Venezuela’s president Hugo Chavez has lost confidence in Western economies. Some surprise! Long an embittered critic of “savage capitalism,” Chavez always sees dark clouds hovering over global markets and the free enterprise system.

This week, the populist strongman pronounced U.S. and European economic prospects to be too shaky for his tastes. Instead, he’s going to place Venezuela’s gold reserve and other liquid assets in China, Russia, and perhaps even Iran. The gold may be no safer there, but doubtless Chavez feels more comfy dealing with authoritarian countries.

In a world buffeted by financial turbulence, gold looks like a glittering safe haven. Should the global economy tank, Chavez wants to sit atop his petroleum reserves at home, with a pile of off-shored gold stashed away under the protection of countries that “know how to deal” with the social unrest that might accompany a financial meltdown.

In Chavez’s world view, totalitarians are the good guys, not the bad guys. For him, the real villains are the suits in Wall Street or the City in London. They are part of the cabal of international capitalism against which he battles in the name of the Bolivarian Revolution and Socialism of the 21st century.

Now he is using Venezuela’s international gold holdings as a weapon in this war. As weapons go, it’s really high-end. Venezuela’s 440 tons of gold rank 15th in the world. In fact, Venezuela holds more gold than Saudi Arabia or the United Kingdom.

In the weeks ahead, Venezuela will presumably move its assets – either paper certificates or actual bars – back home to Caracas or to destinations Chavez considers more stable, more accommodating, and certainly less transparent.

Yet, people who actually understand how the international economic system works point out a central fact of economic reality. You can’t eat gold. It will not run an economy or create jobs. Gold is not a cure for corruption or mismanagement, two of the biggest problems afflicting Chavez’s Venezuela.

Like the world oil market on which Chavez depends for more than 90% of his nation’s foreign earnings, gold is a commodity. And it is just as subject to speculation and volatility.

Could there be some motivation behind Chavez’s move beyond mere nervousness about Western markets? You bet.
Chavez’s continuing campaign of nationalizing private holdings continues to spark international litigation. If court cases that don’t go the strongman’s way, Venezuelan gold and others assets left parked in countries with genuine rule of law might be seized as compensation. Let’s see the legal eagles try to get their hands on gold bars stashed in Beijing!

There’s another advantage to moving assets, too. When in transit, it’s easier for gold to “disappear” into the hands of friends. Should some happen to go missing to friends of Chavez, c’est la vie. Not so with bank accounts. Some strategic “disappearance” could come in might handy should post-regime Venezuela launch investigations or trials involving Mr. Chavez and friends.

The move also serves an immediate practical purpose. For China and Russia, the gold is collateral for the loans for oil and arms they have advanced to Venezuela.

Above all, Chavez’s decision allows him to indulge in his favorite pastime: international grandstanding. It gives him a gold-plated megaphone for repeating his contention that market economies are doomed, doomed, doomed to fail. Long ago, Chavez announced that the way we run our country, our free markets, and our concepts of private property are on their last legs. Socialism will prevail.

Shining through is Chavez’s perennial desire to punch above his weight in the global arena. Venezuela’s economy may rank 34th in the world, but Chavez is easily among the Top 10 Grandstanding Heads of State.

Unfortunately for Venezuelans, their leader’s economic policy has plunged the country to near dead last in the rankings of the Index of Economic Freedom, compiled annually by The Heritage Foundation and the Wall Street Journal. As a result, they are beset by massive inflation, growing indebtedness, and periodic scandals of corruption.

Driving and overshadowing his decision regarding Venezuela’s gold reserve is Chavez’s infatuation with Cuban communism. Wall Street will not lose sleep.

Far more worrisome than his gold antics is Chavez’s destruction of Venezuelan democracy… the radicalization, militarization, and criminalization of his country… and his support for Iran and terrorism.

Ultimately, Venezuela’s future will not be decided on the international gold market but in the violent streets of Caracas.

Ray Walser is a senior policy analyst in The Heritage Foundation’s Allison Center for Foreign Policy Studies.