Saturday, October 20, 2012

Why is most of the money the treasury makes held outside the U.S.?

The major reason for this is that the US dollar is what is
called a "reserve currency." This is a currency that is kept by many foreign governments as a
large part of their supply of foreign currencies.


Governments like
to keep reserves of foreign exchange for various reasons. They like to keep these reserves in
currencies that are most likely not going to go down in value. For this, they want the currencies
of countries that are economically strong and stable. Over the last 60 years or so, the US dollar
has been the world's main reserve currency because the US has been prosperous and
stable.


Because the US dollar has tended to keep its value well,
other countries' governments like to hold it as part of their foreign reserves. This is why the
majority of US currency is held outside the country.

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