4 ms·
> Europe can buy all the yuan in the world and it won’t have any effect. That is entirely wrong. There is only a limited amount of Yuan, so by definition the
by dmichulke 9y ago
> Europe can buy all the yuan in the world and it won’t have any effect.
That is entirely wrong.
There is only a limited amount of Yuan, so by definition the supply of Yuan is affected, no matter in which currency it is bought. Therefore, the price is affected as well.
Will wheat in USD get more expensive if I buy all your wheat with Ruble? You bet it will.
- Symmetry 9y agoThe amount of Yuan isn't literally infinite but China can print new Yuan a lot faster than Europe can buy it up and, in practice, would absolutely need to in response to extra European demand so as to not suffer from a deflation induced depression.
- gcb0 9y agothe amount EU can buy increases as they print more Yaun. not the other way around as you suggested on the first sentence.
- dogma1138 9y agoThe supply of the Yuan is controlled by China, but In this case the limit isn't the available supply of the Yuan at all. For Europe to buy Yuan it needs to exchange something for it, usually another currency likely in this case the dollar rather than EUR. The hard limit is more on how much EUR does China wants to hold and how much USD Europe is willing to spend on buying Yuan. Beyond that you also go into the realm of would China allow Europe to hold large amounts of Yuan, countries tend to be protective of their currency and restrict any single entity from holding amounts large enough to do substantial damage if dumped. Basically they would allow you to buy enough currency for them to benefit but not enough for you to hold it over their head.