Operation Vulcanica Redux and Black Market Bonds
It was once the most boring topic on Earth, but monetary policy like the libertarians whom advocated for its change came out from the wilderness and similarly the Federal Reserve has become quite the hot commodity – forgive the pun. Full of intrigue, the United States’ central bank has constantly been in the news and over more than just its failure to anticipate the 2008 financial crisis, fear of inflation, or its $16 trillion credit card. For example, the Wall Street Journal reported yesterday that the Federal Reserve earned $77 billion last year, slightly below its record $81.7 billion profit set in 2010 – who are these guys?
While the average American struggles to remain employed or in their home the Federal Reserve as well as its major banks have done very well for themselves and by design. How could you fail with a perpetual money machine watching your back? If you haven’t already read it the Economic Populist provides a sterling analysis of how easy it is to turn a profit when your buying and selling U.S. Treasuries from and to the Treasury with money made out of thin air, through quantitative easing and exotic maneavers like “Operation Twist”, in other words, “the great financial circle jerk.” Evidently the U.S. Treasury is making money too and from a surprising source – remember those toxic assets acquired during the financial crisis? Yeah, they’re returning a sweet 8 percent nowadays. The breakdown is worth the read
Graphed above are the total assets held as reported by the Federal Reserve’s press release. For our purposes this white-knuckle asset line and its persistent trajectory through March 2012 gives us an indication of how attractive the brave new world of black market bonds is.
In 2009 two Japanese nationals were apprehended on the Italian-Swiss border trying to smuggle a paltry $239 billion in U.S. government bearer bonds. I say paltry because just last month $6 trillion in fake U.S. Bonds were seized in Zurich. It would have amounted to around a third to a half of U.S. public debt in circulation. Dubbed “Operation Vulcanica” it would have posed a “severe threat to international financial stability” if the ruse had gone through. The situation became even more curious, however, when it was revealed the fake bonds were held in ostensibly legit Chicago Fed crates.
This is some bizarre stuff, but it keeps on coming. Evidently copy cat criminals thought $6 trillion might have been overdoing it so they tried something a little more approachable. Yesterday PressTV reported that Polish police apprehended an international group consisting of eight people: two Italians, two Ukrainians, a women from Moldova and three Poles,” all attempting to put counterfeit U.S. treasury bonds worth $100 million on the open market in Poland.
Chum is in the water. Evidently the Federal Reserve’s activities have attracted other albeit smaller sharks attempting to nibble at what is left of American wealth. The question is, like other black markets, how many people haven’t been caught?