Confiscated Us Bonds Were Headed For Swiss Free Port

Bloomberg reports that Italian police ask sec to authenticate seized US treasuries.

(emphasis mine) [my comment]

Italian Police Ask SEC to Authenticate Seized U.S. Treasuries
By Sonia Sirletti and John Glover

June 12 (Bloomberg) -- Italy's financial police said they asked the U.S. Securities and Exchange Commission to authenticate U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland.

The bonds, with a face value of more than $134 billion, are probably forgeries, Colonel Rodolfo Mecarelli of the Guardia di Finanza in Como, Italy, said today. If the notes are genuine, the pair would be the U.S. government's fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.

The seized notes include 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, the police force said on its Web site. Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli said. Moreover, the "Kennedy" classification of the bonds doesn't appear to exist, he said.

The bonds were seized in Chiasso, Italy [right next the free port in Chiasso, Switzerland]. Mecarelli said he expects a determination from the SEC "within a few days."

My reaction: This is a fascinating story. I wonder what the SEC will come up with.

1) Italy's financial police have asked the SEC to authenticate U.S. government $134 billion confiscated US bonds

2) If the notes are genuine, the pair would be the U.S. government's fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.

3) The bonds were seized in Chiasso, Italy, which is right next the free port in Chiasso, Switzerland.


Conclusion: whether they are genuine or fake, the confiscated US bonds were no doubt heading to a Swiss "free port". These places are a legal "no man's land", located in Switzerland but not officially on Swiss soil (like embassies).


Swiss Free Ports are a legal "no man's land"

Swiss free ports zones, normally based around airports, operate outside of Swiss government control. Goods entering such zones are not registered or taxed, are not reflected in Swiss import statistics, and are sent to other locations without export duties. While free port zones are part of Swiss territory, they operate outside of Swiss customs control.

Swiss free ports enjoy a level of freedom that others don't. For example, European Union free ports are subordinate to the customs authorities. As such, they have to keep a detailed inventory of all the goods passing through their hands. That is not the case in Switzerland, where goods can be warehoused for an indefinite period of time.

Most trading in Swiss free ports happens anonymously via 3rd parties. Buyers can examine (and bring experts to verify) goods being sold, but rarely are there any direct interactions between buyers and sellers. Since free ports are not transparent, they may hide illegal activities, such as forged paintings and counterfeit securities. These fake goods must be of high enough quality to fool experts.

The four big Swiss free ports are Zurich, Basel, Geneva, and Chiasso.


To summarize, what makes Swiss free ports attractive:

1) Goods are ready to be shipped anywhere in the world and don't need to clear Swiss customs before leaving the country
2) Indefinite storage in location outside the jurisdiction of any sovereign nation.
3) Anonymity afforded
4) Avoid/defer taxes because of special legal status.


Swiss Free Ports are like Aladdin's Cave of Wonders

Because of their special legal status, these free ports are used to store all types of expensive and exotic (sometimes illegal) goods, including art, gold, weapons, wines, stock certificates and other securities, etc... Swiss free ports are the number one place for auctioning jewellery, accounting for 60 percent of the world market. Large quantities of art works from all time periods have also been imported/smuggled into these free ports. They are also used to store large quantities of gold/silver, by investors afraid of confiscation.

My mother has been to Geneva's port franc several times to authenticate the art stored there (she is an art restorer). She described to me what the free port was like from her experience:

1) A client asked me to authenticate a painting in Geneva's free port. First, I entered a guarded parking lot. I then went to a front office and signed in with an elegantly dressed guard. They lead me to a room elegantly furnished with carpets and velvet on walls. There was an empty velvet covered easel. They sit you in an arm chair then go get the painting. In this case, it was a "Van Gogh" self portrait newly "discovered". Everything looked right, the paint, the canvas the stretcher the brush strokes. But the person I was dealing with said she could not obtain permission for the painting to be taken out to be X-rayed. Nor could I take paint samples. Under black light the paint looked right, not glowing bleu like fresh paint. To make me feel she dealt in authentic works of art she got permission for me to visit on two other days vaults that were filled with authentic 18th century French furniture and paintings. I advised the client not to buy the painting.

2) Another client took me to see a vault there filled with 19th century and early 20th century Russian paintings that had been just smuggled out of Russian - this was in the late 1980s just as communism was crumbling.

3) Another client asked me to restore some Rubens and other old master paintings that were kept there. They had been taken out of Spain just before a new law was passed that would tax the wealthy on their valuable art works.

As you can see, these places are filled with very rare and valuable works of art, as well as some extremely high quality forgeries. Whether real or fake, Confiscated Us Bonds were undoubtedly heading to Chiasso's free port, to be sold anonymously to private investors.


Final Thoughts

Even if these bonds are counterfeit, they still present a major problem for the US. High-quality fraudulent treasury bonds measured in the hundreds of billions is the last thing the US needs to deal with right now, as it is already struggling to find lenders to finance the government's record deficit spending. These fake/real bonds also do nothing to inspire confidence in the dollar at a time when investors around the world are worried about its worth.

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20 Responses to Confiscated Us Bonds Were Headed For Swiss Free Port

  1. Anonymous says:

    See this site http://cannonfire.blogspot.com/2009/06/mystery-bonds-enter-cult-now-it-gets.html

    Has a nice video with 500 million dollar bonds.

  2. Mark says:

    They may be downplaying that due to diplomatic reasons.

    I guess all countries all over the world are playing poker with their US treasuries right now. And some may even consider dropping them on not-so-official markets in order to keep their sell-off a secret to avoid a run away from longer-term treasuriesby investors which would render them almost worthless.

    So, maybe, the initial story was true and the subsequent reports were "adjusted".

    Isn't it strange that such a thing happens during the climax of a bond crisis? (record low yields and record high debt)

    Isn't it strange that Bernanke was puzzled by the increase of treasury yields?

    Now we have an explanation.

    Additionally, the Chinese could use their long-to-short maturity transformed treasuries as collateral for loans -- which they use to buy up oil and soya indirectly (from their own markets, forcing the markets to buy it from the rest of the world and thereby doing the due diligence to buy it at the lowest possible cost and in exchange for US$).

    The Chinese are not dumb. I'm pretty sure they won't risk their treasuries. They will drop them before everyone else does. Even if they still buy them -- you just cannot know if they are net buyers if you include the treasuries' use as collateral.

  3. VegasBD says:

    They are real. Govt used these to finance off budget projects.

    Easiest solution? Declare them fake since there is no record of US ever producing/selling those.

    One Problem with that....who knows HOW MANY OTHERS we have sold to WHO KNOWS WHO around the world who will instantly rise up against us by being ripped off by us since they would make all their current black market holdings of off balance US debt worthless.

    Sticky situation they got themselves into....

  4. Anonymous says:

    I am so bored reading apocalyse articles. It never come true.

    Anyway, good thing about you, Eric, is that you dare to set timeframe, that end of September, is the beginning of collapse for USD.

    Others commentators don't dare to say the timeframe. They just talk, talk, and talk. Much of what they said are fantasy.

  5. Anonymous says:

    LOL as if he will be right...

    How can there ever be a dollar collapse now?

    Even russia has stated that there is no alternative to the dollar right now...

    I swear to god ya all need to get outside!

  6. Mark says:

    HAHAHAHA!

    The whole world is forecasting the apocalypse now and still there are so many who do not understand it.

    Guys, understand that big changes do not get recognized by the ordinary people. They just read it in books about history. Maybe. The only thing YOU guys ever recognize is when you are out of job.

    Side note: only because things need decades to play out, it does not mean they are not there...... it just feels like that.

    With all that criminal forces in the highest level of banks and governments during each financial crisis, how could ANYONE ever believe these things do not actually happen...

  7. OperationNorthwoods says:

    Anon,

    Maybe he did go outside, at least in the US. It's a country in serious decline, whether on the health front, family front, or economic front. Then try going outside in China.

    Also, if there is a dollar collapse, it will come right after China, Japan, and Russia all proclaim eternal love for the dollar.

  8. Anonymous says:

    Anonymous June 15, 2009 9:34 PM:

    "Even russia has stated that there is no alternative to the dollar right now..."

    While:

    Medvedev: World Needs New Reserve Currency
    http://www.foxnews.com/story/0,2933,526541,00.html

    Russia can't seem to make up their mind.

  9. Anonymous says:

    Absolutely fascinating.Just like a good old Agatha Christie eh ?
    Your articles are excellent reading Eric- great research and a wonderful nose for the pong of rot beneath all things financial.They bring out other enlightened and enlightening perspectives also thru the rich variety of opinions added in comments.
    I seriously hope all this research leads to you writing a book at the end of it.Actually, I hope you make that two books.
    One fiction and one factual.
    I personally will buy a signed hardback copy of each.
    Kudo's to you with much respect.
    Your blog is a daily visit for me,
    though I seriously hope you take time out from it all to give your head a rest every once in a while .
    It would be a crying shame if you were to succumb to information overload....I know this threatens to happen to me quite often in various research,it can be addictive.
    I don't think a single lifetime would be enough to wriggle to the bottom of the coiling twists and turns of this deeply corrupt century.
    all the best to you.

  10. Anonymous said...
    Even russia has stated that there is no alternative to the dollar right now...

    Russia stating there "is no alternative to the dollar right now" is like someone standing on the deck of Titanic (after it hit the iceburg) and declaring "there is not enough life boats". While true in both cases, it doesn't change the fact that the boat is sinking.

  11. Anonymous says:

    We're broke and everyone knows it. Gee, I guess I missed this on FOX last week. The emporer has no clothes.

  12. James says:

    Things are getting curiouser and curiouser. I remember reading two months ago how Japan was going to spend $150 billion to jump start their economy. My guess is that they were going to finance it with the sale of these bonds.

    http://www.msnbc.msn.com/id/30132798/

  13. Anonymous says:

    Eric deCarbonnel said...

    Russia stating there "is no alternative to the dollar right now" is like someone standing on the deck of Titanic (after it hit the iceburg) and declaring "there is not enough life boats". While true in both cases, it doesn't change the fact that the boat is sinking.

    Well you seem to believe that the dollar collapse is eminent, but what if it isn't?

    I mean what happens if all that you believe is no more then some propaganda that you picked up from somewhere, which had the sole intention of driving up prices on commodities?

    I mean there is such a thing as bias when we look at stories in the news... and as such we seek only those things to confirm that which we believe.

    Doing something like makes hard for anyone to see the whole truth...

    Nine Inch Nails

    See the animal in his cage that you built
    Are you sure what side you're on?
    Better not look him too closely in the eye
    Are you sure what side of the glass you are on?
    See the safety of the life you have built
    Everything where it belongs
    Feel the hollowness inside of your heart
    And it's all
    Right where it belongs

    What if everything around you
    Isn't quite as it seems?
    What if all the world you think you know
    Is an elaborate dream?
    And if you look at your reflection
    Is it all you want it to be?
    What if you could look right through the cracks?
    Would you find yourself
    Find yourself afraid to see?

    What if all the world's inside of your head
    Just creations of your own?
    Your devils and your gods
    All the living and the dead
    And you're really all alone?
    You can live in this illusion
    You can choose to believe
    You keep looking but you can't find the woods
    While you're hiding in the trees

    What if everything around you
    Isn't quite as it seems?
    What if all the world you used to know
    Is an elaborate dream?
    And if you look at your reflection
    Is it all you want it to be?
    What if you could look right through the cracks
    Would you find yourself
    Find yourself afraid to see?

  14. OperationNorthwoods says:

    Anon,

    Plato's Allegory of the Cave does a better job of illustrating where we are.

    The fact that we are prisoners in a constructed world doesn't change the fact that 2 plus 2 normally equals 4. Thus, the decline and eventual fall of the American Empire is a logical expectation.

  15. Anonymous says:

    Its just too bad that more of the "right" people are not heard or involved in any attempts to resuscitate the economy.

    I don't believe there is any hope for real change. The criminal element has been in charge for centuries, and the status quo continues. The world will change drastically over the next decades. Only those with useful skills, healthy/strong and intelligent will survive.

    As far as the USD is concerned, why be bothered about it at all. Spend your dollars if you feel they will be worthless. Buy hard assets and pay off debt. Become self sufficient. That is the key to the game...survival.

    There are no saviors, no good leaders or powerful/wealthy people with a conscience.

    Either conform and survive, or meet you maker.

  16. Anonymous says:

    I will be talking yo the ex head of the Bilderbergs tomorrow and get the real scoop on these bonds,

  17. Mark says:

    Soros says that the strength of the US$ is sickness. It is due to large amounts of debt denominated in US$.

    In other (my) words: there is no significant productive demand for US$.

  18. Jimmy says:

    Gold/silver stocks took huge hit in the last 3 weeks. They dropped as much as 30%. Were the big boys shorting them in preparation of dollar collpse?

  19. Anonymous says:

    http://www.turnerradionetwork.com/in...news&Itemid;=50

    Two Japanese men arrested by Italian Police while trying to smuggle $134 Billion in U.S. Treasury Bonds concealed in suitcases, out of Italy into Switzerland, are employees of the Finance Ministry of Japan.
    ...
    Despite assurances from Japanese Finance Minister Kaoru Yosano about Japan's "absolutely unshakable” confidence in the credibility of the U.S. dollar, it is now confirmed based upon the serial numbers of the Bonds, that the $134 Billion is part of the $686 billion of U.S. debt officially held by Japan.
    ...
    The paper bonds below were being smuggled into Switzerland by employees of the Japan Finance Ministry so they could be sold, at discount, under the anonymity of Swiss financial laws. If no one knew Japan was dumping US Treasury bonds, it would not cause a panic worldwide as other nations dumped their US Treasuries too. Japan was rudely surprised when the two employees of the Japan Finance Ministry were grabbed at the Italian border.

  20. EPC says:

    Regarding those Japanese with bonds, someone just put online something from a supposed "insider" in Washington, at http://www.thetruthseeker.co.uk/print.asp?ID=10952. The "leak" is interesting, as a theory (I don't much trust the source), but I still suspect that the bonds were fakes and that the Japanese gents were suckered into buying them by fraudsters seeking not billions, but only a few tens of thousands of dollars from suckers or unwary senior citizens.

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