Foreign exchange reserves cannot be directly used for domestic spending. The money can only be spent abroad or on imports. A country with a large balance of trade deficit relies on its creditors to spend the imbalances accrued in its own market.
Just remember it's all part of the plan. What are you yapping about? You voted for it! In Holland, what we had over a period of trying to get independence, initially from Spain, and trying to raise money to get an army to free themselves, was financial innovation.
In the 1840s they pushed it just a little bit too far and that caused inflation, destabilised the economy.
So in 1844, the Conservative Government of Robert Peel actually passed a law that took the power to create money away from the commercial banks and brought it back to the state.
So since then the Bank of England has been the only organisation authorised to create paper notes.
Since then everything has gone digital and what we now use as money is the digital numbers that commercial banks can create out of nothing.
The problem was that they did not include in that legislation the deposits, the demand deposits, held in banks by individuals or electronic forms of money which essentially is what those deposits are.
They are now in quite sharp decline as we go into recession, the sharpest really since about the 1930s, so real income is declining. Bank-created fiat currency allows the private banks to suck wealth from the economy and over time results in a gradual decrease in the standard of living.
In 1944, at Bretton Woods, the US and the UK began to negotiate how to govern the world economy, the world monetary system, and came up with the World Bank and the IMF, and a series of other institutions designed to manage the global currency.
After independence, these instruments were applied for financing expansion. Why was such a small country able to hold its own against so much bigger countries, for example Spain and Portugal, that had the benefits of their empires for over a century in respect of the Netherlands?
Similarly, after the advent of paper money and the gold standard, the exchange rate depended on the amount of gold the government promised to pay the holder of the bank notes. These amounts did not vary greatly in the short term, and, as such, exchange rates between currencies were relatively stable.