Exchange Stabilization Fund - ESF

Categories: Regulations, Tax, Econ

You keep an emergency fund in case things get wonky and you need a few extra dollars: a savings account, a piggy bank, a shoebox filled with gold coins buried in the backyard. The Exchange Stabilization Fund works on the same principle, except that the emergency in question involves the value of the dollar in foreign exchange markets.

The ESF was first set up in the 1930s, when The Great Depression forced the U.S. government to abandon a strict gold standard. The dollar would vary in value against other world currencies (like it still does today). To make sure the government could step in to prevent sudden, harmful swings in the value of the dollar, it set up the ESF.

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Finance: How does foreign exchange work?11 Views

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Finance allah shmoop how does foreign exchange work All right

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of bananas You take the risk on the foreign exchange

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currency because well you don't like hedging your bets you're

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just going to take the risk if the currency moves

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in paying a ten or twenty percent premium above where

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the relative currencies air trading today that for thousands of

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one thing and you could sleep pretty well at night

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a u s dollars only buys you three thousand or

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two thousand ugandan shillings or things go the other way

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all of uganda's debts basically in return for well uganda

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also got the highly prized you r l uganda dot

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com So then almost literally overnight the ugandan shilling becomes

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highly more valued under the deeply respected and feared auspices

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a dollar twenty and with profit margin per shake it

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suddenly dropped almost in half Eventually you'll have to find

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substitute But well for now it looks like this Foreign 00:02:29.253 --> [endTime] exchange deals Profits will get eating

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