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It’s not just about stability (and rmb is basically pegged to dollar anyway) - you also need to run a deficit and that’s not something China is willing or able
by dilyevsky 3y ago
It’s not just about stability (and rmb is basically pegged to dollar anyway) - you also need to run a deficit and that’s not something China is willing or able to do for foreseeable future
- photonbeam 3y ago> you also need to run a deficit Why is this needed?
- nly 3y ago> > you also need to run a deficit > Why is this needed? At a guess...being the worlds reserve currency creates demand for your currency which drives it's price up. This is bad in general because it means your exports become more expensive. The way you deal with that is to create debt to export in the form of US treasuries, which foreigners can then buy. One way to create treasuries is to create a public deficit (not strictly necessarily, you could raise money even with a surplus and then invest it)