Internationalreservesarethemeansofsettlinginternationaldebts.Under
the goldstandard,goldwasthemajorcomponentofinternational
reserves.FollowingWorldWarII,wehadagoldexchangestandardin
which internationalreservesincludedbothgoldandareservecurrency,
the U.S.dollar.Thereservecurrencycountrywastoholdgoldasbacking
for theoutstandingbalancesofthecurrencyheldbyforeigners.These
foreignholdersofthecurrencywerethenfreetoconvertthecurrency
into goldiftheywished.However,asweobservedwiththedollar,
once theconvertibilityofthecurrencybecomessuspect,oroncelarge
amounts ofthecurrencyarepresentedforgold,thesystemtendsto
fallapart.