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
When you make an international purchase you are doing so in their currency. Your bank is doing the currency exchange for you as a part of their banking services. If there was then some scenario where your bank could no longer do the currency exchange then you would not be able to complete those purchases.
Otherwise many of your regular consumer items were imported or dependent on some international trade, even if you the end consumer are buying it locally with your own currency. The businesses, banks, and government have already done all of the international exchange for you, if they suddenly can’t or are restricted in their ability to do so it will have an effect on the availability and prices of the goods you purchase locally.
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