Posted on 06/13/2009 4:51:15 PM PDT by FromLori
It just gets more and more odd after my original report, with the latest coming from a German newspaper (translation courtesy of Google):
Hit for the Zöllner: The contraband securities valued at 134 billion U.S. dollars are apparently real. Die italienische Finanzpolizei hatte zwei Japaner ertappt, die im doppelten Boden eines Koffers milliardenschwere Anleihen in die Schweiz schaffen wollten. The Italian financial police had two Japanese caught in the false bottom suitcase billion-dollar bonds in Switzerland wanted to create. Von dem Fund profitiert das hochverschuldete Italien.
Note that this has received very little coverage in the so-called "mainstream US media" - but it is everywhere in Europe and Asia.
Japan, for its part, oddly said the following as soon as this story started to hit the press:
“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.”
Uh huh. And the Japanese said in December of 1941 that all was well too. Anyone remember what happened on the morning of the 7th?
Let's apply a little "Occam's Razor" to this entire story.
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.
Next, unless someone knew you were smuggling them, why would you be subject to that sort of search? What made the people involved "interesting" to the authorities? This doesn't sound like a random stop to me; how many people are carrying $130 billion in bearer bonds at any given point in time? No, someone was tipped off that this was happening. Now why would you bother to stop them here, prior to their attempted delivery of such instruments, if they were fake?
Think about this: You know someone is smuggling a load of drugs. You can either bust them immediately or you can tail them and bust them when they show up at the "meet" to exchange the dope for the money. If you do the former the guys with the money get away, having committed no crime. But if you do the latter, you get to bust both the courier and the purchaser - two times the effectiveness for the price of one, and double the seizure value, since you get to seize the cash too!
So let's assume that the certificates are real, as German media seems to believe and which, by the way, makes logical sense given what they were and the sheer impossibility of cashing a fake $500 million bond.
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.
Mr. Holmes would be initially puzzled by such a caper. On the one hand we have the impossibility of the bonds being real, because there simply isn't $130 billion of issues remaining outstanding. On the other hand we have the impossibility of negotiating a fake $500 million bearer instrument, making the exercise of counterfeiting one expensive and futile.
This leaves us with more questions than answers at this point.
Or does it?
As Mr. Holmes is famously rumored to have said, "once you eliminate the impossible, whatever remains, however implausible, must be the truth."
So what remains? Let's run a theory here - one of the few possible remaining options, given the exclusion of what we know not to be true...
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:
Who could have possibly been complicit in such a scheme? I can come up with only two nations (and only nations could be involved due to size): The Japanese and Chinese. Since the two individuals who were arrested were reported to be Japanese nationals......
There are tremendous implications in an event like this, again, assuming the bonds are real.
The owner is going to want them back, of course. But Italy is going to keep a third as their statutory penalty for non-declaration on the border. Oops. That's great for Italy, but it blows bananas for the actual owner.
Of course Italy (or the US!) could declare them "fake" and as a consequence simply burn them. If they are in fact real, that's an even bigger problem. See, Bearer Bonds are issued without registration - they are as anonymous as a $100 bill in terms of who owns them. That's one of their "features", and why they were often used for various clandestine money operations. So if they are real and are destroyed, the owner is out of luck - their money is gone just as it is if you burn a $100 bill in an ashtray.
How much is $130 billion in this context? About 1/5th or so of what Japan legitimately owns of US Treasury debt. How would you like to take an instantaneous (and permanent!) 20% haircut on your securities? That's what I thought.
To add some balance here, there have been stories about fake bearer bonds coming out of North Korea and other places for years. But the idiocy of attempting to pass a $500 million certificate belies this possibility - who in the name of God would take such a thing and give you anything for it without authenticating it first? While bearer instrument are "anonymous" in terms of who owns them, their authenticity is easily verified as they ARE serialized instruments.
I remain puzzled, and am not advancing the above theory as fact.
It is, however, one of the few explanations that actually fits the facts, and for that reason, I think we need some answers. If in fact previous administrations were issuing "off-book" Treasury debt in this fashion to sovereigns then implications are truly explosive as such issues are blatant and outrageous unlawful acts and would expose everyone involved to severe criminal penalties.
Let's hope we get those answers, and this isn't one of those "funny things" that just disappears into the night.
Wasn’t there a thread yesterday about the Kyrgs’ being back in the Russian orbit now?
I too am thinking the FED but there is a part of me that is also thinking just because we stopped issuing bearer bonds doesn’t really mean that we stopped. I am so out of my league on this topic but I am curious enough to try to keep up with you $$$ guys. Just talk slow and keep the words simple:-)
save for later.
This is either something really stupid or something really serious.
When the story first came out, alot of people said they figured they were fakes.
But fakes would not only be worthless, it would probably be the equivalent of a felony to be in possession of them or try to cash them, so I have thought they were real.
And to try to cash this amount, this size of a transaction in bonds “under the radar” so to speak seems to spell to me serious trouble in the bond market and bad, bad news for the dollar.
How about Japan buying our treasuries at auction and then having the U.S. refund the money. Hiding the fact that our treasury auctions are bogus. I vaguely recall a story on these pseudo sales a month of so ago.
gosh 134 b is what BO spends in a weekend. What is the big deal?//sarc
bookmark
That fits.
But if they were legit paper, truly owned by the BOJ or the government of Japan, they could have been shipped in a diplomatic pouch and avoided all of this nonsense and been truly discrete.
That’s the first, biggest reason I have problems believing these are legit: If they were legit, the amount is so large that no one other than the Japanese government could have owned US bearer bonds from that era other than US citizens and US banks. The only off-shore nation buying up that amount of debt back then was the Japanese. So that much fits.
But if they were buying bearer bonds, they as a government enjoy the perks of diplomatic relations, which include diplo pouches. Japan could have couriered the paper to Berne and been done with it.
I will readily admit that Japan’s recent statement of confidence in the US in context of this seizure is quite odd, however.
Which is why we are not seeing inflation. The TARP money is not going into the US economy. It is going into somebody's Swiss Bank Accounts.
Welcome to The United States of Zimbabwe.
The IMF holds 103.4 million ounces (3,217 metric tons) of gold, making it the third largest official holder of gold. The gold is valued on its balance sheet at SDR 5.9 billion (about $9.2 billion) on the basis of historical cost. The market value of this gold was $95.2 billion as of February 20, 2008.
Hm, this incident is no longer as amusing as it was on Thursday.
Interesting fact, that. Will be interesting to see how/if the US state run MSM ignores Italy's request of the SEC.
According to a June 12 story on Bloomberg, Italy's financial police have asked the SEC to authenticate the U.S. bonds. If the bonds are real, that'll put the SEC on the horns of a dilemma: If it confirms the bonds as real, the implications are huge; if it announces the bonds are fake, the reprecussions from those who know better (and possibly are owed $134b) could be huge as well IMHO. Keep in mind, this potentially makes two Japanese guys the third largest creditor of the U.S., just ahead of Great Britian with $128b of U.S. debt. Right, that's as likely as them being discovered by just a random search - no way. If the bonds are fake, well, it's just another (interesting) story to put in the caveat emptor file.
You have a good point re the diplomatic pouch, but it’s possible that the ‘owner’ didn’t trust that channel with such a large amount. Somehow, I have a feeling that the Yakuza might be involved in this.....
bookmark
I thought that was odd - kind of like when someone says, "you can trust me" (you can't)
I won't hurt you (they will hurt you).
When people are trustworthy they don't say it, it's assumed.
Same with those who don't hurt you - they don't have to say it. It's correctly assumed.
And the people who say "our trust in U.S. Treasuries is absolutely unshakable.” - They didn't say that five years ago - or last year. This year they say it ... why?
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