Ooh...a conspiracy?!

As you may or may not have heard, sometime last week it was reported (although not widely--I heard about it on Glenn Beck) that police in Italy had seized $134 billion in U.S. government bearer bonds from two "Japanese nationals" who were trying to smuggle them across the Italy-Switzerland border in the false bottom of a suitcase. According to the Guardia di Finanza, Italy's tax police, the seizure consisted of 249 "Federal Reserve" bonds of $500 million each and 10 "Kennedy Bonds" of $1 billion each. There hasn't been much else reported about this since except that both the Italian authorities and U.S Treasury have concluded that the bonds are counterfeit, the U.S. examining the certificates first via fax and then via internet images. The Treasury also issued a statement indicating that since there is only $105 million in Treasury bearer bond securities outstanding, $134 billion is obviously not possible. The only other thing I've heard is that the "Japanese nationals" who were caught with the bonds are believed to have been released.

Admittedly, I don't know a whole lot about "bearer bonds" and the accounting process that goes along with these but given that the Treasury says that there are only $105 million in outstanding bonds, it seems pretty obvious that these are indeed counterfeits. What I found even more interesting was Glenn Beck's assertion on one of his programs that he felt that the culprits, for a variety of reasons, wanted to be caught. This seemed strange to me and prompted me to do some more research on the whole situation, out of curiosity, and I happened upon something from the World War II era called "Operation Bernhard," that I had never heard of before. It casts this current situation in a bit of a different light...it's likely nothing but it was interesting nonetheless.

Operation Bernhard was a secret German operation during World War II whose goal was to produce a large number of counterfeit British currency and circulate it through Britain, thereby destabilizing the British economy. According to the wikipedia entry, it is the "largest counterfeiting operation in history" and has been the subject of many books and even a movie. The operation was named after its director, SS Major Bernhard Kruger, who organized it at a concentration camp and "staffed" it with camp inmates. Apparently, the plan was originally to drop the counterfeit notes out of planes flying over Britain but, after it was determined that this would not be feasible, the notes were eventually used by the Germans to purchase items and pay personnel. The entire counterfeiting plan never was fully realized and ended with the closing of the Sachsenhausen camp in 1945, but by this time the Bank of England had become aware of some of the counterfeit notes and called them "the most dangerous ever seen." The wikipedia article again states that by the time of the camp's closing, "the printing press had produced 8,965,080 banknotes with a total value of 134,610,810 pounds" and that the "notes are considered among the most perfect counterfeits ever produced, being almost impossible to distinguish from the real currency."

Reading about this really got me to thinking about what Beck had said about the two smugglers who were recently caught wanting to be caught. I don't know about anyone else, but when I think of "counterfeiters" I think of the mafia or a shady operation in back room somewhere (these could still be "large" operations) who want to be able to "get rich," not a government entity "authorizing," whether implicitly or explicitly, a massive counterfeiting operation with the goal of destabilizing the economy of a rival nation. I'm probably way off, but somehow this seems much more sinister.

So, what about this most recent incident? Well, there is already little confidence in the U.S. economy amongst most of the rest of the world. It seems to me that the discovery of a large-scale operation counterfeiting U.S. currency or bonds, or several large-scale operations--that the U.S. government essentially had no knowledge of--would certainly shake this confidence even further. Of course, there's probably still a great deal more to this story but if the government didn't know much about this before the seizure of the bonds in Italy it certainly seems possible that this counterfeit is likely in circulation in the U.S. already. I don't believe that the intent now would be to flood the U.S. with actual bogus paper bills but that such discoveries themselves would be enough today to help push the U.S. economy "over the edge" so to speak.

I admit that I myself find this unlikely but it's an interesting thought nonetheless. There are certainly some nations and/or governments who would likely have an interest in further disruption of the U.S. economy. And just to be clear, I'm not suggesting Japan--the "fact" that the culprits in this incident were reported to be Japanese has actually not been confirmed and even if they were, it's entirely possible they were working on the behalf of another entity. Anyway, I really just found the whole situation interesting and the new thinking about it that Operation Bernhard prompted. It's probably nothing, but you never know...