Why Currency Reserves Matter

Facts matter: Sign up for the free Mother Jones Daily newsletter. Support our nonprofit reporting. Subscribe to our print magazine.


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.”

THE TRUTH...

is the first thing despots go after. An unwavering commitment to it is probably what draws you to Mother Jones' journalism. And as we're seeing in the US and the world around, authoritarians seek to poison the discourse and the way we relate to each other because they can't stand people coming together around a shared sense of the truth—it's a huge threat to them.

Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

payment methods

THE TRUTH...

is the first thing despots go after. An unwavering commitment to it is probably what draws you to Mother Jones' journalism. And as we're seeing in the US and the world around, authoritarians seek to poison the discourse and the way we relate to each other because they can't stand people coming together around a shared sense of the truth—it's a huge threat to them.

Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate