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POP QUIZ: Which Government Most Wants to Sell $134.5 Billion in the Black Market?

I don’t typically like spending a lot of time on stories that have more coverage by blogs than actual news outlets, but this one is really too juicy to pass up and it also continues our ongoing conversation about the dollar’s prominence as a global reserve currency. Two men were recently stopped by Italian authorities while trying to cross the border into Switzerland with a fake-bottomed suitcase containing $134.5 billion worth of US Treasury bonds. That’s right – billion with a B. Let’s take just a moment to review which of the United States’ various creditors even hold that much US debt. According to the latest data from the US Treasury Department, this is what we have to work with through April of this year:

China ~ $763.5 billion
Japan ~ $685.9 billion
Caribbean Banking Centers ~ $204.7 billion
OPEC ~ $189.5 billion
United Kingdom ~ $152.8 billion
Russia ~ $137 billion

Caribbean Banking Centers include Bahamas, Bermuda, the British Virgin Islands, Cayman Islands, Netherlands Antilles and Panama.

From the above list, which is the most likely to attempt smuggling undeclared $134.5 billion in treasuries across the Italian-Swiss border? Which is LEAST likely to attempt it? Got your guesses? No cheating! Answer after the jump.

The two men came from Japan.

How many of you actually got that? The loot apparently consisted of 249 certificates of $500 million each and 10 certificates worth $1 billion each. Not a lot of outlets covering this on a spot basis, but initial coverage comes from what appears to be an Italian-based outfit called AsiaNews, followed by the Times of London yesterday.

IMPORTANT : Let’s bear in mind that a) it is not known whether the bonds are real or counterfeit and b) the identities of the two men have not been released. In addition, it appears that the two men have yet to be charged with a crime.

However, as we noted here recently, a number of government officials have been talking up the dollar ahead of the BRIC summit currently underway, including Japanese Finance Minister Kaoru Yosano.

Seeking Alpha’s Marli correctly points out the following:

“These denominations are strictly for government-to-government transactions and are not found in the private sector. The 16 primary dealers who make a market for US government debt are the only private sector organizations even remotely likely to have access to bonds of that size in paper or bearer form. However, the auction process is entirely electronic and has been so for decades ever since the Depository Trust and Clearing Corporation was established. This would suggest that these bonds, if real, belonged to a Central Bank.”

If the two smugglers are indeed Japanese and the bonds are real, taken together with Minister Yosano’s pledge of “unshakeable confidence” in the dollar, this fiasco would be, to borrow a phrase, one of the biggest Pump-and-Dump plays of recent memory.

You’re hungry for more of this story, aren’t you? I could say more about this but I’d rather wait for more information. If you really must have more right now though, Karl Denninger from the Market Ticker was watching it over the weekend and Bloomberg’s William Pesek takes it up in his column today.