I don't think assets of billions of dollars are kept as physical paper dollars or coins.Office_Shredder said:They can lie about it all they want, but they still need the actual dollars if they ever want to spend them.
Isn't it the same as any bank inventing any dollars for any account? What difference does the name on the account make?Stephen Tashi said:I don't think assets of billions of dollars are kept as physical paper dollars or coins.
Presumably reserves are kept in some clerical way. So what limits the amount? If they were kept as records in a bank controlled by the government then what would keep the government's bank from inventing dollars?
I think the question is since money is moved electronically not physically, what prevents banks/central banks from adding 0’s to their electronic transfers. What/who is monitoring the inflows and outflows to prevent this?anorlunda said:Isn't it the same as any bank inventing any dollars for any account? What difference does the name on the account make?
Stephen Tashi said:Presumably reserves are kept in some clerical way. So what limits the amount? If they were kept as records in a bank controlled by the government then what would keep the government's bank from inventing dollars?
I doubt it's the same. The foreign reserves of a country (in dollars or other specific currency) are said to be depedent on its balance of trade. However the system works, a given country cannot simply increase the money supply of the currency of a different country.anorlunda said:Isn't it the same as any bank inventing any dollars for any account?
It makes sense that the majority of the foreign reserves of a country in a given currency (e.g. dollars) would have to be (in some way) under the control of the country that issued the currency. I wonder how much of nations foreign reserves in dollars are kept in direct deposits in Federal Reserve banks - versus how much are kept indirectly? - e.g. can nations make a deposit in dollars in a Swiss bank and the Swiss bank must indirectly make a dollar deposit in the Swiss bank's account in a US bank.Office_Shredder said:In practice most banks keep their cash at the federal reserve now.
Stephen Tashi said:It makes sense that the majority of the foreign reserves of a country in a given currency (e.g. dollars) would have to be (in some way) under the control of the country that issued the currency. I wonder how much of nations foreign reserves in dollars are kept in direct deposits in Federal Reserve banks - versus how much are kept indirectly? - e.g. can nations make a deposit in dollars in a Swiss bank and the Swiss bank must indirectly make a dollar deposit in the Swiss bank's account in a US bank.
It's ironic that keeping track of physical currency is probably less reliable than keeping track of abstract assets. This is due to counterfeiting and corruption in the printing offces of some governments.Office_Shredder said:The fact that all these financial institutions are able to relatively seamlessly transact electronically while actually making sure all the dollars are actually accounted for is a huge infrastructure that took a long time to develop.
Not just due governments, but definitely no wonder that too much physical money is considered troublesome these days.Stephen Tashi said:It's ironic that keeping track of physical currency is probably less reliable than keeping track of abstract assets.
I've been thinking about that. Anyone, country or individual foreign or domestic, can own assets. The assets can be physical and have some degree of liquidity. Gold bullion is a favorite. Assets can also be in the form of bank accounts both foreign and domestic, or in investments both foreign and domestic. Each form of asset storage has its own risks.Stephen Tashi said:I doubt it's the same. The foreign reserves of a country (in dollars or other specific currency) are said to be depedent on its balance of trade. However the system works, a given country cannot simply increase the money supply of the currency of a different country.
No. What I have in mind is that countries (and I presume individuals) can hold financial assets in a particular currency and have them remain in that currency. For example, a dictatorship that needs to import products from the US will want to hold assets in dollars. However, it won't be able to hold huge dollar assets in actual paper dollars or coins. So how does it keep its dollar assets and what prevents its banks from arbitrarily setting the dollar assets that are held?anorlunda said:Where it makes a difference is the floating exchange rate between currencies of different countries. Is that what you have in mind with this thread?
Why not? I searchedStephen Tashi said:However, it won't be able to hold huge dollar assets in actual paper dollars or coins
For example, China has claimed to have about 3 trillion US dollars of foreign reserve. However, I don't know whether that reserve is literally "in dollars".gmax137 said:"Although the amount can’t be precisely tracked, the Federal Reserve Board of Governors recently estimated that foreigners held $950 billion in U.S. banknotes at the end of the first quarter of 2021, or about 45% of all Federal Reserve notes outstanding, including two-thirds of all $100 bills.
Stephen Tashi said:For example, China has claimed to have about 3 trillion US dollars of foreign reserve. However, I don't know whether that reserve is literally "in dollars".
Foreign reserves are assets, typically in the form of currencies or gold, that are held by a government or central bank to support its economy and maintain stability in the foreign exchange market.
Foreign reserves can be acquired through various means, such as exports, foreign investments, and loans from international organizations. Governments can also purchase foreign currencies directly from the foreign exchange market.
Governments hold foreign reserves for several reasons, including to protect against currency fluctuations, to pay for imports and debts denominated in foreign currency, and to maintain confidence in their own currency.
Foreign reserves are typically managed by a central bank or a designated agency within the government. They are often invested in low-risk assets, such as government bonds, and are periodically adjusted to maintain a balance between liquidity and returns.
The level and management of a government's foreign reserves can have a significant impact on its economy and its ability to weather financial crises. Adequate foreign reserves can help a government maintain stability in its currency, support its economy, and build confidence among investors and trading partners.