ABSTRACT
The reserves of a country are like the working capital of a company or the current account of an individual. In most countries they constitute the foreign currency balances of the central bank and the gold held by the central bank, together with certain special items such as the newly created Special Drawing Rights. As with the cash balances held by individuals or companies, so also with the gold and currency reserves of countries it is important to remember that they do not represent the total assets of those in whose name they stand. Indeed, some of the richest countries in the world have small foreign currency reserves, whereas some with very large foreign currency reserves have few other assets overseas. Such other assets might be in the form of stock exchange investments held by individual nationals, or subsidiaries owned by national companies in foreign countries. They also include such items as the currency balances of the commercial banks, which are of course part of the national reserve but not part of that more narrowly defined item, the currency and gold reserves.
