CFP Contributor David Harris below features a compelling story that has yet to make the rounds in media circles, one that serves as but another precedent for investors to invest in emerging markets with low political risk.
The argument for emerging markets has never been stronger:
The western media have ignored the largest smuggling bust in the history of the world, made entirely of American financial instruments.
Italy’s financial police, the Guardia di Finanza, caught two Japanese nationals attempting to smuggle $134.5 billion of United States bonds into Switzerland. They held 249 Federal Reserve bonds worth $500 million each, Kennedy bonds, and various other financial instruments. The two men were crossing into Chiasso, Switzerland, which is about 40 kilometres (25 miles) from Milan.
There are two possibilities that explain this, and one seems more plausible. The first is that this event signifies the largest and most foolish counterfeiting operation in the history of mankind. The other option suggests that nations are beginning clandestine operations to unload American securities, without creating market panic.
The idea that the bonds are fraudulent seems unlikely to many. They would need to be verified before they could be cashed. Two men could not simply walk into Swiss banks, cashing over $134 billion in bonds, without somebody at least checking the serial numbers.
The idea that foreign nations are protecting themselves makes sense. The amount of money in play is so enormous that state action seems likely. The US government’s reckless borrowing, and the Federal Reserve’s relentless money printing, which is so out of control it is no longer published anymore, has created the very real threat of massive inflation. Governments holding US bonds (Japan being one of them), would clearly be concerned about their holdings losing value.
While this story continues to unfold, there may be a clear winner in this situation: Italy. Italy’s money laundering laws include a 40% penalty for failure to declare instruments and cash in excess of €10,000. So, if the bonds are indeed real, Italy is in store for an enormous windfall, which will surely aid some of its budgetary concerns.
Did Japan try to unload $135 billion worth of US bonds in secret? Or did two criminals just try to get a little too rich? Why have the media ignored the biggest financial story of the year? Has there been a slow news week? Emerging markets, with low political risk, are the right place for your money.
