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James Quinn is a senior director of strategic planning for a major university. James has held financial positions with a retailer, homebuilder and university in his 25-year career. Those positions included treasurer, controller, and head of strategic planning. He is married with three boys and... More
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    This story still smells. OK, if they are fake why were the two men released. Who are they? What are their names? Let's hear their side of the story. Just because an official from our Treasury Dept said they are fake, we're going to believe him. Paulson lied to us for months, day after day. It isn't a crime to be carrying fake US Treasury bonds across international borders? There is a coverup going on here. Maybe the Kennedy Bonds were fake so that if they got caught, they would have an out. More questions need to be answered. Too many questions remain to let this just go away. Where is the mainstream media?


    U.S. says $134B bonds seized in Italy are 'clearly fake'

    18 June 2009 @ 05:14 pm ET

    A spokesman from the US bureau of the Public Debt said Wednesday that the $134 billion of U.S. bonds seized by Italy's financial police are “clearly fakes,” all through no official word has been issued from Italy.


    Two weeks ago, according to the Italian authorities, two Japanese men were caught at the airport with the seized bonds hidden in a briefcase. The notes included 249 securities worth $500 million each, and 10 additional bonds with a value of more than $1 billion. The seizure also included large amount of 'Kennedy bonds'.

    "They are clearly fakes," said Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt in Washington.

    "That's beyond the fact that the face value is far beyond what's out there," he said. “No such 'Kennedy bonds' exist.”

    According to U.S. Treasury records, it shows an estimated $105 billion in bearer bonds have yet to be surrendered, and most matured more than five years ago, he said, noting that the US Treasury stopped issuing bearer bonds in 1982.

    Italy’s Guardia di Finanz, a highly specialized financial police agency, also expressed doubts about their authenticity, especially in the 'Kennedy bonds', but noted the others were so well made that it was hard to tell them apart from real ones.

    The Japanese nationals who were caught bringing in the bonds have been released as they "broke no laws", according to the Mainichi Shimbum, which sent a reporter to the Italian town of Chiasso where the men were arrested.

    Jun 19 9:01 AM | Link | 2 Comments

    Why is the apprehension of two Japanese men with $134.5 billion of U.S. Treasury bonds hidden in their suitcases not on the Nightly News? This is a huge story and could indicate a massive coverup by the U.S. and Japanese governments. Why isn't the Secretary of the Treasury being interviewed? Why is ABC handing over their network to the Obama propaganda machine when possibly the biggest financial fraud story in history is right under their noses. Only Karl Deninger is on top of this story. Read the almost unbelievable facts below and judge whether the whole truth will be allowed to be told. I'm sure 60 Minutes and their 90 year old correspondents are all over it, unless they have an hour planned for Michelle Obama's fashion sense and progress on the vegetable garden.



    Smuggling Or Counterfeit-Printing?

    Ok, this was rumored several days ago, but now I can find actual news reports - at least, outside the US:

    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.

    Posted by Karl Denninger in Editorial at 15:12
    The Saga Of The Bearer Bonds

    It just gets more and more odd after my original report, with the latest coming from a German newspaper (translation courtesy of Google):

    Hit for the Zöllner: The contraband securities valued at 134 billion U.S. dollars are apparently real. Die italienische Finanzpolizei hatte zwei Japaner ertappt, die im doppelten Boden eines Koffers milliardenschwere Anleihen in die Schweiz schaffen wollten. The Italian financial police had two Japanese caught in the false bottom suitcase billion-dollar bonds in Switzerland wanted to create. Von dem Fund profitiert das hochverschuldete Italien.

    Note that this has received very little coverage in the so-called "mainstream US media" - but it is everywhere in Europe and Asia.

    Japan, for its part, oddly said the following as soon as this story started to hit the press:

    “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.”

    Uh huh.  And the Japanese said in December of 1941 that all was well too.  Anyone remember what happened on the morning of the 7th?

    Let's apply a little "Occam's Razor" to this entire story.

    You're not going to walk into a bank with $130 billion in bearer bonds and cash them.  Nor are you going to sell a bond with a $500 million face value to someone without them authenticating it.  They will be authenticated before you get one dime out of them - no matter who you think you're going to "give" them to. 

    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.

    Next, unless someone knew you were smuggling them, why would you be subject to that sort of search?  What made the people involved "interesting" to the authorities?  This doesn't sound like a random stop to me; how many people are carrying $130 billion in bearer bonds at any given point in time?  No, someone was tipped off that this was happening.  Now why would you bother to stop them here, prior to their attempted delivery of such instruments, if they were fake? 

    Think about this: You know someone is smuggling a load of drugs.  You can either bust them immediately or you can tail them and bust them when they show up at the "meet" to exchange the dope for the money.  If you do the former the guys with the money get away, having committed no crime.  But if you do the latter, you get to bust both the courier and the purchaser - two times the effectiveness for the price of one, and double the seizure value, since you get to seize the cash too!

    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.

    Ok, who has $130 billion in bearer bonds?  Remember, bearer instruments haven't been issued by the Treasury since 1982, when they became illegal to issue, at least to US institutions and residents (there was an exception carved out for Treasury instruments issued to non-US residents in 1985 - a time of high deficits)  The answer to that question: it is rather unlikely that there remains $130 billion of legitimate US Bearer issuance outstanding anywhere - to anyone.

    Mr. Holmes would be initially puzzled by such a caper.  On the one hand we have the impossibility of the bonds being real, because there simply isn't $130 billion of issues remaining outstanding.  On the other hand we have the impossibility of negotiating a fake $500 million bearer instrument, making the exercise of counterfeiting one expensive and futile.

    This leaves us with more questions than answers at this point.  

    Or does it?

    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...

    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:

    Who could have possibly been complicit in such a scheme?  I can come up with only two nations (and only nations could be involved due to size): The Japanese and Chinese.  Since the two individuals who were arrested were reported to be Japanese nationals......

    There are tremendous implications in an event like this, again, assuming the bonds are real.

    The owner is going to want them back, of course.  But Italy is going to keep a third as their statutory penalty for non-declaration on the border.  Oops.  That's great for Italy, but it blows bananas for the actual owner.

    Of course Italy (or the US!) could declare them "fake" and as a consequence simply burn them.  If they are in fact real, that's an even bigger problem.  See, Bearer Bonds are issued without registration - they are as anonymous as a $100 bill in terms of who owns them.  That's one of their "features", and why they were often used for various clandestine money operations.  So if they are real and are destroyed, the owner is out of luck - their money is gone just as it is if you burn a $100 bill in an ashtray.

    How much is $130 billion in this context?  About 1/5th or so of what Japan legitimately owns of US Treasury debt.  How would you like to take an instantaneous (and permanent!) 20% haircut on your securities?  That's what I thought.

    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.

    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.

    Let's hope we get those answers, and this isn't one of those "funny things" that just disappears into the night.

    Jun 17 4:44 PM | Link | 7 Comments

    The Russians are giving their unemployed lumber so they can build their own houses. Everyone knows that idle hands will do the work of the devil. This is a brilliant plan and has currently been taken under consideration by the Obama administration. They don't want to be accused of stealing a great idea from our enemy Russia, so they've adapted it to the U.S. Among the ideas being considered:

    • Giving the 14.5 million unemployed sledge hammers, backhoes, and wrecking balls so they can knock down the 2 million vacant houses in the U.S. This will eliminate the huge supply of houses for sale and reinvigorate the entire economy.
    • Giving the millions of unemployed in our urban areas a free Cadillac Escalade (oh yeah - GMAC already did that) so GM, I mean the UAW, can get back on its feet.
    • All 14.5 million unemployed are given a piece of colored sunshine. They then can work together putting the colors together and creating an enormous rainbow that leads to a pot of gold. Everyone lives happily ever after. 

    The Obama economic team is looking for more suggestions. Paul Krugman will be the judge. First prize for the best idea will be having the Dept of Transportation repave your driveway at a cost of only $14 million to the taxpayer - this includes a little overhead.


    Russia, a Lumbering Giant, Asks: Care for Some Cut-Rate Logs?To Aid the Jobless, One Place Makes Timber as Cheap as Beer; Mr. Boiko Gets Out a Saw

    SOSNOVKA, Russia -- Anatoly Boiko stands in front of a pile of neatly sawn planks. The wood, he says, is one of the oddest government handouts he's ever received.

    To help the unemployed, Vologda, the cash-strapped region where Mr. Boiko lives, is giving residents something it has in abundance: lumber. The idea is that they'll build houses with it.

    It's an effort to tap a home-ownership aspiration shared by millions of Russians still stuck in run-down Soviet-era apartments. "My dream is to be able to sit beneath my own apple trees, on my own property, in old age," Mr. Boiko says.

     A few feet away, his half-built house is rising. The interior is empty, and the front door is brand new, yet already jams. Squat and akin to a ski chalet, it's an apt symbol for Russia's efforts to battle the financial crisis: A lot has been thrown at it, but it isn't quite working.

    If Mr. Boiko has a dream, the Kremlin has a nightmare: That Russia's weak economy -- and the first decline in incomes in a decade -- will undermine the nation's de-facto one-party system.

    "We're trying to reduce social tension," says Svetlana Polikova, a senior forestry official in Vologda, a region that's also home to Russia's answer to Santa Claus.

    Even with the third-largest foreign-currency reserves in the world, Russia can't afford to toss around welfare aid like sugar plums. But "wood is something we have reserves of," says Yevgeny Trunov of Vologda's Forestry Department.

    Cheap lumber is one of many programs dreamed up to aid Russia's growing ranks of unemployed. Joblessness hit a nine-year high of 7.7 million in April, or 10.2% of the working population.

    With unemployment benefits capped at just under 5,000 rubles, or about $160, a month, the race is on to keep a lid on social unrest. A sign of the times: Last month, Prime Minister Vladimir Putin penned an article advising managers how best to fire people. In the article, Mr. Putin -- who is famed for his stern demeanor -- showed a softer side. "Sometimes from outside it seems like someone should simply be swept away with a broom," he wrote. "But I can assure you it's not always like this."

    Anatoly Boiko in front of his partially built house. The Vologda region of Russia is giving residents lumber. The idea is that they'll build houses with it.President Dmitry Medvedev set the tone earlier this year, ordering the government to consider letting people prospect for gold in Kolyma, a region famous for Stalin-era labor camps. One part of Siberia has promised free plots of land to anyone who is physically able to plant potatoes and has been directly affected by the downturn. Several governors have urged the jobless to renovate various things around town, including apartment stairwells.

    The downturn has hit Vologda hard. Its main revenue earners -- steel, timber and chemicals -- are export-oriented, but global demand has tumbled. Government data indicate joblessness tripled in the past year.

    Vologda's residents have had the chance to buy wood at a discount from the authorities for years. But when the crisis bit, the region's pro-Kremlin governor, Vyacheslav Pozgalyov, decided it was time to go further. For an average price of 200 rubles ($6.50), or what it costs to buy four beers in a local watering hole, he gave locals the chance to buy enough timber to build a house. The price can be even cheaper depending on variables such as the quality of the wood.

    There's a catch: Beneficiaries really do have to build that house. They also have to fell the trees themselves.

    More than 1,800 people have applied for wood. Officials say they've already signed hundreds of contracts with eager house builders.

    Jun 17 1:09 PM | Link | Comment!
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