Finance, Forex and Investments

Why more Forex reserve leads to more recession and then depression?

As per the news published in the media, India, China and some other countries are trying to grapple with money flooding the economy from a record trade surplus, and swelling of foreign exchange reserves of the country. Why do the Central Banks of such countries have to make special efforts to check the flooding of money and foreign exchange in economy whereas for an ordinary man more money means richness and prosperity ?

Public Comments

1. Dear friend India does not have a trade surplus.But it has around 300 billions $ foreign exchange reserves.India can use the same to produce more goods.But when the demand for goods world wide is low due to less purchaseing power(due to recession)of the people ,who will buy them?So the central Govt. at best can pay back some costly foreign loan to reduce interest burden.The money saved from this can be used for enhancing purchasing power of the people which is the best weapon to fight recession.