Back in the 1990 s, Asia s fast growing economies maintained small reserves, despite booming exports and foreign investment.

It was accepted that maintaining exchange controls required a high level of foreign reserves.

These large foreign exchange reserves are no longer held to buffer temporary trade imbalances.

Public finances showed a 2.8 of GDP surplus in 2008, compared to a 1.4 of GDP deficit in 2000 2005. Savings rates are between 10 and 20 , and external debt has decreased from 110 of GDP in 2005 to 21 in 2008.

Indeed, Argentina s sharp rebound has generated a huge accumulation of foreign reserves for the country.

To reduce the strain put on India's foreign reserves by gold smuggling caused by this external use of the rupee, a separate currency was created.

I also am convinced of the need to find ways to bring into play the resources of countries with large reserves.

Over the past year and a half, China s reserves skyrocketed to 1.8 trillion, far and away the world s largest.

Moreover, China, which holds nearly 2 trillion in foreign reserves, must be part of this rescue mission.

Countries that save too much export too much, according to conventional wisdom, resulting in high trade surpluses and growing foreign exchange reserves.

Indeed, in September alone, China s foreign currency reserves increased by almost 100 billion compared to August.

According to one estimate, the dollar s share in central banks foreign reserves declined from about 70 in 2001 to barely 60 in 2010.

Reserves

This gives China the unprecedented for a large trading country ability to accumulate foreign exchange reserves (now approaching 3 trillion).

They should now cut taxes, ease domestic credit conditions, and increase government investments in roads, power, and public housing. They have enough foreign exchange reserves to avoid the risk of financial instability from increasing their domestic spending, as long as they do it prudently.

After all, central banks seeking to accumulate foreign currency reserves will have alternatives to acquiring dollars, so foreigners won t give America so much rope with which to hang itself.

Much of China s official foreign reserves have accumulated because the PBC seeks to control the renminbi s exchange rate, keeping its upward movement within a reasonable range and at a measured pace.

But, while government officials do not deny that sanctions worry them, they point to Iran s high foreign currency reserves and the Iranians creativity in coping with the effects.

They reduced inflation, floated their currencies, ran external surpluses or small deficits, and, most importantly, accumulated mountains of foreign reserves (which now comfortably exceed their short term external debts).

(l) Other reserves

(j) Operating reserves

China s foreign exchange reserves, indeed, are facing a triple whammy a decline in the US dollar s purchasing power, a fall in the prices of US government securities, and possible inflation in the longer run.

The problem for post WWII Europe, mired in depression and inflation, was that it lacked foreign reserves, which meant that trade carried a high opportunity cost. To facilitate trade without requiring payment after each transaction, the Organization for European Economic Cooperation created the European Payments Union in 1950.

These countries need to allow greater exchange rate flexibility and currency appreciation to reduce their external surpluses and thus the need to accumulate huge foreign reserves in the first place.

Covering this drop in reserves more than half of gas reserves and a fifth of oil reserves have been consumed with imports implies an annual cost of more than 300 billion.

Africa s natural gas reserves amount to about 8 of global reserves.

To prevent their currencies from appreciating too much in the first case and falling too far in the second, emerging countries have accumulated foreign exchange reserves, two thirds of which are denominated in dollars.

The growth of SWF s is a direct consequence of the accumulation of more than 5 trillion in foreign reserves by emerging market economies in Asia and among oil and commodity exporting countries.

Table 6 Comparison of reserves and staff liabilities

Other reserves comprise the following

(g) Transfers to reserves

With China running a seemingly perpetual external surplus, foreign currency reserves have continued to mount even during the global economic crisis, with net growth reaching 140 billion in the third quarter of this year.

As a result, China s dollar denominated foreign exchange reserves, which account for the largest share of all the foreign holdings of US government securities, will suffer interest rate losses.

There is little dialogue about how industrial country issuances can be staggered to minimize the impact on global markets, and what alternatives can be developed for countries that are shut out. If developing countries are left to their own devices, they will conclude that they should self insure by rebuilding foreign exchange reserves to even higher levels, a strategy that has clearly hurt global growth.

The activities on all reserves are shown as follows

It is also true that the massive accumulation of foreign reserves that is now feeding the SWFs growth is excessive and driven by misguided exchange rate policies, with vastly undervalued currencies resulting in current account surpluses.

Africa is estimated to hold more than 10 of global oil reserves and one third of reserves of cobalt and base metals.

All of this represents an utterly unexpected recovery from the vast public and private external indebtedness of just a decade ago. Indeed, Argentina s sharp rebound has generated a huge accumulation of foreign reserves for the country.

On 25 November 2011, the first of US 11 billion of repatriated gold bullion arrived in Caracas Chávez called the repatriation of gold a sovereign step that will help protect the country's foreign reserves from the turmoil in the U.S. and Europe.

a Including earmarked reserves, the total reserves are 70 million for 2002, 93 million for 2003 and 68 million for 2004.

Meanwhile, the fraction of international reserves held in euros grew from 18 to 24 , and the dollar s share dropped from 71 to 66 .

The US and Japan might be among the last to face the wrath of the bond market vigilantes the dollar is the main global reserve currency, and foreign reserve accumulation mostly US government bills and bonds continues at a rapid pace.

a Including earmarked reserves, the total reserves are 70 million for 2002, 93 million for 2003 and 68 million for 2004.

It has 10 of global oil reserves.

Total reserves of titanium are estimated to exceed 600 million tonnes.