When countries to have foreign currency who backup their claims?
Let’s take this scenario: The USA wants to transfer 100M euro to Germany.
Since money is digital the central bank of the USA can claim that have any number of euro they wants. Who verifies that the USA has really that amount of money?
On local currency local bank are under the regulations of use the country central bank but since there is no global central bank who regulate this forigen currencies?
In other words if the USA claim type in their bank account that they have 1000B euro how do you know if its true or not?
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A country’s wealth is usually measured by their Gross Domestic Output (GDP) of which a lot of favtors contribute too.
Lets say the USA has a GDP of $3 Trillion, they use that money for government salaries, spefing on the military etc, and the rest is used to buy from other countries etc.
The GDP of almost any country is available and the world bank works with all these figures that i cannot understand what all goes into it. This is just my understanding.
A great example is Zimbabwe, my bordering country, Zimbabwe used to havra stronf currency but experienced a lot of inflation, they started printing more and more money that their currency became useless and the world didn’t see their currency as worth anything, so after a while $1 or €1 was worth Billions of their currency, that wouod be why a xountey could not necessarily lie about how muxh money they have (a lot of countries are in debt by the way, but I’ll leave it to reddit to fact check me on all the above)
Because the ECB would know. Every Euro created is a liability (a promise of exchange) created by the ECB (the issuing bank). There is a system of accounts because the ECB will want to know how such a liability is created and where it was transferred.
No Central Banks allows their currency to be created without their oversight – which is why Central banks impose regulations on banks. If the US government holds Euros, then someone must have transacted Euros to them. If the US Central Bank simply “claims” that they have Euro and there is no record of them buying or obtaining such an amount, it will be seen in the accounts.
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