Say country A sends some billions of dollars to country B in aid or in exchange for some resource. How does the actual transfer take place? How does the wealth of country A decrease and the wealth of country B increase?
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In addition to wire transfers which is really just bookkeeping, the Federal Reserve Bank in New York has a vault full of gold, owned by various countries. From time to time they literally move bars of gold from Country A’s pile to Country B’s.
There’s a piece of computer code where one computer tells another computer to change a number in a database, and the other computer agrees to do that.
The Bank of International Settlements, also commonly referred to as the Central Bank’s Central Bank.
Usually by wire. In the Obama Iran nuclear deal, he literally sent planes with pallets of cash at their request, to make the terrorist funding untraceable.
Money is interesting. If country A gives Country B a bunch of their currency, then country B basically can come into the free market economy of Country A and take things. No fighting. No fuss. They just hand over paper and take things.
What do they take?
Large tracts of the best land.
Huge infrastructure, oil refineries, ports , ships, cars, water resources, etc.
The best jewelry, food, houses.
They can court mates using outrageous wealth.
Television channels, radio stations news papers.
Mercenary contracts, police bribery, political movements.
Large amounts of protein rich food .
This is why the rich have to push not only for monopolistic schemes of wealth extraction, but also a “free market”. What they mean by free is that money is free to be exchanged for anything and everything, even if it jeopardizes sovereignty and human rights.
If the country who hands over money has price controls, nationalized assets, wage controls, trade restrictions, embargos, tariffs etc, then that money becomes limited in it’s use and of less worth to outsiders, though it may be s perfectly functional intrastate currency.
Some conspiracy theorists would say, the way the rich do it is through fine art sales, or antiques, and down the line of denominations to fine watches. Need 70-80k in somewhat of a hurry? Sell that Rolex panda in whatever country you are in, in that place you know of. They’ll buy it, or have a buyer in a jiffy.
So. Aside from all the other answers, I think if you are thinking of aid to Ukraine, the answer is that most of that money does not get transferred. Ukraine’s central bank has an account at the US central bank and EU central bank, so the respective governments just deposit “money” (numbers… but number that have to be accounted for) into those accounts.
Now, of Ukraine wants to buy a box of bandaids or some hookers or maybe a missile system, they just charge it to that account.
This is one of the things that goes unmentioned in these deals. When the US provides aid, that aid predominantly needs to be spent IN the US. They can transfer that money elsewhere, but the bulk of it will be spent in the US, and the US will tax the people that got those orders, and their subcontractors, etc.
US military spending is a welfare program just as much as actual welfare. Arguably more effective even.
tl;dr: is that it is basically a line of credit for buying imports. Thus, the account that is transfered can be used to buy imports without using country B’s local currency, and importing without having to pay via exports will increase a country’s wealth.
Trade basically has to work this way, because actually transferring the currency to cover trading levels would be insane. Back in the ol’ days, there was the gold standard, which basically meant that countries traded and if one side ran up a balance too high, they would have to physically send gold to cover the amount. Since we have moved away from the gold standard that doesn’t really happen anymore. Nowadays you effectively stop being able to import goods (the value of the local currency on import markets goes down to 0, so you can no longer afford to import).
If I want Good A for my country, who I need to pay for in $, but I only have £. I need to go export something that people want so they will buy my £ for $ so they can buy the item I am exporting, and those $ I can then use to buy what I want to import.
If someone hands me $, then I can buy my imports with $ without having to sell goods to generate $.
Or: I’m having a Crisis! My little nation is out of money and I can’t pay my police, everything is going to go down the drain!
An angel has come and provided an account in a NY Bank with 10M$ in it. Woo!
But Wait! I can’t pay my police with those $, they are paid in £. The bank doesn’t have a branch in my capital, so what is the value if having money half the world away? It is still hopeless right?
Except I can go hire someone in NY with that money to fill a tanker full of gas and drive it across the world to my military base. Now the money I would have had to spend on gas is freed up and I can use it to do all the other things I need to do. Saved at last!
Note that this is **very different** from a currency crisis. In the case there is a lack of physical currency in a country (such as what might happen if the local currency gets so devalued the country swaps to using an external currency), it means there is literally not enough physical dollars to go around, even if there is the value on paper. In that case, you do need to physically move in actual cash.
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