Too many dollars in reserve?
Too many dollars in reserve? Risks to US currency’s global desirability are America’s high inflation & high government debt
By Neelkanth Mishra:
Sanctions following the Russia-Ukraine conflict have triggered much discussion on the impact on how other countries would manage their foreign currency (FX) reserves going forward. These reserves are a country’s insurance against economic shocks, like households or companies keeping some assets in ‘liquid’ form, which means easily convertible to cash, or in cash.
A country’s FX reserves need to be similarly liquid and stable in value at times of crisis: Imagine holding an asset as insurance which becomes inaccessible during a crisis, or whose value drops sharply! The ‘safety’ of reserve assets is thus paramount, which depends on the type of assets held and the currency in which they are denominated.
Read the full article here: https://timesofindia.indiatimes.com/blogs/toi-edit-page/too-many-dollars-in-reserve-risks-to-us-currencys-global-desirability-are-americas-high-inflation-high-government-debt/