Those $134 Billion in Fake Bearer Bonds
Submitted by
CalculatedRisk on Thu, 06/18/2009 - 11:10am (84 comments)
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What's that? Fake Barry Bonds?
giving the bears a bad name
Should we be so quick to believe the Treasury? Their track record has not been so great of late...
"two alleged Japanese citizens"
What, they might be Koreans?
Of course the Treasury would confirm that the bonds were legit if that was the case. Of what import would it be if Japan was trying to dump 1/5 of their treasuries at a discount? It would never make it in the news.
Moreover, it is obvious that for a counterfeiter, the higher the denomination the easier it is to fool everyone. Everything makes perfect sense and I am now ready to let this story fade away discreetely together with the two Japanese conterfeiters.
Allen M's speculation in the previous thread was nice and likely.
These guys most likely are fraudsters who were going to use these to defraud the ill gotten gains of other fraudsters.
They just had to make sure they were on a different planet when the recipients go to their brokrages to deposit them.
I would still like to know who those guys were and what they thought they were doing. Whether they were the perps or the victims, shouldn't somebody be charged with something?
OT: Treasury to Auction $104 Billion In Debt Next Week, a Record...
May I borrow some green shoots plz...
Citizen AllenM says it's our McGuffin, the necessary plot article with no intrinsic worth. I kind of like that description, although it now makes me want to know the underlying plot even more! I don't care about the $134 billion in bonds, I want to know how they were forged, why they were transported, who they were in the custody of, and where they were going! It still sounds like a fun story, international monetary implications aside...
Nemo - international laundering schemes are great for spy novels.
Someone should find these guys and buy out the movie and book rights.
unless these guys were trying to pass them off as being real, then i can't imagine it's illegal to possess fake bearer bonds that don't actually exist. It's like counterfeiting "three-dollar" bills.
I'm just waiting for the Treasury to confirm that all outstanding treasury bonds, of any kind, are in fact fake and worthless
CR no hat tip for the Shillster? Dare you Jest
Even the grimmest dramas require a little comic relief from time to time.
In other news, the gov't of Italy has increased it's investment in US bonds by $134B. /not the news off/
So it's possible it's a Chinese citizen and a Korean citizen disguised as Japanese citizen carrying real US bonds on their way to Switzerland, but was intercepted by Italian cops who were tipped off by Greek and French authorities so they can get a share of the loot. Unfortunately, the Russian mafia got to those two smugglers before the they can talk...but then!......and so on.
Gosh I suck at international crime writing
Speaking of fake and worthless, Romer on the tape talking about how the Fed may need to issue its own debt.
Um... don't they already have their own debt... called US Dollars?
Don't forget that for a fraud to work, at some point along the line those 500 million dollar Bonds would have to fool someone. Perhaps even that most benighted of posters here might decide to make a couple of phone calls to the issuer before committing such sums to those bonds.
No maket for the fakes, no trade, no sense in counterfeiting.
All it would take is a few crooked banksters to enter a few of these bonds slowly into the "legitamate" banking to make them "REAL"
Tim and Ben might know a few guys willing to do this.
I can think of a number of reasons why Treasury would want those bonds to appear fake even if they were real.
But the real point of my previous comment wasn't so much to think in terms of these bonds being fake or real, but to use this unique story as a way of noticing selective perception influences.
We saw a lot of hand-wringing about how some foreign government might be dumping Treasuries and how doomed we would be if that were true. Clearly there's a lot of fear behind such worries. Some of it is justified, some isn't, but knowing that it's there could be very tradable in the near future.
Now we see the more-mainstream media swallowing Treasury statements as Gospel truth without any detailed investigation. How many times have we as a nation been led down the wrong path by misguided government representatives in the past two (ten, fifity...) years? Given the poor track record, why haven't more people learned to start questioning everything coming out of every mouthpiece? Has any investigative reporter actually gone and looked at the bonds or done any fact-checking? Really, what is the story here? Why is "treasury says they're fake" the only story being presented? What happened to the two gentlemen "from Japan"? Who gets to auction off the forgeries on EBay? How is it they were caught, and why was anyone looking for false bottoms in suitcases?
Too many unanswered questions, and too many disconcerting conclusions to be drawn from the nature of the responses we are seeing.
repost from last thread:
Allen-
The issue is forgery and the lack of arrest...not the intent of the actual operation, scam or not.
So they are fakes....now we get to discuss the relative competence of various enforcement agencies?
Crimes of this scale are usually punished (and have been) but since you seem to want to compare fake handbags to this ...well there's nothing more I can say.
We could be here all night but I choose to spend my time on more productive endeavors.
Ciao
MS
Alleged Japanese citizens, stopped by alleged Italian authorities at the alleged Italian-Swiss border hiding some alleged bonds in the bottom of an alleged suitcase. Bloomberg allegedly aired this story.
Let's make sure we cover all the bases.
Another great article @ Naked Capitalism ...
A more comprehensive look at Obama’s proposed financial reforms
A more comprehensive look at Obama’s proposed financial reforms « naked capitalism
Just declaring them to be fakes does not finish the story.
Who are these guys, where did they get these things, what were they going to do with them, and who tipped off the Italian authorities and why?
Here's a good one - what's the CDS premium on those fake bonds? The bonds might be "almost certainly" worthless, and yet a company could be incorporated with those pieces of paper listed as "assets", and then a crony in another organization could start writing or buying CDS on them. $134 billion times 0.001% probability of "reality" is still a lot of pocket change...
The glod standard for chimera ruses is the 'metric ton' of glod.
Doesn't Italy have extremely strong anti-counterfeiting laws? Isn't the fine some multiple of the value of the real thing?
Perhaps Italy wants them to be fake so they can collect $500 billion from these two guys. I'm sure they're good for it.
Promise sorry notes, as it turned out.
Wisdom Speaker - that is very true. With the concept of CDS the authenticty of these bonds should never be in question.
this is the weird part:
“They’re clearly fakes,” said Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt
1.) why would it take that long for them to say something as nonchalant as 'clearly fake'
or how much we actually printed?)
2.) why is it someone from 'Bureau of public debt' issuing this statement (didn't even know we had a bureau like that....would they know the real M3 figures then?
3.) why would you not have any other details?
as far as the Treasury denying they are real....I seem to remember quite a bit of verbage about something being "contained" as well.
Arrest someone for forgery and we'll have some proof. It would seem very simple to debunk this entire story but for some reason they can't or won't.
Ciao
MS
Trying to confiscate 40% of those bonds, in case they are legit, might cost the Italian government a lot more in trade sanctions and NTBs from Japan.
Is a false bottom in a suitcase similar to a false bottom signifying the worst is over, but in reality we haven't seen anything yet?
Dear Sir,
I am the nephew of the exiled King of Tanzania. My father, Edward Owufo left me $134 billion in US government bearer bonds. The bonds were previously stuck in the central bank of Tanzania. My two Japanese henchmen were intercepted by Italian authorities on their way to me in Switzerland. If you assist me in transporting the $134 billion in bonds, I will pay you 10% for your troubles. Please fax your bank details for immediate transfer with your security of a social nature to +255-938-2939.
Thank you for your urgent assistance,
Albert Owufo
Basel Too --
Actually, I am pretty sure it is illegal to counterfeit "three-dollar" bills:
Institutional - Prohibition Against Misuse of Treasury Names, Terms, Symbols, Stationery, Etc.
It is certainly illegal to defraud or to conspire to defraud. And these guys were either planning to participate in a fraud or, more likely, were the victims of a fraud that had already happened.
Either way, I would expect somebody to be arrested.
Everyone on this blog knows that financial fraud is no longer illegal...while financial realism is Anti-American.
:beer: 
Carrying the money equivalent of 30 Nimitz-class aircraft carriers in your luggage gives you a few privileges in dealing with the authorities.
This is from iTulip (but sshhhh, I think they may be in on it):
The Forms in which Marketable Treasury Securities Exist:
Marketable U.S. Treasury securities only exist in three forms: (1) book-entry, (2) bearer, and (3) registered. An overwhelming amount (99.84% of outstanding marketable securities) are in book-entry form which exist not as printed certificates but rather as computer records.
Only .14% exist in bearer form of printed certificate with interest coupons attached but no name on it. Finally, an even smaller percentage (.02% of outstanding marketable securities) exist in registered form with the name of the owner on it. They discontinued the issuance of printed registered securities in 1986.
Using that data it was trivial to calculate that $143.5 billion in physical U.S. Treasury bearer bonds cannot exist:
0.14% x $3.3 trillion total foreign holdings = $4.6 billion.
Since the bonds cannot be real and thus must be fake, and a long history of fake U.S. government securities scans is well documented, our theory on the act of “smuggling” was:
It's a scam </i>
Rise of the Demagogues: The case of the $134.5 billion in U.S. bonds - Eric Janszen - iTulip.com
I loved getting the Nigerian Letter, back in the days of snail-mail...
A couple times a year it would arrive, with urgent pleas for me to share in the largess, all written in the most curious looking block lettered English.
OT - Is the arm-twisting going too far when you break the sec. of state's elbow?
Juvenal Delinquent (profile) wrote on Thu, 6/18/2009 - 2:37 pm
I loved getting the Nigerian Letter, back in the days of snail-mail...
A couple times a year it would arrive, with urgent pleas for me to share in the largess, all written in the most curious looking block lettered English.
It's similar here, but you only get to participate in the largesse if you come from special wombs, went to the right schools and worked for the right organizations.
It's OK; in a few years those bonds wouldn't have been worth anything anyway.
NEW RECORD DEBT AUCTION
Just hit the news wires --
Treasury to auction $104 billion next week -- a NEW RECORD. Interest rates are likely to rise if there is any balk in demand.
Ruh roh...
We Have Mortgage Lift Off
Does anyone here know - exactly how do foreign governments purchase US Tbonds? Do they have an account at treasury direct, like anyone else? Or do they have some kind of direct line to the US Treasury? How are funds transferred? All electronic I would presume but what are the details? I can think of a few good reasons why the govts on both ends would want to keep this info a secret...
OT-
some news ticker highlights today showcasing analyst research abilities....
8AM:Analyst says to buy auto shares on weakness
3:15PM S&P downgrades Daimler on auto-market weakness
512 fica scores are the new 620! Someone touched base on this within last month. Talked this wknd to 4 16-17 yr olds in the family.. they are not dying to have a car.....
It's a mystery! It's a mystery wrapped in a riddle inside an enigma! The f--kin' bagmen don't even know! Don't you get it?
...looks suspiciously at the $500,000 bill the guy at the corner store gave him...
shill --
The "record debt auction" was announced four hours ago.
Might want to add that one to your RSS reader.
Shadowinventory,
This how I remember CPI and SS.
Cruel Statistics: The Impact of Changes in the Consumer Price Index on
Older Women, by Dean Baker and Mark Weisbrot, May 1999
In other news.....Japan has shut down all Italian restaurants, on the account that 'we don't know what's in those red sauce anyways'
Hey ac, if you get a little green paint, that Zero Hedge chart could definitely be made to look like a green shoot. No worries!
Wonder why the Treasury swears that those 134 billion in bonds are really really fake?
China sells US bonds to 'show concern'
BEIJING (AFP) — A decision by China to reduce its US Treasury holdings suggests concern about the US attitude towards its economic woes, Chinese economists were quoted as saying in state media Wednesday.
The remarks, coming after US data showed a modest decline in Chinese investments in US government bonds, were in contrast to an earlier statement in Beijing which had said the recent sell-off was a routine transaction.
"China is implying to the US, more or less, that it should adopt a more pragmatic and responsible attitude to maintain the stability of the dollar," He Maochun, a political scientist at Tsinghua University, told the Global Times.
AFP: China sells US bonds to 'show concern'
Arrest someone for forgery and we'll have some proof.
You don't need to arrest someone to prove documents are forged.
The forger could be dead, and that won't make the documents any less forged.
Thanks Nemo, Ya been away from the desk back and fourth today....dam kid's
ShadowInventory --
Does anyone here know - exactly how do foreign governments purchase US Tbonds?
The same way as everyone else; through a broker/dealer, I believe.
Brad Setser is always reading the tea leaves trying to reconstruct foreign central bank debt holdings, especially Chinese.
Try a Google search for "indirect bidder".
Come on, ya ELMO ya!
(Sold a SPY Jul 96/91 bear call spread right in here).
What if???
What if the bonds here were printed to help European Country X from failing. The central bank would just need to show that there were assets to back up their liabilities.
All the equipment you'd need to adequately counterfeit a older U.S. Banknote (circa pre-1990) is right there on your computer. Finding the right paper could be problematic however. The reason our banknotes now have such garish colors, is because certain color combinations don't copy well together.
The same equipment to counterfeit banknotes of a similar high quality in 1990 might have run you around $100K...
This is one of the reasons governments have shy'd away from paper money, and made everything digital.
Google "Operation Bernhard" for a primer in how one country had planned to bugger another's economy by flooding it with high quality counterfeit banknotes.
If the US cannot honor it's 'non-fake' bonds.. what is the difference between them and fake bonds?
@Eric - of course, if you charge someone with forgery, and in court you prove they're authentic, that would be bad. /tinfoil hat off/
This story is so implausible that it makes me think they're probably real. I don't think ANYBODY is stupid enough to counterfeit denominations that large.
Good thing Bernanke and Geithner have "stabilized" the economy and are in firm control of the bond/currency/mortgage/equity markets. It makes me sleep better at night knowing we're in such competent and knowledgeable hands. Green shoots, baby!
"Using that data it was trivial to calculate that $143.5 billion in physical U.S. Treasury bearer bonds cannot exist:
0.14% x $3.3 trillion total foreign holdings = $4.6 billion."
It is possible that the bonds are not entirely all foreign holdings. perhaps people inside United States were trying to get rid of them as well.
Why would the US Treasury say anything other than they are fake. Could you imagine the outcome if they were to admit this to be true and the implications of such a statement.
Whew, I almost bought a couple of those things.
the perpetual prosperity paperprestidigitizer recovery machine!
Bloomberg publishes fears that recovery cannot be sustained and we will double dip into D....so they want to stimulate again...so, the Fed wants authority to sell debt.
(they can sell back to Freddie and then Freddie back to home owner who get cheques from Govt.)
"You don't need to arrest someone to prove documents are forged.
The forger could be dead, and that won't make the documents any less forged. "
that also assumes one individual acted alone...don't oversimplify it.
Fakes of this nature involve MANY people. Letting or allowing them to go when caught just makes this weirder and weirder. I suspect the real truth lies somewhat in between both stories.
Ciao
MS
I don't think ANYBODY is stupid enough to counterfeit denominations that large.
Do you think anybody is stupid enough to wire money to Nigeria in order to help someone's surviving uncle move a very large sum of money out of the country??
Do you think anybody is stupid enough to wire money to Nigeria in order to help someone's surviving uncle move a very large sum of money out of the country??
Hey yeah, I just did this after breakfast. The guy seemed legit, and I'm going to make off like a bandit...
/stupid like a fox, I am...
@MLM I hope so
MLM, the police reported the bonds were ultra-high quality "counterfeits". You cannot print those with your printer.
Me, I woulda sent Oddjob to the Alps to do the job.
Actually, the fact that they are fake is quite expected, according to the theory in this link
previously supplied by another poster in an earlier thread. In summary, they were intended to be discovered as a signal to someone from someone else. Gentlemen (and ladies), put on your tinfoil hats Darn that pig!.
I still like the idea that this was an ingenious way to pay off Italy for taking three Guantanamo prisoners.
And yet...
What about the coincidence of the G-8 meeting of Finance Ministers in Italy at the time? Geithner was there, Yosano of Japan, etc.
Just coincidence? Or was the timing a key part of the smugglers' plan, to give the bonds authenticity?
And what about the amount, corresponding to that of the remaining TARP funds? Also part of the plan to give the bonds authenticity?
I suppose we'll never know the truth. But a long time ago I stopped believing what the US government claims is truth. So Treasury will have to do better than offering the statement they did, before I consider the case closed
Not even Paulson?
I hear the $1B certificates have a tiny image of a bazooka in each corner.
The gullibility of some of the posters here beggars belief. Is there ANYTHING you folks wouldn't believe, if Treasury told you it wasn't true?
On the contrary, the bonds were almost certainly authentic.
The Japanese government was tentatively attempting to sell a small portion of it's treasury inventory as quietly as possible in Switzerland. Counterfeiting an easily verifiable security in such a high denomination at a quantity greater than all the treasury-holdings of Brazil or the entire GDP of Mongolia is utterly ridiculous. These were not garden variety fraudsters. At the very least something extraordinarily strange was going on here. $500 million dollar bearer bonds ? Bonds that the U.S. hasn't officially issued since the 80s (and this was public knowledge well before this event took place). A fool and his money are soon parted ... but there are easier ways to defraud individuals and institutions.
Some important things to note: the Italian police eventually released the detained individuals, the U.S. Treasury took almost two and a half weeks to issue a statement saying that the bonds were fake, and the Japanese consulate refused to verify that the individuals in question were actually Japanese.
False bottom suitcases? That's what diplomatic pouches are for.
I can't believe the big deal people are making of this low-grade scam. Read the following article from Time in 2001 if you want to know what this is really about.
The Bearer Bonds story was a Litmus test.
What the heck is going on with these "fake" bonds. Today another story: Japanese Bonds @ 15 Billion € Confiscated in Italy. TROY OUNCE: Again "Fake" Bonds: Japanese Bonds @ 15 Billion € Confiscated in Italy
Why would some one smuggle 134 BILLION of fake bonds.Those bonds are real.
The implications for the integrity of the US financial system if the bonds are real is
catastrophic.