Pardon if this is a silly question, but if, say, an oil-dependent country sells its oil (which will mostly be done in USD), it’ll have a whole bunch of USD and none of its local currency. How does it get its currency so that it can spend on whatever it spends on? I’d think it ‘buys it’ from international markets, but it itself is the country that’s supposed to create it, so I’m unsure.
In: Economics
Governments print their own currency. When you have a large influx of foreign currency, you can say “Dont worry everyone, I know it looks like we are printing a lot of money, but if you dont trust that we should, you can trade it to us for USD” which effectively pins their inflation rate to the foreign currency they back it with (assuming they actually have enough foreign currency for everyone who doesnt trust them)
And its up to the government what the “local currency” even is. Many non European countries have said “Screw it, we are trading so much with Europe, we are just using the Euro now” same for the USD (and a few others)
The only really special thing about a “local” currency is that you can pay your taxes in it, and the government expects to be able to buy things with it.
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