Chinese Central Bank Buying Treasuries

Courses on Khan Academy are always 100% free. Start practicing-and saving your progress-now: www.khanacadem...
Chinese Central Bank Buying Treasuries
More free lessons at: www.khanacademy...

[@SilverKnight427]

Yeah... you deserve a Nobel Prize for your efforts.

[@Themelnichenko]

spatial repetition is one of the best parts of these videos. Thanks Khan-- it's my last day of studying for my Bachelor's degree from UW; couldn't have done it without you.

[@lalaboards]

That’s so cool !!!!

[@khanacademy]

@legoman762005 Yeah, I need to do that just so that my brain can think about it clearly. It also gets confusing pretty fast so I like to make sure that everyone is with me.

[@Sam-ru6bc]

Khan Academy, Hello Why is there a demand in Chinese yaun if most transactions happen in the banks, the bank doesn't need to exchange physical US Dollars into physical yaun we just transfer the amount of u.s. dollars what is then in the amount of yaun and whoever wants to use the money we'll take it out there already in yaun so there's no real exchanges between yaun and dollars? Also most of the money stays in the banking system so there is no real demand in physical yaun? Thanks

[@stephencarlsbad]

Currencies are like countries. They must maintain a physical border to maintain control. Just because currencies are being traded in the form of software data and there is still an accounting for what is being traded. Banks store cash, operate in cash and also operate in data transactions. Its easier to move a currency to an account in the form of data than it is to actually move the currency/cash itself. The benefit of making trades in data is that trading is secure, costs less and is stable. It just makes more sense to trust the other guy that he has the physical currency or the backing for it then to demand a physical trade of cash for every transaction. Banks are legitimate institutions and recognize real accounts with real cash in them for trading and are always monitoring their transactions for fraudulent accounts. Legitimacy, trust, & security = strong currency. And a strong currency doesn't need to be physically traded, data transfers will do the trick.

[@echelecopao]

@khanacademy Don't pay attention to legoman762005's silly comment. The repetition you use is very effective to get the important info into people's minds. You are doing an awesome job. I seriously think you deserve a Nobel prize for what you are doing for humankind. btw, this series on currency trading has been extremely enlightening. thanks !

[@hartmaahart4828]

Thanks so much.. Always enjoy and find your programs a great supplement to my studies cheers!

[@GenghisVern]

I've been watching these as they've been posted... the story line is getting scarier each time. Just in time for Halloween too!

[@2leet2cheet]

This scenario also played a roll in the housing boom, via ultra cheap borrowing rates due to the demand from the Chinese. I hope you mention that in your next video.

[@WayAboveYou700]

1. Money is just money, the American goods are simply not desired by Chinese. 2. The structural problems WITHIN the American economy make imbalance of trade, NOT yuan pegged to dollar, 3. Pegging yuan was advised long time ago by Goldman Sachs and JPMorgan so as to make it easier for American corporations their products made with cooperation with the Chinese to Americans and Europe. 4. Chinese are buing treasuries because they have been advised so by Goldman Sachs etc. to stimulate US import...

[@Themelnichenko]

Yeah, check out the search box in your internet browser. It should help you figure out which videos work for you, and which don't.

[@akindeleadegoke]

Quick question. Why can't each county pay the selling country in the selling country denomination ,for example why can't China pay USA for the goods in $$$ in other words why should China have to pay for goods baught from American merchant in yuan and vice versa ( eliminating the process of trying to convert each other revenue back into the home country's currency) ? is there a rule in international trade that says you can't do this? Would it still be the same economic outcome? Please explain!?????? And I must say your videos is really very good and well explained even to kids and thanks for not talking too fast like other annoying presenters. Good Job. I recommend.

[@bobcol9]

Thanks for helping me understand , we need your video's !

[@2leet2cheet]

Im not sure if you were trying to simplify the example. However, to buy Chinese goods, a US firm would need to SELL US dollars and BUY Chinese dollars before it could buy the Chinese goods. Likewise the Chinese firm would need to sell Yuan and buy US dollars before buying US goods. The end result is the same, as the demand for Yuan is greater then the supply, so the supply is expanded to meet demand, and therefore keeping the price of Yuan unchanged.

[@StijnHmrAwesome]

Haha the Chinese are buying papers that say "IOU USA (I own you, USA)" :)

[@hartmaahart4828]

Uh... Btw.. He just says central bank in that it is the primary bank that issues currency for the whole country. , instead of saying PBC.there is no meaning in it. This is an educational channel. .. Let's try to focus on math and concepts, not rage ..

[@ThePeterDislikeShow]

9:50 how about gold or silver or even strategic metals like bismuth or tellurium?

[@ernestmuller8245]

Regarding the Chinese printing Yuan to buy USD, who would be interested in swapping Yuan for USD?

[@rorcon]

Salman, one piece of advice: haters gonna hate. keep doing what you do no matter what others think!

[@nomsdeguerre]

So hold on hold onnnn.. they print Chinese money, use it to buy $US..then use the accumulated $'s to buy US treasuries (loans to the Federal Govt). And then get interest on the $'s they bought..with money they printed as they pleased. This is fucking genius...

[@stephencarlsbad]

The entire key to what makes this work is the PetroDollar monopoly. The only reason China sells us goods is to acquire US dollars to buy petroleum from OPEC nations that WE control. Opec is only allowed to sell petroleum in US dollars. This gives us a currency monopoly over energy being sold to worldwide markets. And it gives us tremendous leverage and control as to which country will be a servant nations to our economy. Not all coutnries can afford to be the US top manufacturing base. If they want to they must compete. They must sell their goods to the US at lower costs than the Chinese can. Places like Europe can't do it because their labor costs are too high. This price leverage gives us a tremendous advantage that ensures that our consumer goods will always be the least expensive that the world can produce. If the Chinese really want a healthy economy and want to maximize the utilization of their resources and people to enrich their elites, then they have to play ball by selling cheap goods to the US in order to get dollars to buy petroleum, in order to have energy for a thriving manufacturing market. Opec is the cheapest oil to buy, to refine and produce and therefore in HIGH DEMAND! Russia has oil, but its DIRTY oil, meaning its expensive to refine because of the high level of impurities. This oil pricing advantage gives the US dollar a huge advantage over other currencies and foreign markets. It creates a DEMAND for US dollars. When foreign countries are desperate to trade their goods for US dollars in order to buy energy, it, again, gives the US leverage over the price of the goods being sold to us. So why don't foreign nations just go to war and take control of OPEC nations or just sell in other currencies to get around the PetroDollar monopoly? They've tried. Gaddafi tried to rebel against the PetroDollar and get foreign oil producing nations to go along with him and he was overthrown and executed in the streets. Saddam Hussein tried too. He was executed. Venezuela tried to compete and their regime has been toppled and left in ruins.

[@musak.4068]

@@stephencarlsbad Gaddafi did more than that, he tried to remove Afrikan dependency on europe and attempted to create a central Afrikan currency.

[@stephencarlsbad]

@@musak.4068 What you dont understand is thats what "rebelling against the petrodollar IS"...

[@musak.4068]

@@stephencarlsbad yeah

[@philkeyouz2157]

So even if they stop to sell goods for US $, they just have to sell their US bonds to continue to maintain the lock.

[@galanoth17]

I'm a noob at economy because I don't have any background in it. Does printing more yuan by the Chinese Central bank and putting it into circulation cause inflation and lower the value of their currency? Or is it balanced out by the fact that their production is massive so that the supply of goods also keep increasing to balance out the supply of money?

[@thehive378]

yes it does. But since China produces insane amount of goods. The inflation is pretty much under controlled.

[@pitty031]

knowledge is power. Thanks for sharing, Sal.

[@fromthegroundup271]

How is the Chinese central bank accumulating Dollars if they are exchanging them for Yuan? (Around 7:48)

[@supermonk3y07]

Actually a lot people learn by repetition. I heard that people have to have things repeated even 7 times or more before it actually sinks into their brain

[@stardaveable]

1 assessment might be wrong, after China receive the dollar, why are they required to convert it to Yuan? USD is currently the world reserve currency, it means they can use USD to buy many commodity goods in the international market, such as oil, mineral etc. they can also use USD to conduct trade with 3rd nations as well. I understand if USD is only accept in US, then China need to convert back to Yuan but that is not the case, that means China will not print Yuan every time when they earn USD.

[@stephencarlsbad]

Not really. The Chinese government isn't the main purchaser of American commodities, Chinese businesses are. And if the Chinese government has a surplus of US dollars, then the best thing to do might be to buy short-term US treasuries and US debt. It gives them the most secure investment vehicle that they can find and it helps keep it fairly liquid so that they can use it to purchase energy in US dollars during the seasons that they need it most. And China doesn't earn US dollars they usually counterfeit it in exchange for US treasuries. This is why they're really not worried about buying so much US debt. And why Trump is currently calling China a currency manipulator as leverage for a better trade deal. If the US labels China as a Currency manipulator, then the US could technically null and void the US debt securities that China holds and bought with counterfeit money without doing any damage to the US dollar or the US credit rating.

[@freesoul2005]

Sallo mian, u r great. Finally understood this thing

[@wendyshoo3476]

They buy up us co or gold

[@KatangaOne]

Well Done Sir.

[@winiwiw1069]

"yuan" sounds more like "yew ann" or "ewan"

[@yermomrhot1539]

im still confused how to identify the demand and the supply?...is treasuries apply only in us?

[@norwayte]

All this "money/currency" is double entry accounting. So there is no "money/currencies-amount" - just a sum of debts and deposits (contra-entry). As you hint at... the state does not pay off his debts. But there is compound interest on debts AND deposits. The debts increase...just accounting it higher and higher. So...more debts...need other debtors (China is indebted,...other states, enterprises, people... It's a chain letter / pyramid game. Every pyramid game has to end sometimes.

[@rishinjeenu8113]

Actual Lecture Starts at 8:20

[@custer264]

Actually if you feel confused stop over thinking it!!! A three year old can understand it. it's just hard to accept that we let them get away with it. The free market wouldn't. I don't know where the academy stands on political issues but I'll give lots of credit for being as honest and analytical as one can be about this subject.

[@xkjg4808]

It has anything to do with currency? If one seller produces more goods and sell more than anyone else, then this seller should of course make more money. USA could buy Americans good instead of Chinese, then it solves all the problem.

[@opns4729]

But it really happened because the China exported more goods to the USA and therefore China had more money

[@galanoth17]

I concur

[@sklanger]

It's pronounced 'yuen' -- like 'yen' but with a 'u' -- not Juan.

[@muhammadalfatih7138]

Btw the Chinese weren’t the first to do this

[@theburden9920]

Japan?? Did??

[@legoman762005]

come at me bro~

[@Ilikemeows]

@legoman762005 Lol!!!!! I know, its mad funny!

[@hallgerdurkolbeinsdottir1487]

Do they really print it all, and does china have millions of dollars in paper? If that is the case then I don't really understand, or is he saying that they print just to make it easier.

[@CJ_102]

Its all electronic. US Businesses/businessmen only hold and pay USD from their bank accounts. Chinese businesses/businessmen only receive local Yuan into their bank accounts. In the middle you have the banks performing FX transactions in the market to convert. Above that, the central banks monitor the macro nationwide currency flows and balances - and perform their own transactions to balance stuff out. In these examples, China sees that all this extra USD is coming in and creating (net net) too much extra Yuan within its borders and too much USD sells in the market. So China Central bank calculates an offsetting amount in Yuan and buys US Bonds with it (they create this electronically = "printing"). US bonds are denominated in USD, so to make this purchase the banks first sell X amount of Yuan for USD in the FX market (this part increases demand for USD and supply of Yuan), then use this USD to buy the bonds for China (this part increases US bond price/ lowers US interest rates).

[@hallgerdurkolbeinsdottir1487]

Carl Harverson thanks, it all makes a little more sense to me now.

[@drzakir123]

@legoman762005 i agree with u legoman.but there is a purpose to it.at the end it manage to push something into my confuse brain.lol.thanks sallu mian for graet video

[@dhavalgada2171]

So much repetition, might wanna move things along.

[@legoman762005]

lol, you repeat everything five times before you move on to the next topic

[@E_Zach]

Legoman762005's comment is NOT silly. The constant breaking of the flow actually stops me from learning anything. It's purely frustrating. I would say that we learn all differently. To me it's like reading a book, but stopping for 10 seconds after each fullstop. It actually makes me lose the context of whats being said, as i only hear it once. On that note: Is there a similar video without the repetition? It's an interesting topic.

[@ridwanraihan9171]

Chinese

[@SunsTo7]

So what is the advantage of China using printed toilet paper to buy T bonds and owning slices of the US in the long run. I believe that there is a method to there madness. They get to export and grow there economy & keep getting holdings within the US.

[@feifeichen6795]

Should've taken French in high school. Teaches you how to pronounce Yuan.

[@Thegamemakur]

中国は一番