Friday, June 12, 2009

Japan Secretly Selling Smuggled $US bonds?

I need to be very clear before writing this post that it is highly speculative, if not fanciful. As such, I would caution readers to view the post as some wild speculation.

The cause of the speculation is an article on Bloomberg, as follows:
June 12 (Bloomberg) -- 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.

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.

I placed a comment against my last post on first reading the story, in which I speculated on what might be going on, and suggested the following:
If the bonds are genuine (unconfirmed), the big question is who might have such a large sum? The only logical answer is a nation state, and with the individuals being Japanese, that would suggest Japan.

The second question is why they are smuggling them?

I have been speculating on this subject and have come up with some wild scenarios. I would like to emphasise that these are 'wild'.

However, the best answer that I could find is that the Japanese government wants to dump US bonds on the quiet. As such, they sought to transfer them to Switzerland, where they could then sell them, and disguise the point of origin of the selling.

In doing so they would avoid spooking the markets by making a Japanese sell-off of US bonds visible. As a large holder of US debt, any significant sell-off would potentially commence a $US rout.

This might make sense, but why would the smugglers go via Italy?

This is all wild, wild speculation, and it is still unconfirmed that the bonds are genuine.

However, if the bonds are genuine, I can see no other logical explanation. In the (unlikely) event that such speculation were correct, it really would be the start of the end of the $US.
I had picked up the article about the smuggling in my regular trawl through the financial news. A short while after writing the comment, I found an article reporting on the G8 meeting.....which is located in Italy.

This means that senior Japanese financial officials are in Italy, and these are the very people who might wish to undertake the quiet dumping of bonds. I was unable to find out who was attending from Japan, but it is a certainty that it would include all the necessary key players necessary for this kind of undertaking.

Regarding the matter of whether the bonds are genuine, this from the Asia News:

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.

Please note that these size of securities are only used in state to state transactions. The problem then arises as to why any counterfeiter might forge such instruments? It is not like forging a $US 100 bill, where it might pass off in a shop. In this case, if you try to use this kind of forgery, then whoever accepts it is going to want to know 100% for certain that it is genuine. They will certainly want to know a lot about it, and no forgery is therefore likely to be of any value whatsoever. As such, why forge such an instrument?

In the meantime, the Japanese have suddenly started talking up the prospects for the $US:

June 12 (Bloomberg) -- Japanese Finance Minister Kaoru Yosano said his government is confident about the outlook for U.S. Treasuries, signaling the second-biggest foreign holder of the securities will keep buying them amid record sales.

“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.”

It could be argued that this public statement contradicts any secret selling of US bonds. However, if you are about to dump a large amount of US bonds into the market, the best way to cushion the impact might be to boost the value by suggesting that there is a strong buyer in the market. The fact that the alleged buyer is in fact a seller will not be known until much later. In the meantime, Japan gets brownie points from the US administration.

In all of this, it should be remembered that Japan is the world's second largest holder of US treasuries. Any public selling by Japan would therefore result in a $US crash, and would wipe out the value of much of the value of Japanese reserves. Back in January, I was discussing the $US dilemma for the major creditors of the US as follows:
The trouble is that, with so many countries holding these $US reserves, most of whom have their own economic problems, it is likely that everyone is having the same thoughts, and confronting similar problems. What you have is a situation in which there is something like a Mexican stand-off. As soon as one starts selling, then everybody must start selling. They are all, at the same time, terrified of selling, because in doing so, they destroy the value of what they are selling. It is a time bomb just waiting to go off.
Selling the bonds without appearing to sell them would be an excellent solution to the standoff. On the one hand you can sound positive, continue to make purchases, reassure the market, and meanwhile offload ever more of the dangerous (toxic) assets through the back door.

Normally, such massive amounts of assets would be impossible to move without regulators noticing, and without alarm bells going off. However, if it is the government and central bank acting, there is no reason why the alarm bells might not be switched off.

For the moment, let's assume that this wild speculation about the story is true. If it is the case that the men who have been arrested are acting in order to commence a sell of US bonds, it is quite likely that they will either be government finance officials, or members of the Naicho (Japanese intelligence service - reports to the prime minister). If it is the former, then a link can be made to the government but, if the latter, then it will be difficult to ever establish a connection.

In the meantime, how will the US and Japan handle the situation, if the bonds are real?

The important point is that it is not in the interest of either country to admit to the operation. For the US, if they point the finger at Japan, they will need to admit that one of the largest holders of bonds is dumping them, and this will cause a run on the $US. For the Japanese, their interest in not revealing what they have been up to is self-evident. If the bonds are genuine, it will need one or both of the governments to confirm that they are genuine. It is in the interests of both governments to deny that this is the case. The most likely story will be that it is a North Korean counterfeiting operation, as they are well known for this kind of activity.

Meanwhile, the Italians will be unable to prove the case one way or another. Without confirmation of the authenticity of the bonds from the US or Japan, how might they establish the truth one way or another? In addition, it is unlikely that the Italians would want to upset the US by pushing the matter.

In short, whether the bonds are genuine or not, I would be very surprised to see that this story goes much further.

The underlying story, if this wild speculation were to be true, is that the Japanese are dumping the $US. If this were the case, then the $US is finished, and we can expect to see it collapse in the very, very near future.

As I have said, this is all wild speculation. However, it does have a kind of painful logic. If the Japanese are, like the Chinese, increasingly dubious about holding $US reserves, then this would be a way of unloading the position whilst gaining the maximum value from the holdings. I have long argued on this post that $US bonds are largely worthless, the Chinese suspect that this may be the case, so why not the Japanese? As another example, Peter Schiff is discussing the absurdity of Japan having faith in the $US.

Once again, I can only emphasise that what I am writing is highly speculative. I have no evidence either way, but can see no other explanation of this rather extraordinary story. If anyone has a less fanciful explanation, then I will welcome comments. This is all very odd, and I do feel that my 'take' on it is quite questionable. It really is moving into the realms of James Bond movies....questions to answer, in particular are...; Is there any reason why anyone might want to forge the bonds? Who, and how might they pass them off? What mechanism might they use to sell the forgeries?

Over to you, the readers, for alternative considerations....

47 comments:

  1. As an additional note, the Schiff video I link to has Schiff pointing out that the Japanese are contemplating an exit strategy, and using the so called 'pump and dump' method. This is talking an asset up, whilst selling it on the quiet.....

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  2. Another question...what caused the Italian police to stop the two men? No answer as yet in any of the articles....

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  3. Update: The following article suggests that the bonds are forged, and that the police are asking the SEC for details. Apparently this will take a couple of days.

    http://www.bloomberg.com/apps/news?pid=20601101&sid=afJXAA1ahZyo

    But why would anyone forge such large denominations??? The more thought I give to this, the less it makes sense.....

    Why would it take a couple of days for the SEc to check? It is not like there are that many $US 500 million bonds that checking the records will take time??? With a potential crime of such magnitude....you would think that there might be some wishes to speed the resolution of the questions....

    It is all very, very odd....

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  4. If the billion-dollar bonds belonged to the Japanese government, wouldn't they have been brought to Switzerland in diplomatic pouches that could not be searched by border guards? To do otherwise would be incredibly reckless and irresponsible.

    Erasma

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  5. Cynicus,

    Excellent spot!

    I don't think a news source like Bloomberg would run a story like that unless it was 100% sure of its facts.

    Like you say though, it's probably not in anyone's interest for the story to come out - so it'll be fascinating to see which news wires pick it up.

    Very, very odd indeed!

    T.

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  6. A fair point Erasma. They undoubtedly could do this to get the bonds in Italy. I agree that this would be the logical approach.

    As such, potential flaw number one in the argument.

    However, it does depend on whether they could trust a diplomat with this job. It may be that, if they wanted to keep the whole thing within a close group, they could have opted for the secret service. Who would have guessed that they could get caught in this way? What are the chances of being searched crossing borders once you are within Europe? More speculation...

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  7. Perhaps they were taking the bonds across the border in order to buy the Roswell flying saucer or the loch ness monster. Frankly this sort of post belongs in the Fortean times.

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  8. Yet another update - the Korean connection emerges in one report on the story...

    "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. If this was another crazy North Korean forgery scheme, it gets close to a casus belli on top of the relentless provocation of the US in recent months. If, in the less likely but possible case that an Asian country were genuinely but secretly attempting to dump dollar paper for other assets, the implications are very disturbing for international markets."

    http://www.globalpost.com/webblog/commerce/who-was-smuggling-134bn-us-bonds-switzerland

    How long before the articles suggesting that it is all a plot by the CIA to start a war with North Korea? It is a gift for the imagination, which is why I have emphasised the speculative nature of the post.

    However, Spiegel, a leading German news source, has also picked up the story, and apparently there is considerable discussion in the Italian press.

    http://www.spiegel.de/international/zeitgeist/0,1518,630158,00.html

    It will be interesting to watch how this story moves in the next couple of days, as major news sources pick it up.

    I would hazard a guess that the story has a long way to run. Even were the bonds to be fake, there is a major story in there. If they are not fake, how will we know? If they are not fake, then the story is potentially huge...

    At the moment, most of the stories are not offering anything new. Feel free to link to any new information.

    Anonymous: There is a real story here. The facts of two men being arrested with the bonds is from reputable sources. It is hardly a story about UFO sightings, as there are real people, under real arrest being investigated for real holdings of either genuine or fake bonds.....

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  9. The game is surely up isn't it? Even if you 'pull a fast one' and exchange some worthess currency for a not-quite-so-worthless one, you ultimately reduce the value of the not-quite-so-worthless one, anyway. And the inevitable panic selling which is going to happen in the near future, hastened by your 'pump and dump', is going to make a valuation of any currency pointless.

    LEAP2020 has been saying that what will eventually kill the economy is the lack of a credible reserve currency. They liken it to the end of the Roman empire when the silver content of coins was reduced to almost nothing, and the resulting uncertainty as to its value simply prevented people from trading normally. LEAP2020 is calling for the establishment of a dedicated reserve currency.

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  10. Who would know if they are genuine? Is there a body independent enough of govt interference that could determine their veracity? It's in just about everybody's interest for them to be declared fake, apart from the Italian Govt who would stand to make a hefty windfall if they were real. And they wouldn't want to upset the US govt either.

    Maybe they are 'real' in that they were printed where ever such things are printed, but were smuggled out by corrupt staff.

    Who knows? I don't think we will ever know the truth here - there is too much at stake if it were some illicit govt scheme. It will be declared a counterfeit operation whatever the reality.

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  11. If bonds of this size are only used between nations, then whether real or fake, who would buy the bonds? Are there other nations who are willign to buy bonds 'on the side' for a discount? Or are there private organisations (crime groups for example) who have enough money to be in the market for dodgy bonds?

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  12. Mark

    Perhaps you could post on the subject of national currencies: why we have them, and what advantages they have over a single global currency.

    To my mind, the fact that people make a living from trading them is probably a good enough reason to get rid of them. What possible benefit does a currency trader bring to the world?

    And I suspect that any problems that can, apparently, be solved by maintaining independent currencies were probably caused by the existence of those independent currencies in the first place...

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  13. You appear to be turning into a 'conspiracy theorist' Cynicus.


    Next thing you'll be buying into the concept that the establishment media is mainly controlled by one group.

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  14. If Japanese government would be involved, they would use diplomatic mail to move bonds across borders.

    Japanese are extremely risk averse bunch. They just don't do these kind of cowboy stunts. If you know how Japanese diplomacy and culture works, imagining Japanese financial officers planning to risk $135 billion (and more importantly, their face) in some shady risky move is just hilarious. Japanese have demonstrated during last decade that they are willing to lose billions and trillions before losing their face.

    If NK is involved (quite possible), they, or someone they are selling these bonds, have found extremely gullible buyer, who don't want to bring experts from Treasury to confirm their authenticity.

    I suspect that this is just some con where some third grade country (possibly NK, who has agents with Japanese citizenships) are taking loans from some gullible billionaires and putting some fake bonds into warrant deposits in Switzerland.

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  15. If they are fake, someone either wishes to destabilise the US$ or intended to use them as a security for a loan that they would then disappear with.

    If they are real and declared real, the Italians will have a windfall and everyone will know someone is trying to dump dollars.

    If they are real and declared fake, their owner will have lost an awful lot of money and will know that their chance of further surreptitious dumping is much reduced. (And presumably the bonds would be locked ..er .. safely away by the Italian police as evidence in any future counterfeiting trial.)

    The only other possibility I can think of is that someone in a high position in Berlusconi's Italy has gone to a lot of trouble to plant totally false reports that have deceived your reputable sources - the likely effect of such reports being to destabilise the Mexican Stand-off and thus destabilise the dollar.

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  16. "Anonymous: There is a real story here. "
    Agreed, the story is real. However, to connect this to the Japanese government or anyone else, with theories of selling bonds on the side whilst talking up the dollar, is an extraordinary claim which requires extraordinary proof. Otherwise it represents conspiracy theory in its purest form; that of making extreme claims or speculations, with very little evidence to back them up.
    A quote from your blog:
    "I would hazard a guess that the story has a long way to run. Even were the bonds to be fake, there is a major story in there. If they are not fake, how will we know? If they are not fake, then the story is potentially huge..."
    That is one of the most non- commital, open-ended paragraphs that I have ever read, and the sentence "If they are not fake, how will we know?", could be taken straight off a UFO blog...
    Why not say; If they ARE fake how will we know that it is not a Japanese & U.S government cover up? After all, as these are government bonds, if the government says they are fake, then they ARE fake, because if the government disowns them, then they can never be cashed and are subsequently worthless. So how can you possibly prove that these "bonds" are real ? Do you really think that any Government would admit to selling bonds in such a manner, when all they have to say is that they were brilliant forgeries and they are in the clear. ? See the problem ?
    Sorry but all you have at the moment is a couple of blokes in custody and a load of paper which is possibly US dollar bonds or not.
    In other words, you have no more proof for your speculation than I do for mine (The "roswell, loch ness monster purchase" theory ). The only difference being that I don't expect anyone to take my theory seriously, backed up as it is with so little evidence...............
    You also say : "I would hazard a guess that the story has a long way to run". Perhaps as long as the one about the imminent collapse of the pound and the dollar ?
    Best regards, John C.

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  17. "Anonymous: There is a real story here. "
    Agreed, the story is real. However, to connect this to the Japanese government or anyone else, with theories of selling bonds on the side whilst talking up the dollar, is an extraordinary claim which requires extraordinary proof. Otherwise it represents conspiracy theory in its purest form; that of making extreme claims or speculations, with very little evidence to back them up.
    A quote from your blog:
    "I would hazard a guess that the story has a long way to run. Even were the bonds to be fake, there is a major story in there. If they are not fake, how will we know? If they are not fake, then the story is potentially huge..."
    That is one of the most non- commital, open-ended paragraphs that I have ever read, and the sentence "If they are not fake, how will we know?", could be taken straight off a UFO blog...
    Why not say; If they ARE fake how will we know that it is not a Japanese & U.S government cover up? After all, as these are government bonds, if the government says they are fake, then they ARE fake, because if the government disowns them, then they can never be cashed and are subsequently worthless. So how can you possibly prove that these "bonds" are real ? Do you really think that any Government would admit to selling bonds in such a manner, when all they have to say is that they were brilliant forgeries and they are in the clear. ? See the problem ?
    Sorry but all you have at the moment is a couple of blokes in custody and a load of paper which is possibly US dollar bonds or not.
    In other words, you have no more proof for your speculation than I do for mine (The "roswell, loch ness monster purchase" theory ). The only difference being that I don't expect anyone to take my theory seriously, backed up as it is with so little evidence...............
    You also say : "I would hazard a guess that the story has a long way to run". Perhaps as long as the one about the imminent collapse of the pound and the dollar ?
    Best regards, John C.

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  18. So who are the people who were stopped on the Swiss border? I have compiled some odds. These are subject to change as new facts emerge.

    Japanese Gov agents acting in a covert but officially sanctioned capacity (eg to secretly ditch US dollars?) (4/10)

    Japanese Gov agents acting (knowingly or otherwise) for corrupt faction within Japanese Gov (2/10)

    Japanese citizens acting as agents of foreign power in a political operation (eg a DPRK plot to destabilise dollar) (0.5/10).

    Japanese citizens acting as agents of foreign power in a financial operation (eg PRC trying to secretly ditch dollars) (1.5/10)

    Japanese citizens acting on behalf of a criminal gang, unconnected to any government (1/10)

    Innocent Japanese tourists caught up in a conspiracy(!), and all other explanations (1/10)

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  19. I suspect that this is just some con where some third grade country (possibly NK, who has agents with Japanese citizenships) are taking loans from some gullible billionaires and putting some fake bonds into warrant deposits in Switzerland.

    Indeed. Japan's motivations for a 'pump and dump' are self evident, but this story has too many loose ends for either the couriers or booty to be genuine. Japan's just not into cloak and dagger gambits like this, whereas North Korea's Dear Leader loves them.

    (Obligatory link to Team America's "So Ronery" (contains profanity))

    So I agree with Nick Nolan's theory of North Koreans on Japanese passports with fake treasury bills if I were a betting man. It won't be pounced on by the media because NK is always up to stuff like this.

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  20. What scares me is how everybody I speak to now seems utterly convinced the recession is 'ending'. Intelligent, informed people all seem to agree we've seen the bottom of it.

    Nobody recognises that it may be QE and other policies causing a brief upswing in a few areas, precipitating a new descent to come.

    In the same way, nobody is likely to believe Japan would be looking to sell dollars. After all, who'd want to sell the worlds most powerful currency just as the recession is beginning to turn? That'd be ... uh ... crazy.

    Something tells me that next year is going to make even this year seem tame.

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  21. Sorry I posted the same comment twice.Does this mean I'm guilty of quantitative posting ? John C.

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  22. Must be the two stupidest Yakuza ever.....

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  23. @Anonymous/John C.

    Give it a rest mate, Cynicus couldn't have made it any clearer that this was speculation and clearly urged caution.

    And if you want to be an ass about it:

    1. Unless you are suggesting that the two men arrested were acting independently of one another, then any theory as to their actions would be by definition a 'conspiracy theory'.

    2. CE didn't make any "extraordinary claim" - he clearly stated (more than once) this was speculation.

    3. Your "proof for speculation" is an oxymoron: one has "grounds for speculation" - if you have proof than you don't need to speculate.

    Given the facts (two Japanese citizens arrested) - and the context(same day as Japanese authorities make dramatic statement about faith in dollar, G8 meeting) there are plenty of grounds for speculation in this case.

    4. Your roswell/ufo analogy is irrelevant and tiresome.

    T.

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  24. Here is a picture of the infamous bonds:

    http://www.businessinsider.com/italy-seizes-a-ridiculous-135-billion-worth-of-smuggled-us-bonds-2009-6

    As the news trickles out on this one, the general view is that it is N.Korea/forged bonds.

    I think the interesting point in this story will be verification of the identity of the individuals involved....

    Still not many main stream media stories on this, or at least not in my latest trawl.

    As the Daily Kos says, 'you just can't make this stuff up'.. so it is a surprise the the media have not picked up on this.

    http://www.dailykos.com/storyonly/2009/6/13/742096/-Japan,Italy,and-U.S.,-134-Billion-in-US-Bonds-Smuggling-Case

    I would say that I like the idea of rich individuals going for a scam, but have trouble in believing that, with all their advisors on finance, that someone would not suggest that this was a scam. The kind of people with this kind of money have the resource to check the veracity of such claims. On the other hand, when it comes to greed, history shows that the most incredible scams can work....

    The popular idea that it is the North Koreans is plausible at first sight. However, they are experienced counterfeiters, and therefore I have to question why they would go for such large denominations. They have previously forged $US, and they presumably have the facility to mass produce. Smaller denominations of anything would be simpler to pass off.

    If this was North Korea's first foray into forgery, I might buy such an incompetent method. However, as experienced forgers...??

    If it was Japan, as some have pointed out, why not just send the money over directly by diplomatic courier? Why try to smuggle the bonds?

    I think, as things stand, we have two options.

    One is that the North Koreans are incompetent forgers. The other is that the Japanese are incompetent and took huge risks in their efforts to ditch $US bonds.

    I am not sure that either explanation is satisfactory.

    I guess we will have to wait and see, and identify whether any new information arises. It is certainly a fascinating story, however it unfolds....

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  25. Reply to Aristotlethegeek on the Gold Standard


    (1)You note:
    But there is a limit to such inflation, unlike fiat money. I don't know of any case where the pure gold standard has resulted in hyperinflation.

    Commodity standards have resulted in very high inflation: take the "price revolution" of the
    15th to 17th centuries, caused in part by massive silver mining and the influx of New World gold into Europe.

    http://en.wikipedia.org/wiki/Price_revolution

    (2)

    Coercion is making me do something against my will .... On a free market, "money" is "free." People voluntarily choose some commodity, generally gold or silver, to serve as a medium of exchange. They should be aware of the possibility of a sudden surge in the supply of gold, or to take an outlandish example, that of someone having discovered the philosopher's stone and churning out gold in huge quantities.

    If I hold a great deal of gold, and vehemently object to seeing its value severely reduced by the mining of large amounts of gold brought onto the market, I am clearly being subjected to a form of theft. My money's value has been reduced. That is a form of non-voluntary theft that will still happen under a commodity standard.

    Furthermore, this means that people are not even properly "protected" from the possibility of inflation at all under a gold standard. Yet this is the chief defence one hears again and again about the gold standard.

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  26. I'm having trouble believing that someone would forge financial instruments with such a ridiculously high face value that it would be impossible to pass them off to anyone. These things are only good for one thing, and that is for dealings between sovereign states.

    Just for grins and giggles, let's assume that the bonds are real. That means that somewhere in the archives of the Fed and/or Treasury are records of these bonds -- probably the Fed. Congressman Ron Paul is pushing a bill in the House to audit the Fed, and his bill just passed the 50% mark for co-sponsors.

    My first thought was that even if the bonds are real and Japan really is dumping, the Fed/Treasury would declare them to be forgeries, get Italy to discretely return them, and hush the affair up. But if there is the possibility of a Congressionally mandated audit looming, then the Fed/Treasury would have to destroy the evidence that these bonds ever existed, and destruction of evidence opens up a whole can of worms. Let's see if Congress takes a bite at this story.

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  27. If they are so good that they are indistinguishable from the real thing, and if they are only used in nation-state transactions, but they are forgeries, where would they have gotten and original to copy? What would the motivation of the provider be? They would be diluting their own holdings by providing an original to copy. Where would the correct paper with all of it's special fibers, correctly compounded ink, and other obscure anti-counterfeiting measures come from? It would be necessary to disassemble one of these billion dollar documents just to begin to learn what all of these measures would be, and there would be many. A nearly perfect copy of this kind of document would imply, necessarily, a lot of things in terms of materials and expertise that only a few in the world have. It's easier to believe they're real, and far more astounding and terrifying in its implications to believe they're forged

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  28. It seems that there is another article that almost exactly replicates the argument in this article.

    http://market-ticker.denninger.net/archives/1119-The-Saga-Of-The-Bearer-Bonds.html

    I am sure that they are coming to the same questions conclusions on an independent basis, but that suggests that I am not moving into complete fantasy.......

    Still, more information is necessary before any conclusions might be drawn....

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  29. Additional Proof that the Financial Crisis could have been prevented by proper Financial Regulation:

    There's no question that [the] zeal for deregulation set Britain up for a fall. Consider the counter example of Canada — a mostly English-speaking country, every bit as much in the American cultural orbit as Britain, but one where Reagan/Thatcher-type financial deregulation never took hold. Sure enough, Canadian banks have been a pillar of stability in the crisis.

    Paul Krugman, Deregulation set us all up for a big fall, June 09 2009


    I have yet to see a refutation of the fact that Canada's regulated fianncial sector saved it from a crisis like that in the US and the UK.

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  30. Is it a possibility the banks are passing these bonds around - to each have on hand during an audit to look like they have more assets than they really do?

    Who would bother to check if 2 banks in 2 different countries have the same US treasury on their books?

    Cynicus, what's your take on this?

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  31. @Lord Keynes

    but that is that same Paul Krugman who said this today:

    UK's economy is 'best in Europe'

    I'm having a hard time keeping up with these people!

    T.

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  32. Not related to this issue, but an interesting article for Cynicus and his readers: http://globalresearch.ca/index.php?context=va&aid=13969

    "De-dollarisation: The dismantling of the American financial empire"

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  33. This from ABC news on 20 February:

    "Officials said today they have
    seized more than $2 trillion in counterfeit U.S. Federal Reserve
    bonds and arrested one suspect in the southern Philippines.

    Police also showed reporters stacks of counterfeit Japanese yen and Argentine peso notes in various denominations, a few fake one-dollar bills and some other currencies seized Saturday.

    Police and staff from the U.S. Embassy arrested a Filipino man in the southern city of Cagayan de Oro with the falsified currencies and U.S. bonds along with German and Argentine bonds — a total counterfeit haul of $2,157,044,400,000.

    ‘Very Good Quality’

    The fakes were of "very good quality" but some of the bond denominations do not exist, said David Popp, a U.S. Treasury Department representative.

    The U.S. bonds, totaling more $2 trillion, were in denominations ranging from tens of thousands of dollars to $500 million. The bonds of other countries were in denominations as small as $30."

    http://abcnews.go.com/International/story?id=81469&page=1

    It seems that good old fashioned idiocy is at issue here. It seems that these two characters actually thought that they could pass off the fake bonds.

    End of excitement. If there is a good simple explanation, then I will go with that. This appears to explain it. Idiocy...

    ReplyDelete
  34. From the article Don Keyes linked to:

    "These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency."

    One thing I don't understand is the way "unemployment" is seen as a bad thing even if China is being paid what it knows to be worthless paper for its efforts. If we really are to believe what we're being told about the dollar, China is just using up energy and materials simpy to keep people working. They'd be better off forgetting about the US and directing most of their manufacturing to the home market. They could all be living like kings in no time. Or can someone suggest a reason why they wouldn't?

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  35. Am I missing something in the explanation for the smuggled US dollar bonds? I thought the original story said that it was Japanese citizens who had been arrested in Italy, not someone from the Philippines..?

    ReplyDelete
  36. Mises on the Idea of a Fixed Money Supply

    Ludwig von Mises supposedly called for a fixed money supply:

    http://mises.org/Community/forums/t/4284.aspx

    ReplyDelete
  37. Any updates on this story?

    ReplyDelete
  38. I just did an internal search for the story on CNN, MSNBC, NYtimes and got zero hits. It seems it's not being covered by the mainstream.

    ReplyDelete
  39. Dear Italian Government, I am a bond authenticity expert. Please send two of the original bonds for my examination. One bond will be sacrificed due to the rigorous testing process and the other will be flown to Switzerland up my shoot to be immediately traded for gold, silver or blocks of cheese.

    Dear Japanese Smugglers, You have faired miselably in callying out your countly's mission. Prease leport back to the homerand immediatery for hali cali celemony in youl honol.

    ReplyDelete
  40. Since my last comment, I have posted and added a note that effectively add up to 'case closed'. However, the lack of news coverage on this story is a bit of a puzzle. The most recent article on the subject that I could find, on Seeking Alpha, expresses the same puzzlement.

    http://seekingalpha.com/article/143462-strange-inconsistencies-in-the-134-5-billion-bearer-bond-mystery

    As such, I will keep an occasional eye on the story, and see if anything new turns up. This story must have an ending....the question is what ending? The lack of media interest on this is a genuine puzzle.

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  41. The Times has now piced up the story, but nothing new as yet.

    http://www.timesonline.co.uk/tol/news/world/europe/article6507161.ece

    The article is a repetition of other articles, with the same lack of information on the smugglers and no idea of whether the bonds are genuine.

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  42. Good post.
    What I find truly stunning is that the whole thing got reported in the first place. I mean that's a huge national security issue.
    You can expect a few heads to fall in the Italian customs...

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  43. Really excellent blog on a very murky business.

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  44. This story reminds me of why China is pushing for a world currency and not the US dollar.

    That China is one of the biggest holder of gold reserves is interesting.

    The US dollar since 1971 has been based on a "promise to pay" and when people walked away from mortgages that promise became worthless.

    That the bonds have not been authenticated speaks volumes of a cover up.

    With that amount of money, establishing the legitimacy of the bonds should have taken less time then has passed.

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  45. A fascinating article has appeared on Bloomberg as follows:

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a62_boqkurbI

    The author is unaware of the fake bonds from the Philippines, and questions what on earth is going on, including questioning why it is taking so long to get answers.

    At this stage, the delay is starting to make me wonder too....

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  46. I'm afraid you've missed the simplest explanation, and it makes your speculation look a little wild.

    I think it's very likely that these bonds aren't intended to be passed for their face value, but are used in a variation on an old scam as props. Gullible investors are persuaded to put up money that is for some reason needed to turn the bonds into cash.

    One story in use is that the bonds are taken by Andean tribesmen from a US government aircraft that crashed whilst secretly taking money to fund an ally during the Second World War.

    You get the idea. Hell, you probably get the emails from people trying the same scam without props.

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  47. I just hope to have understood this the way it was meant
    http://www.fintel.us/customers/PrivatelyHeldBusinesses.html

    ReplyDelete

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