Essem

Hi Mish,
First of all thank you very much for all the insights you impart. Confused a little bit about the trade surplus/deficit and forex reserve. To my knowledge, when trade takes place between two countries, the money goes from/to the purchaser/seller account. How that affects the forex reserve of the central banks. Why countries keep forex reserve, even when their currency is fully convertible. Thanks in advance

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Mike Mish Shedlock
Mike Mish Shedlock

Editor

When the US buys goods from China, the Chinese central bank takes the dollars and pays the sellers in Yuan. China can either sterilize (offset the inflow) or not.


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