonds worth more than a few tens of thousands of euros must be arrested...the value of the seized counterfeit bonds is equal to 1 per cent of the US Gross Domestic Product (GDP). Thirdly...two well-dressed Japanese men carrying a briefcase travelling in a local train usually used by Italian manual labourers who commute to Switzerland for work had as much chance to go unobserved as two European businessmen travelling in the Congo....Seizure of US Government Bonds, Asia News, 6/12/2009

Hunt for “$134.5 billion Italy” on the Web and you'll get hundreds of sites that have looked at this story. A key point about this story is that, despite the assurances of the US government about the bonds being faked, they are “bearer bonds,” non-registered, negotiable instruments of a size (500 million US, and 1 billion US) that are only exchanged nation-to-nation. They were also last issued in the early 1970s. The seizure included bank documents describing in detail the acquisition and verifying these bonds. The Italian police who seized them had some doubts about the largest denomination (Kennedy $1 billion) but couldn't tell the difference between known genuine $500 billion bearer bonds and the ones they seized in Ponte Chiasso.

There are two major competing interpretations of what to this writer is one of the strangest financial stories of the last decade.

1)The Japanese, or someone else in the Far East, are unloading American debt. The amount represents 25% of Japan's current holdings of U.S. debt.

2)And not to be outdone, the conspiracy types, which are legion on Left and Right wing blogs, note the corresponding values: $134.5 billion in bonds; $134.5 billion in remaining TARP funds. Was the U.S. administration, or officials in Treasury or the Fed, parking a big pile of money overseas as a contingency in case things went to hell in the U.S.?

The writer for Asia News discounts the latter. This is not surprising. Such a transfer by anybody, or by any organization with attachments to the White House, the Fed or the Treasury Department would bring down a national government – our national government. He notes with more seriousness the terrifying danger of destabilizing world dollar-based credit markets by either vast amounts of counterfeit bearer bonds or by the Japanese (or a client) dumping a pile of U.S. debt.

It is not clear how statements by US Treasury spokesman Meyerhardt and Italian financial police can be reconciled. For the former the bonds “are clearly fakes”; for the latter, speaking at the start of this whole affair, some bonds were indistinguishable from the real ones when it comes to quality and detail...Italy’s Guardia di Finanza has a reputation for being a highly specialised and expert financial police agency. How could it be so easily duped! And if the bonds are “clearly fakes” why did it take US authorities two weeks to find out...Another discrepancy is the fact that, along with the securities, original and recent bank documents were seized as proof of their authenticity...If what Meyerhardt says is true, some major financial institutions have been deceived by the securities carried by the two Asian men. This would be a bombshell and raise serious questions as to how many bank assets are actually made up of securities that for Meyerhardt are “clearly fakes.”...If counterfeit securities of such high quality are in circulation the world’s monetary system, let alone that of the United States, is in danger. International trade and exchanges could come to a halt...Whether it is counterfeit money or money laundering, what happened is potentially more dangerous for the stability of the international system than the results of Iran’s elections...If the bonds are real it means someone with a lot of cash no longer trusts the US dollar as a reserve currency...the international press and main TV networks, with some exceptions, have ignored the whole affair. These days this is actually the real news.Mystery Surrounding $134.5 “fake” Billion Seized in Ponte Chiasso Remains, Asia News, 6/18/2009

The refusal to cover, or total ignorance of, this story by America's MSM is not really surprising. Iran's rioting is easier, and a lot cheaper to carry. And there's always Secretary of State Clinton's elbow.

But the Wall Street Journal hasn't looked at it, nor has Investor's Business Daily, two pretty sober sources. What the hell is going on?


1 comment:

Wonker said...

Update of sorts, although I am somewhat mistrustful of what I'm reading on this--which, as Luther says, is very undercovered.

Latest I have is that these bonds were allegedly counterfit and the smugglers have already been released and have disappeared.

Frankly, another explanation for this is that, real or not, these "bonds" could be used by nefarious foreign governments (read the N Koreans, Iranians, or possibly the Chi-coms) to further undermine our currency which is already under considerable pressure.

This could explain the Chi-coms' constant pushing for a "new reserve currency." Having exploited our earlier go-go economy to seemingly entirely move the U.S. manufacturing economy from our shores to theirs, why not wreck our currency so their version of fiat capitalism by closet commies can become the new world standard. It wouldn't be the first time that American stupidity has allowed a foreign government to undermine our own best interests.

I tend to resist conspiracy theories, but something is going on here. Screwing with our bonds, or even reasonable facsimiles, can be an act of economic warfare if orchestrated by a foreign government.

But then, in Obamanation, since the U.S. is evil anyway, who cares? We deserve to be squashed by third world thugs, right?