Update [2009-6-21 19:39:42 by problem is]:

Interesting. As to my comment about the US news media not reporting the story, Tom Petruno of the LA Times says:

http://latimesblogs.latimes.com/...

The case has received little play in mainstream media, which Pesek presumes is because it’s so surreal.

You mean Mr. LA Times, surreal as in absurd like the latest Paris Hilton crapola your paper prints daily??



From Mr. Denninger at The Market Ticker:

http://market-ticker.denninger.net/

"The Bond Saga: It Gets More Odd"

Reuters by way of Mr. Denninger:

http://www.reuters.com/...

"UPDATE 1-U.S. Treasury says bonds seized in Italy are fakes"

"Based on the photograph we've seen online, they are clearly fake. And not even good fakes," said Stephen Meyerhardt, a spokesman for the Treasury's Bureau of the Public Debt. He added that there is only $105 million in Treasury bearer bond securities outstanding, so the $134 billion amount seized far exceeds the universe of outstanding securites.

And:

"In the last two years, Italian authorities have seized some $800 million of U.S. bonds in the Como area in northern Italy."



Mr. Denninger:

Wait a second...... $800 million in real bonds have been seized, but there are only $105 million outstanding?

The Financial Times by way of Mr. Denninger:

http://www.ft.com/...



"Mafia blamed for $134bn fake Treasury bills"

The mystery deepened on Thursday as an Italian blog quoted Colonel Rodolfo Mecarelli of the Como provincial finance police as saying the two men had been released.

Mr. Denninger:

What? I find it incomprehensible that the Italian government released these two if they were actually caught in a massive counterfeiting operation with $134 billion in fake US Securities. I find it equally incomprehensible that there was not an immediate indictment out of a US Prosecutor coming from such an event and a demand for extradition back to the United States. So let's see if we can try to sort out what we're "learning": * The bonds are declared fake by the Treasury, stating that there's only $100 million outstanding and obviously $134 billion have to be fake.

* Italy claims to have seized $800 million in real US Bonds in the last year.

* The last legitimate issue of paper US Treasuries (that is publicly admitted to) was in the early 1980s when bearer instruments were outlawed. All are now stated to be electronic (just a serial number and amount.)

* The two gentlemen are allegedly Japanese, and there are various stories about who they really are - from notorious counterfeiters who have served hard time for previous offenses to Japanese finance officials. Most notably, there has been no public statement from Italy about these gentlemen's actual identities.

* It appears from all reports that these two were detained but not arrested, with some reports that they were not only released but took the allegedly-fake instruments with them, even though Italian law precludes both your release and return of your fake instruments if you are caught with fake securities or currency.

Well, it could all be "tin foil hat stuff" like reader drsmith131 pointed out...

Thanks Mr.Denninger for letting contradictions in the facts "bug" you. A healthy dose of skepticism especially in political discourse or "official" US government statements and announcements might keep more of our own money in our own pockets... if you get my Summers/Geithner Wall Street reform plan drift...



Original Post:

Several financial and economic blogs have picked up and analyzed this story. These are some smart financial people, generally capitalist free marketeers, not your conspiracy theorist wing-nut crowd.



Photo courtesy of Adnkronos:

http://www.adnkronos.com/...

Reposted by Joe Weisenthal at Clusterstock:

http://www.businessinsider.com/...

We start with Karl Denninger at "The Market Ticker":

http://market-ticker.denninger.net/...

Smuggling Or Counterfeit-Printing? Ok, this was rumored several days ago, but now I can find actual news reports - at least, outside the US... Those sound like Bearer Bonds - at least the Kennedy ones do. We no longer issue those (nor does pretty much anyone else) for obvious reasons - they're essentially money and can be had in VERY large size, making them great vehicles for various illegal enterprises. But folks: This is $134.5 billion dollars worth.

The Fed no longer issues bearer bonds? Sean Maher from "Dead Cats Bouncing" reports:

http://www.deadcatsbouncing.com/...

Who Was Smuggling $134bn in US Bonds to Switzerland? The presentation of huge sums in US bearer bonds isn't unprecedented in fact, even if it is in scale. In 2008, two bearer bonds to the value of $1bn were presented in Singapore, and upon authentification the receipt from the Federal Reserve was signed by Ben Bernanke himself.

So who would be smuggling $134 billion in US issued bearer bonds to sell them in Switzerland and why?

Sean Maher expands on it in the Global Post:

http://www.globalpost.com/...

It's not as crazy as it sounds. The Fed did actually issue bearer bonds up to the value of $500m each until the late 1960's (when electronic record keeping superseded them), and these look on initial examination like the genuine article.

So counterfeit or genuine Bernankes:

Mr. Maher:

If they are fakes, it would be the biggest such operation in history, and would almost certainly imply state involvement, with North Korea the prime suspect.

Mr. Denninger:

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.

Mr. Denninger:

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.

Mr. Denninger:

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...

Genuine Bernankes?

Mr. Maher:

If they are real, they could only have come from a handful of countries with sufficient dollar reserves to have accumulated such a huge sum, notably China and Japan.

Mr. Denninger:

How much is $130 billion in this context? About 1/5th or so of what Japan legitimately owns of US Treasury debt.

Mr. Derringer followed up today:

http://market-ticker.denninger.net/

Note: Since this is today's post you may have to follow up int future with the title "The Saga Of The Bearer Bonds." I will try and come back to update the link.

The Saga Of The Bearer Bonds 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.

Conclusion Mr. Denninger:

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... 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.

And why oh why would a nation want to dump US bonds quietly?

Mr. Maher:

The significance of this story is that it highlights the very topical importance of retaining investor faith in a fiat currency; if the supply of money is suddenly perceived to be vastly higher than believed, whether as a result of policy or widespread fraud, confidence can be badly shaken... an Asian country were genuinely but secretly attempting to dump dollar paper for other assets, the implications are very disturbing for international markets.

Very interesting indeed. Bernanke has personally signed 2 bearer bonds worth a total of $1 billion as recently as 2008. The US corporate media appears to be silent on a "possible" massive counterfeiting fraud that could implicate North Korea... think about the BS mileage CNN could get on that one.

For those that have been paying attention, the evidence of market manipulation on Wall Street is overwhelming in the last 6 months. Failures to deliver have moved from equity spikes to Treasury spikes. The Fed is now implicated in using a surrogate to manipulate equities and futures purchases, mostly in the last half hour of the trading day to flood the light volume market with buy orders. Those at the Fed and Treasury know the tight correlation between the DJIA, S&P 500 and consumer confidence due to the baby boomers love of their 401k values.

Intervening in the last 20 minutes, dumping up to $12 billion in buy orders to just push the Dow and S&P into positive territory, repeatedly and particularly on Friday so the News idiots repeat all weekend that the markets are up is a manipulation that correlates with the discredited "green shoots" propaganda on the economy coming out of Washington and Wall Street.

So if their exists manipulation in the markets by the Fed and Treasury, is the Fed's involvement with issuing debt outside of the normal channels to keep it under the money supply expansion radar not feasible? Perhaps one of the several reasons Bernanke and Geithner fear an audit of the Fed and full disclosure to Congress for their activities?