$135 billion in US bonds seized in Italy -- smuggling or counterfeit?

[Winehole23]

Smuggling Or Counterfeit-Printing? (http://market-ticker.org/archives/1114-Smuggling-Or-Counterfeit-Printing.html)

Ok, this was rumored several days ago, but now I can find actual news reports - at least, outside the US (http://www.asianews.it/index.php?l=en&art=15456&size=A):

Milan (AsiaNews) – 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.
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.


If they're real, what government (the only entity that would have such a cache) is trying to unload them?


If they're fake, this is arguably the biggest counterfeiting operation ever, by a factor of many times. I've seen news about various counterfeiting operations over the years that have made me chuckle, but this one, if that's what it is, is absolutely jaw-dropping.


The cute part of this is that if the certificates are real Italy just got a hell of a bonanza - their money laundering laws provide for a statutory 40% penalty for failure to declare instruments and cash in excess of $10,000 Euros, which means they'd garner a close-to-$40 billion dollar windfall.
That ought to help their budget problems!


Notice, by the way, that the US Media has totally ignored this story - even though the securities in question are allegedly US instruments.


Gee, I wonder why? Might the authorities know they're real and be just a wee bit nervous that disclosure of a sovereign attempting to covertly dump nearly $140 billion in debt could cause a wee bit of panic, given that we're running nearly $200 billion a month in deficits?


Inquiring minds want to know what's really going on here.

[FaithInOne]

Just someone from the FED taking a vacation.

[Winehole23]

Just someone from the FED taking a vacation.



Milan (AsiaNews) – 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.

[Winehole23]

Italian anti-mafia prosecutors said they seized a record $6 trillion of allegedly fake U.S. Treasury bonds, an amount that’s almost half of the U.S.’s public debt. (http://www.bloomberg.com/quote/PUBLDEBT:IND)

(http://www.bloomberg.com/quote/PUBLDEBT:IND) The bonds were found hidden in makeshift compartments of three safety deposit boxes in Zurich, the prosecutors from the southern city of Potenza said in an e-mailed statement. The Italian authorities arrested eight people in connection with the probe, dubbed “Operation Vulcanica,” the prosecutors said.

The U.S. embassy in Rome (http://topics.bloomberg.com/rome/) has examined the securities dated 1934, which had a nominal value of $1 billion apiece, they said in the statement. Officials for the embassy didn’t have an immediate comment.

The financial fraud uncovered by the Italian prosecutors in Potenza includes two checks issued through HSBC Holdings Plc (HSBA) (http://www.bloomberg.com/quote/HSBA:LN) in London (http://topics.bloomberg.com/london/) for 205,000 pounds ($325,000), checks that weren’t backed by available funds, the prosecutors said. As part of the probe, fake bonds for $2 billion were also seized in Rome. The individuals involved were planning to buy plutonium from Nigerian sources, according to phone conversations monitored by the police. http://www.bloomberg.com/news/2012-02-17/italy-police-seize-6-trillion-of-fake-u-s-treasury-bonds-in-switzerland.html

[EVAY]

In the accompanying story, doesn't it indicate that there were other counterfeit bonds stopped in several other years? It seems that the Italian media is treating it as a counterfeiting or money-laundering issue, rather than a sovereign nation trying to dump U.S. bonds. No?

[Winehole23]

In the accompanying story, doesn't it indicate that there were other counterfeit bonds stopped in several other years? As in post #1 of this thread. Yes.

It seems that the Italian media is treating it as a counterfeiting or money-laundering issue, rather than a sovereign nation trying to dump U.S. bonds. No?It's the mafia's fault.

[EVAY]

Good grief, WH, I'm not suggesting that it is the mafia's fault. I haven't the first clue who is behind this.

It just seemed to me from the reading that inferring sovereign debt dumping on the basis of this article, as written, might be a bit of a stretch.

[Winehole23]

I have no idea what to think of this either. My attempt to lighten the mood apparently misfired, as it often does...

[Winehole23]

(it probably wasn't clear, but the blued was meant to clown Italian prosecutors, not you)

[Winehole23]

US embassy says "fake," Italian press says "allegedly fake." Don't know what to think about that either.

[TeyshaBlue]

I dont understand how you could hope to waltz into Switzerland and convert these to cash. Surely they are ledgered somewhere to someone.

[TDMVPDPOY]

lol italy

[Winehole23]

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=81470&page=1#.T2THC_U098E

[GSH]

There was a report just like this maybe 18 months ago, and another right after the last Presidential election. Same lack of coverage. I later read that the paper was fake, and that the reports themselves were greatly exaggerated. That's possible. But there were a couple of other potential scenarios that are extremely disturbing, especially at that time. The ABC story indicates that all of these were fake. I would sleep better believing that, so I probably will.

[Winehole23]

nighty nite, then

[Winehole23]

disclosure: I have no settled opinion on the cluster, but it's a noticeable cluster

[GSH]

There were insinuations that it was a nation trying to quietly dump debt. There were also insinuatinos that they were fake, but that there was still a government behind it. (De-stabilizing our goverment economically is the only reason I could think of for that.)

After dredging up what I could on the first two, there were things about the stories that made me wonder if the whole damn thing was fabricated, sort of like an urban legend. I also found that it would be VERY hard to move one of the extremely large bonds if you were not the representative of a government and/or selling to the representative of a government. And that the actual transfer of funds for that kind of sale attracts a lot of attention and questions, no matter what they show in the movies. The point being that anyone good enough to produce counterfeits of that quality would likely know that they couldn't sell them in the hotel bar.

I spent some time on it, and that's all I came up with that was worthwhile. I'm really tempted to believe that they caught someone with some illegal paper, but that some local law enforcement vastly overstated the amounts. It makes them look good, and it makes the rest of the story a bit more logical. FWIW

[Winehole23]

Would you mind sharing what you dredged up? Having your opinion about your own sources is nice, but it's no substitute for links.

[RandomGuy]

There were insinuations that it was a nation trying to quietly dump debt. There were also insinuatinos that they were fake, but that there was still a government behind it. (De-stabilizing our goverment economically is the only reason I could think of for that.)

After dredging up what I could on the first two, there were things about the stories that made me wonder if the whole damn thing was fabricated, sort of like an urban legend. I also found that it would be VERY hard to move one of the extremely large bonds if you were not the representative of a government and/or selling to the representative of a government. And that the actual transfer of funds for that kind of sale attracts a lot of attention and questions, no matter what they show in the movies. The point being that anyone good enough to produce counterfeits of that quality would likely know that they couldn't sell them in the hotel bar.

I spent some time on it, and that's all I came up with that was worthwhile. I'm really tempted to believe that they caught someone with some illegal paper, but that some local law enforcement vastly overstated the amounts. It makes them look good, and it makes the rest of the story a bit more logical. FWIW

Bonds denominated in $500M do not get "lost". US treasuries tend to be sold in VERY controlled conditions, and resold just as carefully.

The bonds in question are almost undoubtedly counterfeit. Physical notes are just not the way these things work anymore.

I would also note that most US Treasuries are sold with horizons of 30 years.

A bond from 1934 would have matured before I was born, in all liklihood. Not sure about the maturity of debt that far back, but I don't see any reason to think that it was so different as to have a maturity date more than 70 years in the future. Such an instrument would be VERY hard to market/valuate.

[RG has some professional experience in such things]

[RandomGuy]

There were insinuations that it was a nation trying to quietly dump debt. There were also insinuatinos that they were fake, but that there was still a government behind it. [ read: North Korea--RG ] (De-stabilizing our goverment economically is the only reason I could think of for that.)

After dredging up what I could on the first two, there were things about the stories that made me wonder if the whole damn thing was fabricated, sort of like an urban legend. I also found that it would be VERY hard to move one of the extremely large bonds if you were not the representative of a government and/or selling to the representative of a government. And that the actual transfer of funds for that kind of sale attracts a lot of attention and questions, no matter what they show in the movies. The point being that anyone good enough to produce counterfeits of that quality would likely know that they couldn't sell them in the hotel bar.

I spent some time on it, and that's all I came up with that was worthwhile. I'm really tempted to believe that they caught someone with some illegal paper, but that some local law enforcement vastly overstated the amounts. It makes them look good, and it makes the rest of the story a bit more logical. FWIW

I would pretty much agree, based on what I could find in 2009, when it originally broke.

My guess is that it was a scammer hoping to sell the bonds for pennies on the face value to a sucker hoping they would be real. Oldest trick in the book.

[Winehole23]

what did you find in 2009 and where did you look, if you don't mind my asking

[RandomGuy]

what did you find in 2009 and where did you look, if you don't mind my asking

I honestly don't remember. Much of what was available was based on the intitial reports, and there wasn't much else.

If the bonds were anywhere near legit, then they could be traced back to the owners.

Legit bonds have coupon interest payments that have to go SOMEWHERE.

I suppose I could re-do some of it as a follow up.

[Winehole23]

no need, really. thanks just the same.

[GSH]

Would you mind sharing what you dredged up? Having your opinion about your own sources is nice, but it's no substitute for links.

I don't have links.

Look, I'll admit that I was worried about the possibility of some country trying to quietly dump a bunch of our debt, even though it was probably just fear-mongering. I couldn't find any good sources of info, so I asked a bond trader at the money management firm we use. I called a friend from college who has a handfull of Series-whatever licenses. There was no way I could find to verify the actual news stories, but I at least wanted to try and understand how things work. I really didn't have any experience with billion-dollar bonds, if you know what I mean.

I offered the little bit I was able to learn, take it or leave it. Basically it was along the lines of what RandomGuy said. Legitimate sellers just don't go around cold-calling, or carrying the actual paper in their briefcase. But if there really is/was something big and sinister going on, there likely wouldn't be any trustworthy sources with links explaining it.

You know, the funny thing is, I probably don't trust governments, politicians, or Wall Street types any more than you do. I disagree about some of the solutions, but I'm not blind. And I'm dead serious about all the polarizing rhetoric being the biggest thing protecting the bad guys.

[RandomGuy]

...I'm dead serious about all the polarizing rhetoric being the biggest thing protecting the bad guys.

Only idiots believe that.




That is so obviously sarcasm if anyone needed it blue to figure it out... that person is an idiot. Yeah, I went there. WHOOT.

HA!

[GSH]

Only idiots believe that.




That is so obviously sarcasm if anyone needed it blue to figure it out... that person is an idiot. Yeah, I went there. WHOOT.

HA!



You made me laugh.


Sometimes things happen that give you a little bit of hope. :D

[Winehole23]

I don't have links.

Look, I'll admit that I was worried about the possibility of some country trying to quietly dump a bunch of our debt, even though it was probably just fear-mongering. I couldn't find any good sources of info, so I asked a bond trader at the money management firm we use. I called a friend from college who has a handfull of Series-whatever licenses. There was no way I could find to verify the actual news stories, but I at least wanted to try and understand how things work. I really didn't have any experience with billion-dollar bonds, if you know what I mean.

I offered the little bit I was able to learn, take it or leave it. Basically it was along the lines of what RandomGuy said. Legitimate sellers just don't go around cold-calling, or carrying the actual paper in their briefcase. But if there really is/was something big and sinister going on, there likely wouldn't be any trustworthy sources with links explaining it.I appreciate the reply. Thanks for the background, sketchy though it is.

And I'm dead serious about all the polarizing rhetoric being the biggest thing protecting the bad guys.How so?

[GSH]

I appreciate the reply. Thanks for the background, sketchy though it is.



How so?



I wrote three different long responses to that question. I looked over each one and said, "That part's just gonna piss him off." I'm really not in the mood to fight. Maybe I'll take a shot at it tomorrow.

Let me say this much. I can't line up with the Occupy people - but I would still like to see a (figurative) flame-thrower taken to a lot of the bullshit in the financial markets. I don't buy the extreme views of global warming - but that doesn't mean that I don't see the need for us to develop and use alternative sources of energy. (Sorry about the triple negative.) I don't think we can keep leaving our borders wide open, and allow an average of 1,500 people per day (for 20 years) - but our best friends in SA swam across the border, and I stood godfather to their kids (actually, padrino).

People who disagree with us aren't automatically monsters, or bigots, or ignorant. And I'm guilty of getting sucked into that version of things, too. And while people are out pissing on each other, the ones who are really doing the most damage get to keep doing what they do.

There. That's my fourth re-write. And it probably got long enough to piss you off about something, too. But I swear I wasn't trying.

[Winehole23]

what part of that is supposed to piss me off?

[Winehole23]

People who disagree with us aren't automatically monsters, or bigots, or ignorant. And I'm guilty of getting sucked into that version of things, too. And while people are out pissing on each other, the ones who are really doing the most damage get to keep doing what they do."ideological mystification"