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
Because other countries don’t want Bolivian currency. If you took your euros to the USA, you wouldn’t be able to use them at a gas station or restaurant, you’d have to convert it to currency they would accept. There isn’t a lot of demand for Bolivian currency, so it might be difficult for the Bolivian government to pay for things if they can’t get ahold of enough currency that other countries want, like US$ or Euros. Additionally, their currency might not be as stable in value, so fewer countries would want to trade for their currency as it might lose too much value before they could use it themselves, which might be a long while as Boluvia doesn’t produce very much that the rest of the world wants to buy.
When you buy stuff online from foreign countries, or use your bank/credit card in foreign countries, your bank and/or credit card company make the conversions between currencies according to whatever current rates they use.
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