I was reading about Bolivia running out of US Dollars and the government is shitting their pants.
Why is this a problem?
I don’t have any US dollars and I’m fine. If I buy something from an American website, I don’t need US dollars. I only have Euros in my bank account. I will use my Euro bank card to buy something from the American website.
Same if I buy something from a Japanese website. I don’t need Japanese Yen. I just use my bank card.
I can survive my entire life without worrying about having “foreign reserves”.
So why do countries like Bolivia need foreign reserves to buy some oil or whatever?
In: Economics
Since most have already given the reason, I will share a recent example.
During the outbreak of the Russian Ukraine war, Russia was hit with sanctions which reduced the buyers. So Russia offered to sell crude to India in exchange for rupees. India took them up on the offer. But, again due to petroleum, the trade between them was lopsided with Russia selling a lot more to India than it was buying from India. This led to Russia holding a rupee surplus that it didn’t know where to spend. India is still a net importer so there are not a lot countries willing to sell to Russia in exchange of rupees. They ended up investing a lot in the Indian bond market.
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