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Foreign exchange reserves normally only come into attention when there is a capital accounts crisis in a country with a sudden surge of capital outflows ... the immediate impact of that is a collapse in the exchange rate, which can interfere with essential imports (food, fuel, etc.), but the central bank can use the foreign exchange reserves to prop up the exchange rate and slow the decline while the government tries to sort out a more permanent fix.
Does peak oil qualify as a sudden surge of capital outflows in energy-importing countries?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Mon Jun 2nd, 2008 at 06:34:31 AM EST
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