Italian authorities seized $135 billion in U.S. bonds from two Japanese nationals preparing to cross into Switzerland, leaving many to wonder how two individuals managed to get their hands on so much money. In fact, the bond denominations the men had are only used in state-to-state transactions.

Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.

A few things. First of all, assuming the bonds are real, how did these two guys get their hands on bonds in denominations that only states use in transactions? Were they stolen from a government – or did a government give them the bonds? The amount is large enough to affect how the dollar trades.

Second, if they are fake, how many of these counterfeit bonds are making their way around the world? And more importantly, who or which country is responsible for printing the counterfeit bonds? Ed Morrissey points out that North Korea has printed fake U.S. money in the past, though this seems to be on an entirely different level of sophistication.