We think the Japanese were going to convert formerly valuable and trustworthy Treasuries into Euros, something that inspires confidence. — Ed.
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.
What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.
First mystery: why has this gone almost completely unnoticed thisweek? Asia Times reported it first, and it was confirmed by theItalian news agency Adnkronos and Business Insider,the only American media outlet to take an interest so far. Adnkronosdoesn’t include the story in its English-language service, however; Ihad to Babelfish the webpage to be sure it confirmed Asia Times. Wouldn’t the discovery of $134.5 billion in American bonds in a false bottom of a suitcase smuggled through Italy into Switzerland seem a bit newsworthy in the US?
Second mystery: Are the bonds real? If so, how did the two Japanesetravelers get their hands on so much convertible cash? As the AsiaTimes report mentions, the denominations involved are usually used instate-to-state transactions. They would have had to steal them from agovernment — or perhaps a government gave them the bonds to convert insecret, covered by the Swiss insistence on secrecy in banking.
Third mystery: If the bonds are counterfeits, then how many morehigh-quality counterfeit US bonds are floating around Asia and Europe? Who is funding their creation, and why? Counterfeits on this scalewould affect bond prices and weaken the dollar. North Korea hasattempted low-rent counterfeiting of $100 bills, which the UN helped hidefor a while, but this seems beyond their capabilities — and potentiallya lot more destructive to the US. It would take quite a bit ofsupport to counterfeit state-to-state bonds, almost certainly requiringsome governmental involvement.
Hopefully, the press follows up on this case. I love a good mystery, but this one needs to get solved ASAP.
Update: Examiner blogger Craig Meister wonders whether the Japanese wanted to start dumping the dollar.