Suitcase With $134 Billion Puts Dollar on Edge:
By Daniel at 17 June, 2009, 11:20 pm
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June 17 (Bloomberg) — 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.
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.
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.
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