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[Tim Oppenheim <timopp AT mac.com>]

Hmm Interesting, just a couple of things to stir some debate.

The old saying, borrow a $100 from the bank and the bank owns you.  
Borrow a million dollars ( or some huge number) you own the bank. I  
think that be a pretty good adage and applies here. There are  
hundreds of trillions of dollars invested in US securities, a run on  
them would cripple the world economy.

We are pretty much "the" market for China and the Pacific Rim, they  
would do much to insure our healthy economy.

Tim

On Oct 6, 2005, at 11:30 AM, Juliana Dutra wrote:

>     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
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