$134bn bond tale is worthy of a 007 plot
June 21, 2009
 By William Pesek
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 realise. At a minimum, it would suggest that the US risks losing control over its monetary supply on a massive scale.
The trillions of dollars of debt the US 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 US'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 US 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 still 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.
These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest US creditors.
It makes you wonder if some of the time US 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.
You can almost picture novelist Tom Clancy sitting in his study thinking: "Damn! Why didn't I think of this yarn and novelise it years ago?" He could have sprinkled in a Chinese angle, a pinch of Russian intrigue, a dose of Pyongyang and a bit of Taiwan-Strait tension into the mix. Presto, a sure bestseller.
Actor Daniel Craig may be thinking this is a great story on which to base the next James Bond flick. Perhaps Don Johnson could buy the rights to this tale.
When I first heard of the $134bn story, I was tempted to glance at my calendar to make sure it didn't read April 1.
Let's assume for a moment that these US bonds are real.
That would make a mockery of Japanese Finance Minister Kaoru Yosano's "absolutely unshakable" confidence in the credibility of the dollar. Yosano would have some explaining to do about Japan's $686bn of US 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 $1bn 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 pay day 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 US, 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 US Treasury "has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn't want reported over the last, say 10 years or 20 years". He adds: "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 Fed chairman Ben Bernanke need right now is tens of billions more of US bonds - or even high-quality fake ones - suddenly popping up around the globe.
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