) -- Japan is investigating reports two of its citizens were detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland.
“Italian authorities are in the midst of the investigation, and haven’t yet confirmed the details, including whether they are Japanese citizens or not,” Takeshi Akamatsu, a spokesman for the Ministry of Foreign Affairs, said by telephone today in Tokyo. “Our consulate in Milan is continuing efforts to confirm the reports.”
An official at the Consulate General of Japan in Milan, who only gave his name as Ikeda, said it still hasn’t been confirmed that the individuals are Japanese. “We are in contact with the Italian Financial Police and the Italian Public Prosecutor’s Office,” Ikeda said by phone today.
newspaper reported today Italian police found bond certificates concealed in the bottom of luggage the two individuals were carrying on a train that stopped in Chiasso, near the Swiss border, on June 3.
said, citing Italian authorities. The case was reported earlier in Italian newspapers
If the securities are found to be genuine, the individuals could be fined 40 percent of the total value for attempting to take them out of the country without declaring them, the Asahi said.
contacted the Treasury Department about this case, and received an official blow-off letter in response -- basically saying they had "no comment" on this 134 billion dollars in US bonds, seized at the Italian border, as it was "evidence in an ongoing investigation."
Beck then goes on to put up the numbers of which countries hold the largest numbers of US bonds. In order, they are
Based on the public, unclassified numbers, $134.5 billion in US bonds could only have been produced by Russia, the UK, Japan or China... no one else. The amount of money is so huge that if Russia produced it, they would only have 2.5 billion dollars in US bonds left.
, said that whether this was a government dumping its bonds or a counterfeit operation, it was "gigantic" in scope and "unlike anything we've ever seen -- not just in size but also in sophistication."
According to Wiesenthal, in order to counterfeit these bonds, "it would be the kind of technology you would expect only a government to have." Wiesenthal also believes the 1934 issuance date on the bonds suggests they may be elaborate forgeries.
~~(o)~~
Dear Mr. Geithner:
No doubt you are already aware of the wild
stories circulating in response to the news that two Japanese nationals
were caught trying to smuggle some $134 billion in US Government
bearer bonds into Switzerland from Italy. Since the Secret Service
seems a bit slow in addressing the issue (What's the problem? Haven't
you hired an undersecretary of Secret Service motivation yet? Couldn't
you get Agent Frank Horrigan out of retirement and send him on special
assignment or something?) and the Italians change their story about the
instruments almost as often as they change governments, we thought you
might benefit from some of our analysis.
Obviously, with respect to authenticity, there are three options:
- All the documents are fake.
- Some of the documents are fake.
- None of the documents are fake.
Taking these in order-
1. All the documents are fake. (Likely)
If all the documents are fake then the possibilities narrow to some degree:
Perhaps
the work of a technically sophisticated but socially inept
counterfeiting operation that is most likely attempting to dupe gullible
private citizens or low-level managers. As of today an Italian Colonel
in the Guardia di Finanza was complimenting the workmanship of the
documents and speculating some of them might be authentic (at least to
the European press). Leaving aside for a moment the rather dire career
consequences such pronouncements might have, one assumes the Italians
have some experience with forged documents. Admittedly, however, such
expertise might not readily flow up to an officer politically focused
enough to reach the rank of Colonel in any Italian organization. (I
think I met one at a party in Miami once).
It would be a
short-lived game once someone tried to pass one to an institution of any
note. One assumes any bank large enough to accept such instruments
into anything other than a safe-deposit box has best-practices methods
to authenticate them, the key portion of which would be contacting the
issuer (since the Fed doesn't issue/hasn't issued bonds like this, this
would have to be the Treasury). Obviously, the Treasury would maintain
specimen copies and make these available via facsimile transmission for a
first-blush gut check. Still, Swiss institutions are highly unlikely
to accept even authentic bearer instruments from a U.S. issuer without a
very detailed provenience investigation. Further, even bearer bonds
are serialized, meaning that it should be a trivial matter to establish
if the securities these documents purport to be were actually issued.
As technically sophisticated as such forgeries might be, absent access
to authentic originals, details like issue dates and proper serial
numbers would be hard to obtain.
Some support for this theory:
None
of the coupons on the various documents appear to have been clipped.
Since the Treasury has not issued bearer bonds since 1982 or 1985
(depending who at Treasury you ask) if these documents were authentic
someone has taken a serious inflation beating on the deferred interest
payments. (Turns out that high denomination instruments weren't printed
after late 1969).
The Treasury claims that less than 1% of
"marketable securities" are in bearer form. $134 billion in bearer
bonds would imply some $13 trillion in marketable securities (assuming
that class includes these bonds). This conflicts with the amount of
"Total Marketable U.S. Treasury Securities Outstanding" for November
2008, as reported in Table B-87 of the 2009 "Economic Report of the
President." That document lists total Marketable U.S. Treasury
Securities Outstanding" as $5.82 trillion. All outstanding Treasury
securities are listed in the same table as $10.66 trillion with
"Unmarketable Securities" taking up $4.83 trillion. Note that in the
category of "Marketable Securities" "Treasury Bonds" are listed at a
"mere" $594.6 billion.
Even if we choose to discount the
Treasury's offhand "1%" figure, it is difficult to imagine that a huge
portion of the outstanding treasury securities would be in the form just
a few, similar documents that somehow found their way into a single
briefcase on the Swiss-Italian border.
High quality counterfeit
"Federal Reserve Bonds" and the like are apparently common and seem to
originate from Indonesia and other places where unrest has permitted
high quality presses to fall into nefarious hands.
2. Some of the documents are fake. (Possible).
This
would be quite possible if our two Ninja Smugglers were delivering a
sample original document and a set of fake duplicates to show a buyer
the quality of the forgeries. In this case you are still dealing with a
technically competent counterfeiting operation, but now you have one
with access to at least one of the originals. That begins to feel like a
state sponsored operation, or, at the very least, a rather amazing
theft story. One wonders why the theft of a $500 million bearer bond
(the smallest possible denomination according to the Guardia di Finanza)
would not be reported, but stranger things have happened behind the
walls of an embarrassed bank.
The Treasury did in fact issue $500
million denominated instruments between 1955 and 1969, starting in
early 1955 along with $100 million instruments. In fact, all of the
Treasury bonds printed in the early 1950s were bearer instruments with
coupons. Imagine processing half a million coupons and you start to
understand why the larger denominations were attractive. The last were
apparently printed in late 1969. It seems clear that $1 billion
instruments were never issued. Those would appear to be forgeries.
Taking
the "theft" example, having no hope of passing the document
(provenience investigation) one could still maximize value by
counterfeiting it and, as before, selling the result to foreign
intelligence services, governments, or just gullible
American/Japanese/French tourists in Italy/Switzerland.
It is
also entirely possible that this is the work of a government. (Foreign
or domestic). There is quite a great deal of precedent here The German
Operation Bernhard, named for SS Major Bernhard Krüger, forged a huge
number of small and medium denomination Bank of England pound notes
during World War II, to provide their agents with currency, to pay for
war material from foreign sources and to destabilize the British
economy. At its peak the work was of such high quality that the Bank
of England itself readily accepted the currency. Over GBP 100,000,000
was printed just in 1945. The Germans actually planned... wait for
it... wait for it... to drop the currency from airplanes over England
(apparently the very few helicopters that existed at the time had
insufficient range) but the Luftwaffe, badly weakened by then, did not
have the air power. Examples of the notes still occasionally turn up
though the Bank of England invalidated several series of the relevant
currency denominations in response to the counterfeits.
More
recently, the origins of high quality forgeries of $100 notes, the
"PN-14342" family, have been attributed to Iran (which printed its own
currency on Intaglio presses prior to the revolution) North Korea,
Russia and even the CIA (permitting it to evade congressional budget
oversight).
Motives for foreign counterfeiting of such notes
should be obvious. They are less so, perhaps, for high denomination
bearer bonds. This is the hitch in this "fake" bit. That's a lot of
bonds to have in the same place and one assumes even a Guardia di
Finanza Cadet would notice if the serial numbers were all the same and
not bother to pester the American Secret Service for authentication.
Why print more than one serial number with such high denominations? Lot
of work, that. Could it really be that no one noticed this? (Well, it
is Italy, after all).
3. None of the documents are fake (unlikely).
For
the purposes of amusement, and delving for a moment into (REALLY into)
the realm of aluminum foil (Haven't you ever stopped to wonder who it
was who pulled real tin-foil off the market and forced everyone to move
to the aluminum variety? And why?) there is the (slim) possibility that
you printed the damn things. That splits us into a number of
alternatives:
Some foreign government (no corporate entity or
individual has $134 billion laying around) has been holding the things
to use as portable cash in emergencies. (This would explain the lack of
coupon clipping- who cares about interest when you are just looking for
portable wealth?) Or perhaps they haven't even been holding them for a
long while, but exchanged them recently to facilitate their clandestine
cross-border movement- perhaps even with the acquiescence/assistance of
the Treasury. (After all, it would look pretty bad if that much U.S.
debt was moved around openly). Here ya go [China (~$760
billion)/Japan (~$680 billion)/Russia (~$140 billion)] a bunch of bearer
bonds we had laying around in the archives so you can smuggle the
things into Switzerland.
Technically the difference between a
valid and invalid Treasury bond is the willingness of the Treasury to
accept it. Excellent deniability here. If anything at all happens you
can just disavow the documents, reissue some other ones, or not,
whatever. This would answer the question "how did anyone think that any
bank would accept such large denominations?" The Treasury would
validate the documents, of course. This would, however, not answer the
question as to why two individuals traveling on Japanese passports would
be attempting to slip into Switzerland in the best amateur hour
smuggling operation since the guy who dropped two kilos of cocaine on
the floor while standing at the immigration counter at JFK.
What
might answer that question in this highly unlikely but entertaining
scenario is the fact that this sort of rank incompetence is quite
characteristic of the Japanese generally and Japanese Intelligence
(Naikaku Jōhō Chōsashitsu) specifically. Hardly a month goes by without
news of some executive with a case filled with brand new U.S. hundred
dollar bills in Tokyo. At one point in 1998 a briefcase with $50
million in negotiable instruments was left in the Tokyo subway by an
intoxicated bank executive.
Perhaps Japan wants to move capital
offshore in preparation for general hostilities related to North Korea's
increasingly evident mental deficiency.
We have heard a few
reports that the individuals weren't arrested (though these aren't well
sourced) and the Japanese consulate doesn't seem to know (or want to
tell anyone) if they are actually Japanese nationals. (What's the hold
up? You've got passports and passport numbers. Should be a matter of
hours to get that figured out).
We would be remiss if we did not point out the (fanciful) possibility that this was the Treasury's doing entirely. Why?
Perhaps
you intentionally orchestrated the discovery of the instruments which
you will now rule counterfeit to cast doubt on similar instruments you
would prefer not to redeem. (Play rough with us, China, see what
happens).
Perhaps you were establishing credit with a foreign
financial institution from which you could buy more Treasuries (hah) or
otherwise buoy the market (S&P 500 futures are a popular theory for
manipulation these days) without tipping the Treasury/Fed's hand in the
process. (Credit Suisse and UBS both have enough AUM to conceal a
"mere" $134 billion).
Perhaps you wanted an easy way to tip the
debt crippled Italy 40% of $134 billion (the forfeiture fine for failing
to declare) without congressional oversight. That buys a lot of Fiats.
China or Japan will probably be blamed for the "incident" and no one
will be surprised if it is hushed up. Instead everyone will assume that
the remaining 60% went back to the original holder and Italy gets $53
billion without a lot of questions. Clever, Mr. Geithner, JamesTim Geithner.
Of course, any of these "they're real" options brings up a rather serious question:
Since
these securities appear to have been off the books, and none of the
Treasury disclosures about foreign or domestic holdings would seem to
support this many bearer instruments (much less this many in the same
place) how do we (does anyone) ever believe any statements about the
size of outstanding U.S. debt again?
Whatever the case you have
to admit that it is a sad state of affairs when, under your stewardship
of the Department of the Treasury, an incident like this stirs up even
the slightest suspicion rather than being immediately relegated to pages
of "Treasury Debt of Honor," the latest Tom Clancy pulp to be found in
the "thriller" section of one of LaGuardia's HMSHost owned bookstores.
We
challenge you to do the right thing. That, of course, is to come out
with a clear, concise statement ending the sort of speculation that,
while currently confined to fringe financial blogs, has begun to creep
into major outlets. (Handelsbaltt, for instance). Be careful, though.
If someone suddenly notices that Italy has gone on a spending spree
(Dodge Vipers for EVERYONE!) we hope you have a good lawyer. (Though,
after the Turbo Tax Teflon, we suppose that's not really an issue).
_____________________________________________
The Strange Inconsistencies Behind the $134.5 Billion Bearer Bond Mystery
June 16th, 2009
Here’s yet another huge financial story that has been virtually blacked out by the US financial media. Although on the surface, this story appears to be a non-event, if we consider some of the released facts about this case, you will understand why I consider it to be a huge story. On June 8th, the
Asia News reported the following story:
“Italy’s financial police (Guardia italiana di Finanza) has seized US
bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40
km from Milan) on the border between Italy and Switzerland. They
include 249 US Federal Reserve bonds worth US$ 500 million each, plus
ten Kennedy bonds and other US government securities worth a billion
dollars 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.”
Here are just a few fascinating facts about this case (at least they are being reported as “facts” at this current time):
(1) Though the smugglers have been identified in the press as
“Japanese nationals” there has yet to be any confirmation if the
smugglers were indeed Japanese or of some other ethnicity. How difficult
is it to confirm the ethnicity of the smugglers and why is this
information being kept secret?
(2) According to a brief Bloomberg article regarding this story, the
seized bearer bonds allegedly were dated as of 1934. Since bearer bonds
in denominations of $500 million did not exist in 1934, the bonds were
deduced as fake, though the Italian police are still waiting for a
declaration regarding the bonds’ authenticity from the SEC. There is
something truly “off” about this declaration. How can the quality of the
forged bearer bonds be so meticulous that they “are indistinguishable
from the real ones”, yet the people involved in the alleged forgery so
ill-informed as to not date the bearer bonds with a more recent year
that would not immediately identify them as fraudulent? How hard would
it have been to date the bearer bonds with a more recent year? An
equivalent analogy would be if an expert art forger meticulously
re-created a Picasso oil canvass and then erroneously signed the work
with the wrong artist’s name. This story just does not add up.
(3) The Bloomberg story also reported that there is no known
existence of the alleged 10 Kennedy bonds that were discovered in the
smuggler’s suitcases, each with a denomination of $1 billion. Again,
this discovery defies any logical explanation. Why would expert
counterfeiters make 249 bearer bonds with denominations of $500 million
apiece, each undistinguishable from the real thing, and then instead of
just making 20 more such bonds, decide to make 10 bonds in denominations
of $1 billion a piece in a bearer bond design that has never existed?
Were the alleged counterfeiters just too lazy to confirm if Kennedy
bearer bonds were ever a legitimately issued security? Again, this story
makes no sense.
(4) On March 30, 2009, the US Treasury Department announced that USD
$134.5 billion remained in its Troubled Asset Relief Program (TARP). The
stated amount of seized bearer bonds was $134.5 billion. Coincidence?
(5) The two well-dressed Japanese men opted to travel to Chiasso on a
local train normally full of Italian manual laborers commuting to
Switzerland. If they were really intent on successfully smuggling these
bonds, counterfeit or real, why would they not take more care to select a
travel route in which it was literally impossible for them not to stick
out like two sore thumbs? Again, this part of the story defies all
logic.
(6) The bearer bonds were discovered in a hidden briefcase
compartment after a customs inspection. Again, if the bonds were indeed
authentic and owned by a nation state, they could have been transported
in a diplomatic pouch exempt from customs searches that would have
guaranteed transport without detection.
Thus, all of the above irreconcilable and illogical points, other than
the coincidence of the amount of the bearer bonds exactly matching the
remaining TARP fund amount declared on March 30th, seem to indicate that
not only were the seized bearer bonds counterfeit, but also that the
smugglers were intent on being caught.
Before I continue, let’s review the purpose of bearer bonds.
Here is the Wikipedia definition of bearer bonds:
“A bearer bond is a
debt security issued by a business entity, such as a corporation, or by
a government. It differs from the more common types of investment
securities in that it is unregistered – no records are kept of the
owner, or the transactions involving ownership. Whoever physically holds
the paper on which the bond is issued owns the instrument. This is
useful for investors who wish to retain anonymity. The downside is that
in the event of loss or theft, bearer bonds are extremely difficult to
recover.”
If you recall the Michael Mann movie “Heat”, starring Robert DeNiro
and Al Pacino, during a daring daytime armored car robbery, the
criminals specifically targeted millions of dollars of bearer bonds for
theft precisely because of the above qualities of bearer bonds that make
them very difficult to trace. Again, due to the properties of bearer
bonds, it seems highly unlikely that $134.5 billion of bearer bonds
would be transported, if they were real, by two men with no security,
since theft guarantees that they would be lost forever.
Thus far, about the only piece of information that appears to be
reliable as reported by various news sources regarding this huge mystery
is the remarkable authenticity of the 249 seized bearer bonds in
denominations of USD $500 million. If any of the other facts, as they
are being reported, are remotely accurate, then the bearer bonds were
likely counterfeit. Still, the interesting part of this story, at least
to me, is that the smugglers seemed intent on being caught with the
counterfeit bonds. This leads me back to my previous question. What
possible reason would the smugglers have for wanting to be caught? One
of the quickest ways to sabotage and usher in the death of a currency is
to raise legitimate questions about its ability to withstand
counterfeiting efforts. Prove that counterfeiting is not only possible
but highly likely, and the world’s confidence in the sabotaged currency
will undoubtedly plummet.
In fact, this very tactic was applied during World War II when the
Nazis launched Operation Bernhard in an attempt to crash the British
economy by producing, by 1945, 132 million expertly counterfeited
British pounds, a figure that represented roughly 15% of all real
British pounds in circulation at the time. The counterfeit pounds were
produced by expert printers and engravers supervised by an SS officer
named Bernhard Krueger. As well, historical evidence exists that the
Allies considered launching a counter-counterfeit plan against the Nazis
as well. During this time, it was also alleged that the Bank of Italy
counterfeited their own money by issuing the same securities twice with
identical registered numbers and codes in order. The purpose of this
counterfeiting was to secretly expand monetary supply without public
transparency or accountability. Perhaps then, this $134.5.billion bearer
bond mystery was an attempt of a nation state to shake the world’s
confidence in the position of the US dollar as the world’s reserve
currency.
There should be little debate that the world’s emerging economies in
Russia, Brazil, China and certain Gulf Nations are at economic war today
with the world’s Western nations and their economic allies. The
currency war being fought today is sure to get much uglier in the
foreseeable future, in both open tactics as well as secretly executed
tactics. Currently, if the currency war were the world series of poker,
the US and the UK would be holding a pair of 2s and relying on nothing
but bluffs to keep the rest of the world at bay. Conversely, the Chinese
and other emerging nations with large surpluses would be holding
straight or royal flushes, and likely quietly maneuvering to go “all in”
at some point.
Given that the discovery of $134.5 billion of bearer bonds in the
suitcases of two Japanese nationals in Chiasso, Italy on the border of
Switzerland qualifies as one of the largest smuggling operations in
history, and given the various implications of such an act and the
possible players involved, the silence regarding this huge story is
simply stunning. It is not a huge story, per se, because of the
counterfeiting operation, because accusations and revelations of massive
money counterfeiting operations have occured in the past. It is a huge
story, rather, due to all the inconsistencies of the story and the
potential explanations that could explain these inconsistencies. The
larger story at hand is, who are the players (nations) involved, and
what was the intention of this likely counterfeiting operation? Maybe
the future will reveal the answers to these questions. But maybe not.
(This article above raises some good points. The article below is very dismissive and says the Treasury Dept claims the bonds are fake, which when you consider the questions raised by the article above, it doesn't make sense.--jef)
_____________________________________________
Smuggled $134 billion in T-bonds are fakes, U.S. says
Speculation about the Italian smuggling case involving $134 billion
in purported U.S. Treasury bonds may have been fun while it lasted, but
the Treasury Department says today the bonds are bogus.
"They’re obvious fakes," said Steve Meyerhardt, a spokesman for the Treasury's Bureau of Public Debt in Washington.
Two Japanese men were detained by Italian
authorities last week after they were caught trying to enter Switzerland
with what appeared to be $134 billion in U.S. Treasury bonds in a
suitcase.
As I noted
in this post
on Wednesday,
conspiracy theories have run wild in the blogosphere
based on the few details that had emerged about the case -- and because
mainstream media had largely ignored the story.
Meyerhardt said Treasury authorities could see immediately from photos of the bonds that they were doctored.
What’s more, the package of bonds was said
to include "Kennedy" bonds worth $1 billion each. "There is no such
thing as a Kennedy bond," Meyerhardt said.
Most important, the total of
Treasury paper "bearer" bonds outstanding is a mere $105 million, he
said. The Treasury has been issuing bonds solely in electronic form
since 1986, although a relative handful of investors never bothered to
convert their bearer bonds to electronic form.
And yes, I realize that there’s probably
nothing Treasury can say to satisfy people who believe that there’s
something more sinister going on here. (douchebag!--jef ;| )
The big question, still, is what the apparent forgerers hoped to do with the paper.
(Well, I'm not satisfied. That goes without saying, since this is a 2.5 yr old story that I just found out about. I will continue to post more as I find it. Admittedly, many of this info came care of links posted by David Wilcock.--jef)
