This is an underreported story that I’ll go ahead and attempt to scoop the mainstream media on: Two Japanese men in their 50s were detained by Italian authorities while crossing the border into Switzerland with US$134,000,000,000 in US Treasury Bonds hidden in the bottom of a suitcase.
Private-sector US Treasury Bond trades are done entirely electronically. It’s hard to believe, but central banks hold little pieces of paper worth a billion dollars each. Although the US claims that there aren’t enough such pieces of paper in the world for these to all be real.
This is stranger than fiction and of course there are all sorts of fun theories. If they’re all real, then no matter where they’re from, this is probably the end of the US$ as global reserve currency – which this blog keeps predicting over and over again. 
It’s an interesting case. One wonders what, exactly, these men have done wrong.
They moved fake bonds — which apparently don’t even look like the real thing — across a border in a false-bottomed case, and said they had nothing to declare. They weren’t lying, they weren’t smuggling, and they didn’t try to exchange the bonds for anything. Having a false-bottom case might be illegal under some weird, wrong-headed, law, but that seems pretty minor, like possessing nunchucks.
It seems as though they’ve been caught in flagrante delicto… But perhaps before doing anything corpus delicti-ish. Hopefully (from their point of view) they weren’t also carrying documents detailing their theoretical criminal conspiracy.
Of course, the fun part is: Maybe the treasury wants us to think the bonds were fake! It’s unknowable, but depending on whether or not the men are released we can get an idea of what’s really going on.
Through one of Jared’s links I notice there are just over $105 billion in unredeemed bearer bonds in circulation. That’s the most interesting part: Who has them? They’re a perfect untraceable currency, ideally suited to illegal government-sized transactions. They’re the kind of thing that show up in James Bond movies, good for large Bolivian cocaine transactions, funding private armies for African dictators, and appropriating fortunes from communist banana republics.
Okay, if they are fake, what is the point of counterfitting $134 billion worth of bonds? How do you launder that? The story is almost more interesting if they are fake…
Could be a simple fraud? Try to sell them to someone really rich who is simultaneously uneducated in the appearance of bearer bonds, like the biggest ghetto drug dealer in New York.
If you’re running an ongoing, expensive, criminal enterprise you wouldn’t have to launder the bonds, you’d just re-circulate them in the underground economy (eg/ use them to buy more coke to cook from the Dominicans). The reason to buy the bonds in the first place is $134 billion in bills of any denomination is too voluminous to actually spend.
I was wondering if the Japanese couriers weren’t the vendors but rather the victims? What if they didn’t counterfeit the bonds but rather had bought them in good faith?
Or, better: What if they were just couriering the bonds from seller to buyer, and now seller, his bonds revealed as fakes by the international media, has to run and hide from someone with $134 billion to spare — said New York gangland kingpin, perhaps.
That’s why Tarantino had Vince accidentally shoot Marvin in the face in Pulp Fiction — catastrophic accidents make for interesting writing. I think his actual logic was, “You always see Schwarzenegger walking around with an uzi, or whatever. But what if it accidentally went off?”
It’s got the makings of a tragedy, and I know how I’d end it too. Same way the mercenaries got Jack in Traders. In a sunny Caribbean island paradise, our protag walks down a dock to escape on his yacht. From behind he hears a voice:
I think your theories discount just how much money this is. Pablo Escobar is probably the richest criminal who ever lived: his net worth was US$9 billion.
$134 billion is so much money (around the GDP of United Arab Emirates) that only countries and multinational corporations could even bother counterfeiting it.
Right, better to think of it in terms of “number of Bill Gateses” or something (a little over two). Or one-point-three-four Rockefellers. Same problem as with these bailouts: The numbers are unimaginable.
I think the underground economy is a lot bigger than is apparent, but point taken. We’re talking oil company / oil emirate money maybe. Besides, drugs as a way of driving a movie plot is so nineties.
Or the Russian Mafia: part crime syndicate, part country, part big-oil player. The Russians are shaping up as part of a new Eastern Bloc, along with China, under The Treaty of Good-Neighborliness and Friendly Cooperation. Maybe the Chinese are trying to offload some of their treasuries on the sly (but then: they wouldn’t be fake, unless someone swapped them out on the way to the private auction in Switzerland).
Plus, if you make movies with Chinese characters, and Mandarin segments, you have a built-in market of hundreds of millions. The government censors particularly love plots where something’s been stolen from the people and the protag has to return it (c.f. most recent Jackie Chan/Jet Li movies).
Yeah, this is a cool fucking situation, whatever the reality of it.
It’s also possible that, since bearer bonds tend to circulate in secret*, they were counterfeited decades ago and have been in “legitimate” circulation since, the fiction of their authenticity passing unnoticed and allowing them to hold value. If everyone you meet thinks a piece of paper is worth $X, then it is worth $X — the same theory under which currencies work.
The USD has been the denominational currency of oil transactions for decades, and not all oil producing nations want payments in a form the US government can interdict. Then we’d be looking for a country — probably an OPEC member — that used to have a surplus, has since been hard-hit by the recession, isn’t very friendly with the US, and has some kind of Japanese connection (unless those two were just couriers). Maybe Indonesia? How’s Venezuela doing?
* In Nick Lesson’s book he said that even Barings kept bearer bonds uninventoried in filing cabinets for years. His first job at the bank, in fact, was inventorying the bonds in the Singapore office — he could have strolled away with millions without anyone noticing.