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| Suitcase With $134 Billion Puts Dollar on Edge: William Pesek |
| 2009-06-18 |
| It's a plot better suited for a John Le Carre novel. Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear. Are these would-be smugglers agents of Kim Jong Il stashing North Korea's cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit? The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale. The trillions of dollars of debt the U.S. will issue in the next couple of years needs buyers. Attracting them will require making sure that existing ones aren't losing faith in the U.S.'s ability to control the dollar. The dollar is, for better or worse, the core of our world economy and it's best to keep it stable. News that's more fitting for international spy novels than the financial pages won't help that effort. It is incumbent upon the U.S. Treasury to get to the bottom of this tale and keep markets informed. Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan's Gobi Desert or the famed Temples of Angkor. Bernard Madoff who? These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border. This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that's life. Let's assume for a moment that these U.S. bonds are real. That would make a mockery of Japanese Finance Minister Kaoru Yosano's "absolutely unshakable" confidence in the credibility of the U.S. dollar. Yosano would have some explaining to do about Japan's $686 billion of U.S. debt if more of these suitcase capers come to light. Counterfeit $100 bills are one thing; two guys with undeclared bonds including 249 certificates worth $500 million and 10 "Kennedy bonds" of $1 billion each is quite another. The bust could be a boon for Italy. If the securities are found to be genuine, the smugglers could be fined 40 percent of the total value for attempting to take them out of the country. Not a bad payday for a government grappling with a widening budget deficit and rebuilding the town of L'Aquila, which was destroyed by an earthquake in April. It would be terrible news for the White House. Other than the U.S., China or Japan, no other nation could theoretically move those amounts. In the absence of clear explanations coming from the Treasury, conspiracy theories are filling the void. On his blog, the Market Ticker, Karl Denninger wonders if the 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." Adds Denninger: "Let's hope we get those answers, and this isn't one of those 'funny things' that just disappears into the night." This is still a story with far more questions than answers. It's odd, though, that it's not garnering more media attention. Interest is likely to grow. The last thing Geithner and Federal Reserve Chairman Ben Bernanke need right now is tens of billions more of U.S. bonds -- or even high-quality fake ones -- suddenly popping up around the globe. |
| Posted by:Besoeker |
| #6 "Blest paper credit! Last and best supply! That lends corruption lighter wings to fly! Gold imp'd by thee, can compass hardest things, Can pocket States, can fetch and carry Kings, A single leaf shall waft an Army o'er, Or ship off Senates to a distant Shore, A leaf, like Sibyl's, scatter to and fro Our fates and fortunes, as the wind shall blow: Pregnant with thousands flits the scrap unseen, And silent sells a King or buys a Queen. Alexander Pope |
| Posted by: Grunter 2009-06-18 17:24 |
| #5 It's just an Asian scam with fake bonds that bear issue dates of the 1930s. Has happened before. Any assumptions that these papers could be real are simply ridiculous. |
| Posted by: European Conservative 2009-06-18 14:53 |
| #4 Any one seen |
| Posted by: Procopius2k 2009-06-18 13:10 |
| #3 We'd more likely learn who shot Kennedy than the real story behind these bonds. |
| Posted by: Iblis 2009-06-18 12:46 |
| #2 Wow! That's almost as much money as General Motors burned through in the last six months! |
| Posted by: Mike 2009-06-18 11:57 |
| #1 Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. If?... |
| Posted by: mojo 2009-06-18 11:16 |