Soma and ESF portfolios are managed equally to make their risk and return characteristics as consistent as possible. Where feasible, the investment will be distributed in proportion between SOMA and ESF Holding Company.
The Federal Reserve Act authorizes open market transactions, including foreign exchange transactions, and the Federal Reserve of new york conducts such business according to the instructions of the Federal Open Market Committee (FOMC).
1934 the gold reserve act authorizes the us treasury to establish the European treasury, and the federal reserve bank acts as the financial agent to manage the foreign debt holdings for the chief financial officer. The U.S. Treasury Department is fully responsible for the international financial policy of the United States.
The United States has no foreign exchange reserves.
The reason why the United States has no foreign exchange reserves is because the US dollar is the dominant currency. At present, according to the dependence of foreign exchange reserves, the world currencies can be divided into three categories: one is the dominant currency, the other is the reserve currency, and the third is the common currency. The dependence of overlord currency on foreign exchange reserves is zero, the common currency is one, and the reserve currency is between zero and one. The dollar is the main currency. Euro, Japanese yen and British pound are reserve currencies. Although the RMB has great influence, it is still in the ranks of ordinary currencies. The history of international economic development shows that a currency plays an important role in the international monetary system, with strong economic strength, good currency stability and low dependence on foreign exchange reserves, and vice versa. In today's world financial globalization, maintaining a considerable amount of foreign exchange reserves is an important guarantee to stabilize the value of the local currency. However, it is not without cost to reserve foreign exchange. First, reserving foreign exchange is equivalent to holding financial claims expressed in foreign currency and saving for other countries. Secondly, the increase of foreign exchange reserves needs to expand the money supply accordingly. If there are too many foreign exchange reserves, it will increase the pressure of inflation and increase the difficulty of monetary policy operation. Third, holding too much foreign exchange reserves often faces trade friction from the other side, and at the same time bears the losses caused by foreign exchange depreciation.
The reason why the United States has no foreign exchange reserves: 1. Manipulation and pricing of patented products.
To understand the real reason why the United States has no foreign exchange reserves, we must trace back to the history of dollar hegemony. Strictly speaking, the United States also has foreign exchange reserves, but the scale is very small, accounting for about 0.59 months of its imports. Germany, France, Britain, Canada and other developed countries, their foreign exchange reserves account for about 1. 1 ~ 1.9 months of their imports; In contrast, Japan's economic development is second only to that of the United States, and it is also a big exporter of financial assets and capital, with extremely excessive capital, and its foreign exchange reserves are imported 13 months. Obviously, an important reason why the United States does not need foreign exchange reserves is that as an international reserve currency, it can be directly used for external payments, and it is not necessary to use foreign exchange reserves to adjust the balance of payments, adjust the foreign exchange market and make international payments. These three functions are closely related to the three sources of foreign exchange reserves: first, from the surplus of commodity trade, second, from foreign direct investment or foreign currency loans, and a large part from other unclear channels.
As we all know, the establishment of dollar hegemony is due to the changes in the international monetary system. Dollar hegemony is based on the steady development of economic strength. She relies on two systems to ensure the world competitiveness of her economy. First, a developed higher education system. It creates the most important knowledge products in the world by absorbing outstanding students from all over the world and conducting basic research for them. Then through the intellectual property protection system and scientific and technological innovation system, these property rights will be transformed into direct and indirect products and sold all over the world. Products in the world have the pricing power of products and are not affected by fluctuations in the world market, so that this price can be adjusted according to the specific trade pattern, so that the entire American economy can maintain an appropriate development speed.
The reason why the United States has no foreign exchange reserves is that it is difficult to convert euros into dollars.
Another source of dollar hegemony is a reasonable game model between bipartisan politics and the independent Federal Reserve. On the premise of maintaining stable economic growth, the financial market is relatively mature, and various monetary policy transmission mechanisms are running well, which provides a good operating environment for flexible use of monetary policy. The change of the international monetary system has finally created the strong position of the US dollar, and the reasonable adjustment of the US economic structure and the sustained development of the economic aggregate have further created a relatively good atmosphere for maintaining the stability and hegemonic position of the currency. Due to the excessive power of the US dollar, it brings more financial risks to all countries in the world, so the voice of reforming the international monetary system is rising. Many experts and scholars believe that the instability of the current international monetary system comes from dollar hegemony. The United States has benefited from seigniorage and currency stability, while other neighboring countries have borne more costs of inflation and financial crisis. The international community is tired of dollar hegemony. In recent years, the rise of the euro has posed a severe challenge to its hegemony. Many people pin their hopes on this new currency. After all, for other countries, there is another choice when reserving foreign exchange. However, so far, no currency can pose a strong challenge to the hegemony of the dollar. In fact, the dollar still occupies a central position in the international monetary system. Just look at how it maintains the trade balance with other countries, and you can get a general idea of the mystery.
The reason why the United States has no foreign exchange reserves is that financial hegemony arouses dissatisfaction.
There are two countries around the United States: one is the country that implements the export-oriented strategy (mainly East Asian countries). These countries regard the United States as the most important export market, accumulate a large amount of US dollar reserves through the current account surplus, and then keep these reserves in the form of purchasing US Treasury bonds. From the perspective of the United States, it has obtained the injection of real resources by exporting dollars, and these exported dollars often flow back to the United States by buying US Treasury bonds. For example, in the trade with East Asian countries, because the United States exports a lot of dollars through the current account deficit and injects a lot of substantive resources (mainly commodities) into itself, it not only meets domestic consumption demand, but also helps to maintain domestic price stability and enjoys the benefits of seigniorage. At the same time, because East Asian countries have accumulated a large amount of US dollar reserves, the main way to hold US dollar reserves is to buy US Treasury bonds, which helps the United States to finance its current account deficit by paying lower interest rates, thus avoiding unsustainable current account deficits.
According to the data of the U.S. Treasury Department, in the past three years, the capital inflow from Asia accounted for 40% of the net inflow of foreign capital in the United States, while in 2004, the proportion was close to 50%. Therefore, it can be considered that the reason why the United States can maintain the balance of payments so far depends largely on the re-injection of foreign exchange reserve funds in East Asian countries. The other category around the United States is European countries and Latin American countries (including some OPEC countries). Investors in these countries buy a lot of financial assets (stocks and bonds, etc.). ) issued by American companies or the US government. By selling these financial assets, the United States has integrated a large amount of real capital into neighboring countries and applied these capitals to domestic construction or international FDI investment.
Under this framework, the international monetary system clearly shows three characteristics. First, the current account deficit of the United States continues, the capital account surplus continues, and American foreign debt continues to accumulate; Second, the current account surplus and foreign exchange reserve accumulation in East Asia; Third, European countries' current account deficits, capital account surpluses and reserve assets remain basically unchanged. In this way, through the institutional arrangement of the international monetary system, the United States can effectively pass on its own risks and enjoy various convenient conditions in time, thus forming its own virtuous circle. This virtuous circle also determines that dollar hegemony will be unshakable for quite some time to come. As long as the dollar dominates, people will see that the United States can maintain financial stability and sustained growth without foreign exchange reserves. The problem is that countries around the world have begun to question the hegemonic position of the dollar, which will also lead more new developed countries to seek new reserve currencies to replace the position of the dollar.