China Pegs to Dollar to Keep Trade Imbalance

[@Brian-eo7rd]

First video I've watched in quite awhile from Khan Academy, just wanted to comment that the quality (of drawings) has improved considerably! Good job! Also, as a economics graduate student the narrative provided here seems pretty fair/accurate, given the constraints of 3 minutes and a non-expert viewership (of course the mechanisms can be much more sophisticated, but the idea is more or less this).

[@TheTariqibnziyad]

thank you for the clarification. really nice!!!

[@MineCartable]

It would make sense to say that the price of the US dollar would go up. If $50 mill gets exchanged for (Yuan)300 mill. The US exchanges the (Yuan)120 mill for $20 mill. 180 Mill extra Yuan to go around, and $30 mill that's taken out of the cycle. If I've got the wrong idea, then please correct me, because I like to know when I make mistakes.

[@TheMobocracy]

a trade deficit = a capital surplus It's an accounting impossibility to have a surplus of both. If the U.S. is a better place to invest than places overseas then foreigners are going to invest in the U.S. more so than overseas. On net this results in a capital account surplus which due to rules of accounting = a trade deficit.

[@CJ_102]

Great video Khan Academy thanks! I do wonder why the Chinese wouldn't simply use the extra USD 30m to buy US T-bills and FX only the balancing USD 20m into local CNY/CNH/RMB. Perhaps you cover that in the next few videos as the subject progresses. Great work!

[@stardaveable]

Trade deficit is more complicated than this, why don't you talk about the factor of American's spending habit? That we as the government and the people does not produce anything, all we do is spend and go into debt. And if you look at US's trade deficit from 1950 to now, it has the same pattern with any other nation on earth, however most of those other nations does not peg their currency and still run a deficit with us, how do you explain that?

[@wjun0131]

You cannot talk about trade balance without accounting the Origin of product and Value added from Supply chain. Example: China only adds $2 to the $500 value of Iphone and yet it is tagged as 'Made In China'. - US needs to run trade deficit to supply enough USD to the world, this is critical to keeping USD as the dominant Reserve currency. The benefit of this is that whenever the Fed prints USD America 'taxes' the real value out of all the USD reserves around the world (Essentially robbing every country haha).

[@TheIndiangooner]

In this video, Salman claims that the People's Bank of China would want to make sure that Chinese currency stays at a 6:! ratio with the USD. I did not understand what is the need for that. Why wouldn't Chinese Banks want the Chinese currency to be stronger? Why always try to be weaker than the USD?!

[@danielramirez8298]

Because their goods and services also will aprecciate and then they can not sell cheaper, and gonna export less