Sometimes a bizarre event seems to capture the madness of the times, and this news a href=”http://www.bloomberg.com/apps/news?pid=20601101amp;sid=ayy1QKcwcGN0″span style=”color:#cc0000;”from Bloomberg/span /afits the bill. strongemA couple of Asians carrying Japanese passports have been arrested by Italian border police with a trunk load of non-negotiable US bearer bonds to the value of $134bn./em/strong It’s not as crazy as it sounds. The Fed did actually issue bearer bonds up to the value of $500m each until the late 1960’s (when electronic record keeping superseded them), and these look on initial examination like the genuine article. If they are real, they could only have come from a handful of countries with sufficient dollar reserves to have accumulated such a huge sum, notably China and Japan. If they are fakes, it would be the biggest such operation in history, and would almost certainly imply state involvement, with North Korea the prime suspect. Either way, even in the context of the trillions we have become accustomed to seeing tossed around in bailout plans, we’re talking serious money.br /br /The significance of this story is that it highlights the very topical importance of retaining investor faith in a fiat currency; if the supply of money is suddenly perceived to be vastly higher than believed, whether as a result of policy or widespread fraud, confidence can be badly shaken. If this was another crazy North Korean forgery scheme, it gets close to a emcasus belli/em on top of the relentless provocation of the US in recent months. If, in the less likely but possible case that an Asian country were genuinely but secretly attempting to dump dollar paper for other assets, the implications are very disturbing for international markets.br /br /emstrongspan style=”font-family:trebuchet ms;color:#3366ff;”This article continues at /span/strong/ema href=”http://www.deadcatsbouncing.com/”emstrongspan style=”font-family:trebuchet ms;color:#cc0000;”www.deadcatsbouncing.com/span/strong/em/adiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/1897020887579135393-402923588351559638?l=deadcatsbouncing.blogspot.com’//divdiv class=”feedflare”
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Last 5 posts by Sean Maher

• Geithner Toxic Asset Plan Collapses: Will US Banks Follow? - June 10th, 2009
• US Unemployment hits 9.4%...that's Bullish, Right? - June 5th, 2009
• Oil Price Surge: Deja Vu? - June 3rd, 2009
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• Bond Market Rediscovers Inflation... - May 22nd, 2009