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Bonds Worth $134.5 Billion Are Seized In Italy

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Heres what Karl Denninger thinks on Ticker

http://market-ticker.denninger.net/archive...t-Printing.html

hehe

we will continue to buy your debt with your strong dollar policy mr treasury secretary

http://www.lewrockwell.com/blog/lewrw/archives/027232.html

Japan secretly trying to divest out of their US debt?

Posted by Chris Brunner on June 11, 2009 11:48 AM | Post a civil, substantive, and intelligent comment

From the original article:

Two Japanese nationals were detained by Italian financial police last week after trying to enter Switzerland with $134 billion worth of undeclared U.S. bonds, mostly Treasury bonds, an Italian daily said Wednesday. The Japanese consulate general in Milan confirmed that the detention had taken place and said it was trying to confirm with Italian authorities whether the two were indeed Japanese nationals and their identities.

According to the report in il Giornale, two unidentified Japanese in their 50s concealed the bonds, including 249 U.S. Treasury bonds each worth $500 million, in a suitcase with a false bottom that was searched by the Italian authorities June 3 when they were in Chiasso, at the border with Switzerland, about 50 kilometers north of Milan. The daily did not say on what charges they have been detained, but the two may have been detained on suspicion of attempting to take a large amount of securities out of Italy without declaring it because the paper said they had not declared the bonds.

This is very significant news, because, as Michael Barnett writes in an email, one of the following must be true:

1. The Japanese are trying to secretly divest themselves of about 25% of their US debt. (They own about $600B in US debt.)

2. The Japanese are acting as Chinese or North Korean agents in trying to help them divest themselves of US debt in secret.

3. There is an enormous sum of counterfeit US debt out there and these guys are trying to sell some of it.

None of these cases bodes well for the US debt market.

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UPDATE:

Japanese news report here with more pics in the vid:

http://www.dailymotion.com/video/x9k0lg_bonds_webcam

AND:

From Aprils Wall Street Journal, coincidence?

WASHINGTON (Dow Jones)--The Treasury Department has changed the scope of how the $700 billion financial rescue will be used, muddying attempts to gauge how much money they have left and providing a political opening for critics.

The Treasury revealed to Dow Jones Newswires over the weekend that they had $134.5 billion left in the Troubled Asset Relief Program, or TARP, a fact repeated by Secretary Timothy Geithner during a Sunday television interview. Since then, however, the Government Accountability Office issued a report suggesting that the amount remaining might actually be as low as $32.6 billion.

http://online.wsj.com/article/BT-CO-200904...eTabs%3Darticle

:unsure:

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Guest sillybear2

"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."

But surely it's simply a matter of checking whether the US Treasury has a countervailing record of them, and whether they've been paying the coupon on them.

I've read that US $100 dollar bills are the favourite with counterfeiters, and for some reason the US mint keeps the design and colour detail needlessly simplistic, outside of the US maybe it somehow gives credence to the reserve currency to have a mass of notes circulating regardless of their origin? After all, genuine notes only circulate based on trust. Obviously the US Govt misses out on the original Seigniorage if the notes are fake, which makes up a big part of Federal Reserve 'revenues'. Maybe it's akin to Microsoft's early permissive attitude to piracy because it helped them cement their monopoly?

At least people are still willing to go to the trouble of counterfeiting US bonds, that's flattering in a way, given recent events you'd think they'd be more money in printing loo roll.

The ECB came up with the €500 note for some reason. I suppose $100 bills are like the Boeing 747, the Europeans came up with the A380 superjumbo :-

500-euros.jpg

Very dodgy denomination IMHO. Our £50 notes are viewed with suspicion, and quite rightly.

Edited by sillybear2

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<SNIP>

The ECB came up with the €500 note for some reason. I suppose $100 bills are like the Boeing 747, the Europeans came up with the A380 superjumbo :-

500-euros.jpg

Very dodgy denomination IMHO. Our £50 notes are viewed with suspicion, and quite rightly.

The only place I've ever been that accepts largish notes without worry is Japan, the 10,000 Yen is worth about £64, but most seem happy to take it because it is still a very cash orientated society.

On the bond, I have visions of the Japanese Yakuza working with the Mafia on this one. Perhaps its a hundred years worth of extortion money and they have decided that they wanted to cash it in before it became worthless.

Edited by mikelivingstone

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I've just a had a quick trawl on the web. Surely something of this magnitude would appear on Reuters, BBC, Sky, CNN or similar? Only sites that have it seem to be ones that fire pop-ups giving me the opportunity to play poker or get cheap viagra. Youtube vid looks like a high-school prank.

Got it,

Here's the video of this criminal attempt:

;)

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shit, that happened about 10 miles from my house.

Not new though. Once they caught Don Johnson (yes, the one in Miami Vice) with a lot of that:

In November 2002, German customs officers at the Swiss-German border performed a routine search of Johnson's car. Bank statements evidencing US$8 billion in transactions were found in the trunk of his car.He was accompanied in his black Mercedes-Benz by three men: an investment adviser,a personal assistant,and a third of unknown identity.Initially it was thought Johnson was involved in money-laundering,but he was cleared of wrongdoing

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Hits the FT

http://ftalphaville.ft.com/blog/2009/06/12...ative-stealing/

In the Italian/Swiss border town of Chiasso last week- on Thursday the 4th, to be precise - Italian police stopped two Japanese men and searched their luggage. In a false bottom of one of the cases they found this:

7250.jpg

That’s 249 US Treasury bond certificates - undeclared - with a value of $500m each. As well as, according to a report from the Italian police, 10 Kennedy bonds at $1bn a pop. In total, $134.5bn of Treasury securities.The story was reported by the Italian news agency Adnkronos, and appears here on the website of the Guardia di Finanza, the Italian customs police.

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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.â€

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.

The Asahi 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.

The undeclared bonds included 249 certificates worth $500 million each, the Asahi said, citing Italian authorities. The case was reported earlier in Italian newspapers Il Giornale and La Repubblica and by the Ansa news agency.

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.

The Italian embassy in Tokyo was unable to confirm the Asahi report.

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I am Italian. The whole story has been given, quite surprisingly, exactly zero coverage on the media. Just to give you an idea, it was only briefly mentioned on page 19 of the printed edition of the second biggest national newspaper and I haven't heard anything about it on television.

However, the youtube video seems genuine to me (the person who said it looks like a high school prank has no clue). And the article from the Financial Police website confirms the story, so it's a safe bet to say that it did happen.

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Hits the FT

http://ftalphaville.ft.com/blog/2009/06/12...ative-stealing/

In the Italian/Swiss border town of Chiasso last week- on Thursday the 4th, to be precise - Italian police stopped two Japanese men and searched their luggage. In a false bottom of one of the cases they found this:

7250.jpg

That’s 249 US Treasury bond certificates - undeclared - with a value of $500m each. As well as, according to a report from the Italian police, 10 Kennedy bonds at $1bn a pop. In total, $134.5bn of Treasury securities.The story was reported by the Italian news agency Adnkronos, and appears here on the website of the Guardia di Finanza, the Italian customs police.

I have a question, which demands a answer I cant give it.

If these bonds are counterfeit and worth like 1 billion USD (each). Where did the counterfeiters get an original from, to counterfeit it. Its not like you can just pick them up like a £50 note.

I think there genuine.

Edited by debt-free

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I have a question, which demands a answer I cant give it.

If these bonds are counterfeit and worth like 1 billion USD (each). Where did the counterfeiters get an original from, to counterfeit it. Its not like you can just pick them up like a £50 note.

I think there genuine.

Caught one falling from Ben’s helicopter?

HelicopterBenSmall.jpg

Edited by Captain Cavey

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...

The ECB came up with the €500 note for some reason. I suppose $100 bills are like the Boeing 747, the Europeans came up with the A380 superjumbo :-

500-euros.jpg

Very dodgy denomination IMHO. Our �50 notes are viewed with suspicion, and quite rightly.

In Spain the €500 note is known as a "Bin Laden" because you never ever see one in circulation (for some strange reason <_< )

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Tin foil hat time? :ph34r:

Lots of suspicion over this at ticker forum tonight:

http://www.tickerforum.org/cgi-ticker/akcs...8888&page=1

A few extacted quotes so far:

Bonds found in Italy mentioned on Glenn Beck TV Show

He basically said he doesn't understand the media's silence on this. That whether they are counterfeit or whether they are real, both are bad. Counterfiet is bad, but real is worse. He explained that if counterfeit, then this is an operation that is far more sophisticated than ever seen before, and the implications would point to a state. If they are real, it also points to a sovereign nation - that apparently wants to 'quietly' dump treasuries without calling attention on the open market. He went over today's TIC flows and discussed the top 5 nations that hold our Treasuries. Basically, only 2 nations, China and Japan hold enough for $134B not to be a majority of their holdings. England and Russia hold almost exactly the amount in controversy ($130-$140B). So, if it were either of those nations, they'd have gotten rid of all their holdings.

It was a very good show. Beck has done his financial homework.

He's latched on to what I have: That none of the existing explanations make sense.

1. You can't cash a $500 million counterfeit bond, or pledge it. It WILL be verified, and when it is, you're ****ed. Therefore, if they're counterfeit they're toilet paper and the printer(s) know it.

2. There AREN'T $134 billion in KNOWN ISSUED bearer bonds outstanding. We know this because the DTC tracks the historical issues prior to 1982, when they were outlawed for general US issue (there IS, however, an exception for non-US citizens)

Read #1 and #2 very carefully.

If neither #1 or #2 can be true, what's left?

Genisis- That there are bonds issued which the public knows nothing about. Maybe a secret slush fund.
Maybe.

But if that's the explanation then should that hit the street the panic level will put the VIX at 150 in an hour, and everyone knows it.

Th WORST possible explanation is that these bonds are REAL and were issued by one or more administrations as a means of deficit spending beyond legal authority.

Why? Because then the entire premise of how much debt we are in, and the soundness of the Treausry complex is instantaneously called into question.

Such a revelation would likely lead to an immediate loss of the nation's "AAA" credit rating and MIGHT lead to an immediate shutdown of foreign Treasury buying.

Genesis- OK. The oddest thing is the lack of coverage in the US news. Makes me wonder if something is up.
And, as always, that niggling little question as to why the "couriers" haven't been arrested...
I don't know what the explanation is.

But what I do know is that the two obvious explanations - they're raw forgeries, and they're remnants from previous issues - are both highly unlikely to be true.

The former because you could never turn them into money (in which case you wasted your time and trouble on making them for nothing) and the latter because there aren't that many outstanding - by nearly a factor of 100.

Therefore, one must search for other possible answers, no matter how insane they sound at first blush.

Well it seems the ONLY reason the government would not have made an official comment about them by now, in an effort to keep the market calm and speculation out of the trading, would be because they ARE authentic.

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Continued from my previous post:

Watched the clip with Glenn Beck and he said they contacted the Treasury about the bonds and they said "No comment. The bonds are part of an on going investigation so we have not comment"

I said it before and I'll say it again...seems like they could easily check the serial numbers or registration on the bonds to see if they are real or fake. That should only take a day or two at the most.

The length of time and their investigation of this matter would seem to lead me to believe that they might be real. Perhaps there are some very high level discussions going on right now between the Treasury/President/ and who ever was trying to dump those bonds?

It is inconceivable that $134 billion in authorized and reasonably recent issue bearer bonds exist. Also, the $500mm denomination was only issued from the late 1959s to the mid 1960s, at least officially, and $134 billion of them is un-possible (just look at the size of the federal budget during that time and the deficits and tell me how it could happen?)

Again, go see my #1 and #2 "not possible" scenarios, then roll around in your head what MIGHT be going on here. If that doesn't make the hair stand up on your neck....

In a nutshell, if they're not forgeries and they're not authentic "old issue" bonds, then the most likely possibility is that they're authentic bonds issued "off the books" by one or more administrations over the past 27 years. That immediately raises a number of questions, such as "if there's $134.5B that we didn't know about, how much more is there?"
What country was sold off-balance sheet bonds and did they KNOW? That's a big question, because whoever it was is now out $134B they THOUGHT they had. While this wouldn't cripple China or Japan, it surely would Russia or England.

http://www.tickerforum.org/cgi-ticker/akcs...8888&page=2

Edited by MOP

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:ph34r:

Sunday, June 14, 2009

An Open Letter To The Secretary Of The Department Of The United States Treasury

Posted by Marla Singer at 1:25 AM

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 U.S. 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:

1. All the documents are fake.

2. Some of the documents are fake.

3. None of the documents are fake.

Taking these in order-

1. All the documents are fake.

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.

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.

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 JÅhÅ ChÅsashitsu) 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).

http://zerohedge.blogspot.com/2009/06/open...department.html

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Cheers for the update MOP, fascinating stuff. I think they are real myself :ph34r:

Starting to look that way. They should have verified them as fake within a couple of days, but the silence continues.

Very interesting discussion going on with Karl Denninger (username Genesis) on Market Ticker. Bloomberg even took quotes from this thread today:

http://www.tickerforum.org/cgi-ticker/akcs-www?post=98888

The bloomberg article:

Suitcase With $134 Billion Puts Dollar on Edge: William Pesek

Commentary by William Pesek

June 17 (Bloomberg) -- It’s a plot better suited for a John Le Carre novel.

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.

The trillions of dollars of debt the U.S. will issue in the next couple of years needs buyers. Attracting them will require making sure that existing ones aren’t losing faith in the U.S.’s ability to control the dollar.

The dollar is, for better or worse, the core of our world economy and it’s best to keep it stable. News that’s more fitting for international spy novels than the financial pages won’t help that effort. It is incumbent upon the U.S. Treasury to get to the bottom of this tale and keep markets informed.

GDP Carriers

Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who?

These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border.

This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that’s life.

Clancy Bestseller

You can almost picture Tom Clancy sitting in his study thinking: “Damn! Why didn’t I think of this yarn and novelize it years ago?†He could have sprinkled in a Chinese angle, a pinch of Russian intrigue, a dose of Pyongyang and a bit of Taiwan-Strait tension into the mix. Presto, a sure bestseller.

Daniel Craig may be thinking this is a great story on which to base the next James Bond flick. Perhaps Don Johnson could buy the rights to this tale. In 2002, the “Miami Vice†star was stopped by German customs officers as he was traveling in a car carrying credit notes and other securities worth as much as $8 billion. Now he could claim it was all, uh, research.

When I first heard of the $134 billion story, I was tempted to glance at my calendar to make sure it didn’t read April 1.

Let’s assume for a moment that these U.S. bonds are real. That would make a mockery of Japanese Finance Minister Kaoru Yosano’s “absolutely unshakable†confidence in the credibility of the U.S. dollar. Yosano would have some explaining to do about Japan’s $686 billion of U.S. debt if more of these suitcase capers come to light.

‘Kennedy Bonds’

Counterfeit $100 bills are one thing; two guys with undeclared bonds including 249 certificates worth $500 million and 10 “Kennedy bonds†of $1 billion each is quite another.

The bust could be a boon for Italy. If the securities are found to be genuine, the smugglers could be fined 40 percent of the total value for attempting to take them out of the country. Not a bad payday for a government grappling with a widening budget deficit and rebuilding the town of L’Aquila, which was destroyed by an earthquake in April.

It would be terrible news for the White House. Other than the U.S., China or Japan, no other nation could theoretically move those amounts. In the absence of clear explanations coming from the Treasury, conspiracy theories are filling the void.

On his blog, the Market Ticker, Karl Denninger wonders if the 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.†Adds Denninger: “Let’s hope we get those answers, and this isn’t one of those ‘funny things’ that just disappears into the night.â€

This is still a story with far more questions than answers. It’s odd, though, that it’s not garnering more media attention. Interest is likely to grow. The last thing Geithner and Federal Reserve Chairman Ben Bernanke need right now is tens of billions more of U.S. bonds -- or even high-quality fake ones -- suddenly popping up around the globe.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

Last Updated: June 16, 2009 15:00 EDT

http://www.bloomberg.com/apps/news?pid=206...id=a62_boqkurbI

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