Why Currency Reserves Matter

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This goes in the “obscure but sort of important” folder. Eduardo Porter reports that developing countries are building up excessively large currency reserves, partly as “insurance against financial disaster.” Rather tragically, these countries tend to lose money on all the dollars they’re buying up—and it’s not like they can really afford to lose money here—and what’s worse, the money they spend padding their reserves is money they’re not spending on important things, like health care or infrastructure or other domestic investments.

So why are they all doing it? Dean Baker and Karl Walentin have argued before that it’s because everyone thinks the international financial system is rather volatile and no one wants to go through the same meltdown that countries in East Asia suffered in the late ’90s. But the fact that these poorer countries all have to incur very large costs because of a rickety system set up largely to benefit the richer countries indicates, as Baker and Walentin wrote, “a serious failing of international financial institutions.”

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

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