Question:

Explain why and how governments restrict currency convertibility?

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Explain why and how governments restrict currency convertibility?

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  1. There are several methods, and I only know a few:

    A government can establish a rule that its own citizens may not own or trade in any or certain foreign currencies.

    A government can specify an official conversion rate at one ratio for domestic use and another for international trade.

    A government can require that domestically, all conversion must be done at government-run conversion offices (government banks), where limits are placed upon how much one person may convert in a fixed time frame.  

    These facts are one of the reasons that, in general, the people cannot trust their government to safeguard the peoples' interests.  These things are easy for governments to do because with few exceptions, currencies are controlled in most countries by central, government-owned banks.  The US has something similar, the Federal Reserve Bank, but the government does not control it.  In this respect, the US has LESS control over its own currency than many countries.


  2. u explain it

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