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[Juliana Dutra <kila01 AT yahoo.com>]

    Chávez moves reserves out of US Treasuries
http://news.ft.com/cms/s/f32c1946-3605-11da-903d-00000e2511c8.html

    Venezuela has transferred a large portion of its
$30.4bn of foreign reserves out of US Treasuries and
into banks and other financial instruments in Europe,
seemingly for political reasons.

Why does this matter?

Quite simply because the USA needs all the support it
can get from all foreign central bank:

    HOW A US CURRENCY CRISIS COULD UNFOLD
http://www.financialsense.com/fsu/editorials/2005/1004.html

    There are many ways a currency crisis could unfold
for the US. One main one would be selling of UST
bonds. That effectively would be dollar flight, first
out of TBonds into dollar cash, then out of dollar
cash into say, Yen. Or Yuan, or Euros....

    Now at the moment I don't see this happening but
it definitely can.

    In such a scenario, if other foreign central banks
did not all join to support the USD, it would be very
possible that the USD could collapse not in weeks, but
possibly in a day or even if things got hot, in an
hour. Electronic money is so fluid that markets could
be flooded in only an hour. Then the US would have to
halt trading here, but of course there are foreign
markets. I doubt the US could get the international
forex markets to close too... in which case, the
collapse would continue.

    One of the things that concerns me is that the
world really has geared their finance on the US
consumer, and the US housing boom. (...) The US
housing boom is peaking. We still have statistics
indicating that its going strong, but also clear
indications that it is slowing. It is my view that
should the US consumer slow decidedly, there will be
little incentive for the Chinese, say, to keep
supporting the USD. They may decide at some point to
go ahead and try to focus on their Asian markets, as
might Japan, figuring that the US is toast anyway for
a decade. Should that happen, I am sure we will be
looking at a very serious possibility of a real
bonafide USD crisis. Basically they would be saying,
the US consumer market is maxed out, and not worth
saving.

So would Chavez be giving the nudge that collapses
that pyramid scheme?

Or will it not matter anyway?

    We can't pay it off
http://www.financialsense.com/fsu/editorials/finger/2005/1005.html

    All these debts keep piling up. Who's buying it?
Nations with assets, that's who. China, Japan and
India are among the heaviest buyers of U.S. debt. Over
52% of U.S. debt is now held by foreigners. If they
ever decide to sell their debt, the dollar would
plunge, causing a massive inflation in the U.S.
Besides, do we really want so many dollars held by
communist nations such as China? Isn't that
detrimental to our national security?

    One foreigner who's willing to vote with his feet
is Venezuelan President Hugo Chavez. He's selling his
dollar reserves, pulling his country's money out the
the U.S. and investing it in Europe. But, so far,
other countries haven't followed his lead.

    Suppose for a minute that foreign nations remain
faithful to the dollar. Do we really believe that our
government will have the financial wherewithal to
repay its debts? We have explosive debts now: how can
we repay those debts and future debts when the
unprecedented burden of retiring baby-boomers hits the
system? We can't.  One of two things will happen:
either the Federal Reserve will embark on a system of
hyper-inflation, such as what Germany saw in the
1920s, or our own government will default on its
uncontrollable debt. There's no magic number to tell
us when either one of those will happen. But anyone
who reads between the lines can figure it out, and
neither scenario will be pretty - especially if both
occur.

    U.S. bonds are considered the safest investment
around. They are given top ratings by all ratings
firms and are considered the least likely to default.
But the pressure on the almighty dollar is building at
such a rapid pace - $1.8 billion a day in trade
deficits and over $1 billion a day in budget deficits
- that the bond will have to cry "Uncle" at some
point. It may be a year from now or ten years from
now, but it will happen. I predict that by the time
President Bush leaves office, the U.S. Treasury bond
will no longer be rated investment grade.

    Imagine what it will be like when you get no
Social Security check. Or when your military pension
stops. Or you can't afford the medicine you need to
stay alive. Or, if you do get a check, it will be
virtually worthless due to hyperinflation. We are
headed to a system where those who have money - real
money, that is - live, and those without it die. We've
seen it with the government's reaction to Hurricane
Katrina. Expect it to be far worse when Hurricane
Uncle Sam hits