So essential if the Chinese wanted to but Us ,treasury bonds they could buy them from a bank or on the open market.
What is meant by the open market? is it the general population who have treasury bonds to sell to the CHinese?
Thanks a lot this currency exchange is really interesting!!!
edwin lacson, well said.
Best quality fake Diplomatic Passports, United States of American , European Union , Isreali ,Swizerland, Australian,and many more Identity cards and Passports ,resident Permits, Visas , Green cards, Social security numbers, Driver's License with all categories,marriage certificates,proofs of addresse, diplsomas etc. We have the best HOLOGRAMS AND DUPLICATING MACHINES With over 13million of our documents circulating over the world. Our Passports,Identity cards and Driver's Licence are equiped with readable ID Scans, Barcodes, exact Identical Holograms,water and UV prints. FASTEST DELIVERY WITH VARIOUS DELIVERY OPTIONS WhatsApp::::+237673281671 SKYPE: jeff.ian2 Contact e-mails: (((( [email protected]))) General support: (((( [email protected]))) Technical support: (((( [email protected]))) We are the best producers of HIGH QUALITY counterfeit Banknotes,undeveloped currency notes,SSD solution for processing of banknotes,Preservation Powders and also real and original documents. With millions of our products circulating around the world. We offer only original high-quality counterfeit currency bills,processed and unprocessed banknotes , all sorts of banknotes processing, regenerating and preservation chemicals and also original registered documents. We offer high quality banknotes for the following currencies; EUR - Euro USD - US Dollar GBP - British Pound INR - Indian Rupee AUD - Australian Dollar CAD - Canadian Dollar AED - Emirati Dirham ZAR - Rand CHF - Swiss Franc CNY - Chinese Yuan Renminbi MYR - Malaysian Ringgit THB - Thai Baht
the US benefits as consumer spender on chinese commodities produced there on low labor costs rather than in the US, with china having the second most traded country of origin, this gives china the ability to capture markets and therefore pay off its foreign debt due to increased economic progress
thanks alot sorry can you tell me please your name
Purchase Best Quality Real and Novelty Passports,ID Cards,Visas,Drivers License,Stamps,Birth Certificates,Diploma,Permits for all countries. Are trying to change your Nationality ? Do you need work Papers ? Do you want Travel ? Do you need Papers you cant have ?If Yes , then you are in the right place at the right time. We are an independent group of specialized IT professionals and data base technicians who are specialized in the production of quality documents such as passports,drivers license,id cards,stamps,visas,diplomas of very high quality and other products including real and fake banknotes for all countries: USA, Australia,UK, Belgium, Brazil, Canada, Italian, Finland, France, Germany, Israel, Mexico, Netherlands, South Africa, Spain, Switzerland and More... We have been in the field for over 25 years now and have alto of experience when it comes to duplicating and Producing Documents. We produce 2 types of document quality 1.The Real 2.Fake. The Real Documents are registered into the Data Base System and they have all neccessary security features which makes it 100% original and acceptable every where meanwhile the fake documents are not registered but they do have the security features and can only be convincing physically . FASTEST DELIVERY WITH VARIOUS DELIVERY OPTIONS Viber::::::+237679835745 WhatsApp::::+237679835745 SKYPE: douglaswilliam411 Tel/ +237 679835745 Contact e-mails: (((([email protected] )))
Where we left off in the last series of videos,
we had the Chinese Central Bank that was trying to make sure
that the yuan does not appreciate too much.
So the way they did that is that they bought up all of the excess dollars
using yuan that they printed.
So what they do is, they print yuan
-- I'll do the yuan in this blue color--
so they print yuan,
and then they use that printed yuan to buy dollars in the open market.
And what that does is it props up the demand for dollars
and keeps the price of yuan down, so then they get dollars.
So they print yuan and they buy dollars.
And as we saw, they have to keep doing this
in order to keep the yuan deflated,
or in order to keep the dollar inflated.
And this is so that they can maintain
a favorable balance of trade.
But as they do this,
they're just building the stockpile of dollar reserves.
And as we mentioned in the last video,
they're not just keeping a big vault of dollar bills there.
They're going to use it to buy assets,
and they're going to buy liquid and safe assets.
And the main asset they're going to buy is U.S. Treasury bills.
So then they take these dollars and they buy U.S.Treasury bills.
And let me draw some of the other actors here,
because they can buy it from two separate people.
There is the United States government.
So there is the U.S. Treasury.
They are going to issue Treasury bills,
when they essentially just need to borrow money.
And then there's other people that have already bought Treasury bills.
So let me draw them over here.
So then there are other people who own Treasury bills.
So this is someone who owns a Treasury bill right over here,
wearing a hat, maybe with a little bit of hair and a moustache.
So this is someone who owns a Treasury bill.
So just to give a review,
when the U.S. government wants to borrow money,
people hand the U.S. government money
-- I'll draw it as a dollar bill, right over there--
they hand the U.S. Treasury money,
and then the U.S. Treasury gives them an IOU.
This IOU is what a Treasury bill is,
and what it entitles the holder of this piece of paper,
it allows them to get interest from the Treasury,
depending on what type of Treasury bill or bond it will be.
It'll be over a certain period of time.
I have a whole video on this,
especially the ones where I talk about the yield curve.
And then at some future date, the U.S. Treasury is going to
pay them a larger amount of money than they put back in.
So this right here is a Treasury bond or bill.
T-bill if it's a shorter duration,
Treasury bond if it's a longer duration.
This is a Treasury bond.
It is a loan to the U.S. Treasury.
Now, the Chinese Central Bank,
they have all these excess dollars.
They can buy treasuries from either two sources.
When the U.S. Treasury itself needs to raise funds,
it will essentially put these IOUs for auction.
It will sell them to whoever is willing to take them for the least interest.
So let me put it this way,
so what they can do is
they can give the money directly to the U.S. Treasury,
when the U.S. Treasury puts Treasury bills
or Treasury bonds up for auction.
So it can give the money directly to the U.S. Treasury,
and then the U.S. Treasury will give them one of these IOUs,
or it could buy it from someone already has it out in the open market.
This is a very deep, very, very liquid open market.
Or they can give these people right over here money,
and then they would transfer the IOU over to this Central Bank.
So what is happening at the Central Bank?
What is essentially happening here?
What's essentially happening is
the Chinese Central Bank printing money to buy dollars
that it will then essentially lend to the U.S. Treasury.
So it looks kind of convoluted,
but the essence of what is happening here
is that the Chinese government,
you have the Chinese Central Bank lending to U.S. government.
And it might be buying other assets,
but the Treasury bonds and bills are
really the main form of liquid asset they might be buying.
So how does this affect the United States,
other than the fact that instead of owing other investors these IOUs,
It now owes it to the Chinese?
But what is the net effect of having this player out here,
having this very significant player out there,
that is fairly aggressively willing
to pay for U.S. government IOUs, U.S. treasuries?
What is the effect of that?
Well, we saw in the yield curve video
that the more people willing to give you a loan,
the lower the interest rates are going to be.
And I can show you a very simple example of that.
If I'm looking to borrow！and I'm no longer talking about nations,
I'm just talking about Sal now--
let's say that I'm over here,
and I'm looking to borrow $10.
And I say, hey, who's willing to give me the best deal on $10,
and I'm going to pay you back next week.
So you might come along and say,
I'll lend it to you for 10% interest over a week.
So you can pay me $11 next week.
So this would essentially be 10% interest over the week.
You give me $10 now, and if I agree to you,
then I'll give you $11 in a week.
That would be 10% interest.
But then let's say Mary comes along.
And she says, oh, I can do better than Mr. Orange Guy over there.
This is Mary. I can do better than Mr. Orange Guy over there.
I'll lend you $10, and you can pay me $10.50 next week.
So notice what happened.
Both of these people have $10 to lend.
They're looking to get some return on their $10.
If he was the only player here,
I'd have to go to him and say,
OK I'm going to pay you 10% interest.
Then she says, no, no, no, I also have $10 and,
gee, I'd be happy with just a 5% return.
$0.50 off of my $10 in one week, that's a good return.
So right now, look at this person.
But the more money that's available to borrow,
the more competitive this side of the equation is going to be,
and the lower the interest rate I can get.
You can imagine even a third person says,
no, no, no, wait! I've got $10.
Let me draw this third person, who says,
I have $10, and you know what?
It's going to just be sitting in my bank account doing nothing
unless I lend it to you.
You can pay me, I don't know, $10.25 next week.
And then I'm going to go to this person.
So the larger than the number of people willing to lend to me,
the lower my interest rate will be.
Or another way you could think of it,
the larger the supply of money to be lent, that leads to lower--
you can view it different ways.
You could view it as lower borrowing costs,
which is another way of just saying lower interest.
Or you can even view it as cheaper money.
It costs less to borrow the money.
The cost of borrowing money is the interest. Lower interest.
Now, what does that do?
What does having lower interest?
So this is just a small example with me trying to borrow $10.
The more people there are, the more competitive that is,
the better interest rate I'll have.
So you just take that same notion to kind of a macro level.
The U.S. government is constantly borrowing money.
The more people out there willing to give it money,
willing to buy the U.S. government's IOUs,
the lower the interest rate will be.
So the net effect of having this major buyer of U.S. Treasuries
is that having them out there accumulating all of these dollars,
taking them all out of the foreign exchange markets
and then using them to buy treasuries,
it lowers the interest rate for treasuries.
So the net effect is
the U.S. Treasury has lower borrowing costs.
So what does that mean?
So let's make it very clear.
So the Chinese buy treasuries,
which are essentially loans to the U.S. government,
then the U.S. has lower borrowing costs.
The U.S. has lower interest or borrowing cost.
And I'm talking about the government right now.
And this has several interesting side effects.
This means that it's easier for the government to finance deficits.
They don't have to pay as much in interest to finance deficits.
So that means that they can spend more.
They can give out more payments to U.S. citizens,
or they could lower taxes, either one.
Both of those would lead to deficits.
So it's easier so that the government can either spend more
or they don't have to raise taxes.
Or they could they could lower taxes,
because they don't have to spend as much in interest.
Now, the other interesting thing
that the U.S. Treasury borrowing costs go down,
that means that the interest rate on everything goes down.
This is one of the benchmark interest rates.
And you should watch the video on the yield curve
if you want to understand more about it.
And I know some of you are saying, wait,
doesn't the Federal Reserve set interest rates?
The Federal Reserve only sets overnight, very short-term.
If you're going to borrow money overnight in your bank,
that's what the Federal Reserve sets.
If the U.S. government is borrowing money over 5 or 10 years or 20 years,
that is set by the market.
That is set by a market mechanism
very similar to what I showed just over here.
So this is dependent on more capital being there to be borrowed.
So this is, so 10-year, and 15-year,
and 20-year debt for the U.S. becomes cheaper.
But this makes all debt in the U.S. cheaper.
And there's two ways you can think about why this piece happens.
One is, just on a very superficial level, people say,
hey, you know, someone like General Electric is
only a little bit more risky than the U.S. government.
If the U.S. government only has to pay 3% on its on debt
that it has to pay back in 10 years,
maybe General Electric should only have to pay 0.3% more than that.
So you use the U.S. government as a baseline,
and then depending on people's risk,
they pay a little higher spread.
Another way to think about it is up here.
The Chinese government is just pouring dollars
either directly into the U.S. government,
or into the actual U.S. Treasury market.
So this guy right now, he has more dollars.
He's not going to use the Treasury,
because he thinks treasuries are too expensive,
which means that their interest is too low.
So he's going to take these dollars he got from the Chinese,
and he's going to lend it to someone else.
That dollar is still there.
He'll lend it to General Electric,
or maybe he's a credit card company and he'll lend it to the consumer.
So in general, all debt in the U.S. gets cheaper.
Now, what's the net effect of all of these points?
What's the net effect of this,
all debt in the U.S. becomes cheaper?
There's just more dollars for loan in the U.S.,
more dollars than people can borrow.
The government is spending more,
or the government will lower taxes.
What is the net effect of all of this?
Well, people will either have more money in their pockets,
because they've gotten a government job
or they've maybe gotten some type of entitlement payment.
Or, they're going to have more money in their pockets,
because they're paying lower taxes.
Or they're going to have more money in their pockets,
because it's easier for them to put more debt on their credit card,
or to refinance their mortgage.
So, all of these lead to more cash in American pockets.
Now, that's obviously not an unambiguously good thing,
because this is all financed with debt.
It's not just solid debt-free cash.
So, more cash in American pockets essentially financed with debt.
And this debt, as you can see,
it's either occurring at the credit card level,
it could be occurring even at the corporate debt level,
or it's occurring indirectly at the government level.
But all of this is being enabled by the fact that
China is willing to buy treasuries, which means that
China is really just willing to lend to the U.S.
So what's happening?
China is artificially keeping its currency low,
and it's doing that by buying dollars, taking those dollars
and essentially lending them to the United States.
And that eventually ends up
in the hands of American people and companies, and even the government.
And what are they going to do?
Well, they're going to buy cheap Chinese products
that are artificially cheap because the currency is lower.
So then they will buy Chinese, artificially inexpensive.
And obviously, you know, they do have lower labor costs and all of that,
but it's even lower to the American than it would be
if the currency were allowed to freely float.
buy Chinese products.
So the net effect of this entire scenario
that I've been describing over the last few videos,
is that the Chinese are essentially lending money to the Americans
to then go ahead and buy more Chinese products.
Log in to save your progress and obtain a certificate in Alison’s free Currency Exchange online course
Sign up to save your progress and obtain a certificate in Alison’s free Currency Exchange online course
Please enter you email address and we will mail you a link to reset your password.