America still isn't talking about the $134.5 billion in "counterfeit" securities caught in Italy, at least the MSM media outlets. And as Zero Hedge pointed out earlier today, no one's asking the United States government to make a scene out of this, it might just be nice to get a statement for the sake of the tin foil hattists and the rest of us wondering "WTF?!"

Surely I am not afraid to admit to being a card-carrying member of the Tin Foil Hat Society; End the Fed sign from last November's protest made out of cut up Ron Paul 08 campaign signs? Check. Skepticism over the official 9/11 report? Check. I do, however, draw the line at David Icke's "The global elite are really shapeshifting lizards" theory, though I do enjoy reading the theories for a good hearty laugh. Lizards! As if! The monkeys are bad enough as is, no need to introduce cold-blooded lizard DNA into the mix.

I digress.

This story is still getting minimal coverage in the United States and UK, though it is making the rounds in other areas in Europe. What gives?

KD has an update at Market Ticker and until I can dig a bit further, this will have to do. Just to catch you up, original Jr Deputy Accountant posts on this may be found here, here, and here. The plot thickens!

So let's assume that the certificates are real, as German media seems to believe and which, by the way, makes logical sense given what they were and the sheer impossibility of cashing a fake $500 million bond.

Ok, who has $130 billion in bearer bonds? Remember, bearer instruments haven't been issued by the Treasury since 1982, when they became illegal to issue, at least to US institutions and residents (there was an exception carved out for Treasury instruments issued to non-US residents in 1985 - a time of high deficits) The answer to that question: it is rather unlikely that there remains $130 billion of legitimate US Bearer issuance outstanding anywhere - to anyone.

Mr. Holmes would be initially puzzled by such a caper. On the one hand we have the impossibility of the bonds being real, because there simply isn't $130 billion of issues remaining outstanding. On the other hand we have the impossibility of negotiating a fake $500 million bearer instrument, making the exercise of counterfeiting one expensive and futile.

This leaves us with more questions than answers at this point.

Or does it?

As Mr. Holmes is famously rumored to have said, "once you eliminate the impossible, whatever remains, however implausible, must be the truth."

So what remains? Let's run a theory here - one of the few possible remaining options, given the exclusion of what we know not to be true...

Are we willing to assume that all the "issue" of Treasury bonds has been done "above board" as required by law. If Treasury has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn't want reported over the last, oh, say 10 or 20 years, then the following is about to occur:

Who could have possibly been complicit in such a scheme? I can come up with only two nations (and only nations could be involved due to size): The Japanese and Chinese. Since the two individuals who were arrested were reported to be Japanese nationals......

There are tremendous implications in an event like this, again, assuming the bonds are real.

The owner is going to want them back, of course. But Italy is going to keep a third as their statutory penalty for non-declaration on the border. Oops. That's great for Italy, but it blows bananas for the actual owner.

Of course Italy (or the US!) could declare them "fake" and as a consequence simply burn them. If they are in fact real, that's an even bigger problem. See, Bearer Bonds are issued without registration - they are as anonymous as a $100 bill in terms of who owns them. That's one of their "features", and why they were often used for various clandestine money operations. So if they are real and are destroyed, the owner is out of luck - their money is gone just as it is if you burn a $100 bill in an ashtray.

How much is $130 billion in this context? About 1/5th or so of what Japan legitimately owns of US Treasury debt. How would you like to take an instantaneous (and permanent!) 20% haircut on your securities? That's what I thought.

To add some balance here, there have been stories about fake bearer bonds coming out of North Korea and other places for years. But the idiocy of attempting to pass a $500 million certificate belies this possibility - who in the name of God would take such a thing and give you anything for it without authenticating it first? While bearer instrument are "anonymous" in terms of who owns them, their authenticity is easily verified as they ARE serialized instruments.

I remain puzzled, and am not advancing the above theory as fact.

It is, however, one of the few explanations that actually fits the facts, and for that reason, I think we need some answers. If in fact previous administrations were issuing "off-book" Treasury debt in this fashion to sovereigns then implications are truly explosive as such issues are blatant and outrageous unlawful acts and would expose everyone involved to severe criminal penalties.

I am with KD. It is all wild speculation at this point. And still, it is my understanding that no one is in custody though you will have to forgive me as my Austrian is a little rusty these days. Now does that work? If someone is caught smuggling billions in undeclared securities across the border, they should be detained and arrested. If someone is caught smuggling billions in fake undeclared securities, they should be detained and arrested. And yet these two Japanese cats? Where are they?

What got me when I first heard the story was the claim that there were "250 Federal Reserve bonds" (Janet Yellen, are you trying to smuggle F-bills into Switzerland, you tricky little scamp, you!) and it is that detail which above all other strange and obscure details leads me to believe that this is merely a case of a couple of suckers being in the wrong place and the wrong time with a few too many fake bazillions in financial instruments not normally thrown around so carelessly (I know *I* prefer to keep my $500 million securities tucked safely in my bra between my lighter and a roll of cash when traveling - isn't that what everyone does?). What in the hell other conclusion can one come to?

I do, however, quite enjoy seeing at least the bloggers who are picking this up speculate wildly as to the true financial obligations of the United States. Oh shock and awe! OMG we're not nearly as credit-worthy as we pretend to be! Could it be?

Well, probably not in this case. But still, it's an interesting story none-the-less.