First of all, the headline is wrong. "China" has proposed no such thing as that. One private Chinese banker has proposed it.
China selling all its dollars at once would depress the dollar significantly. That’s why China won’t do any such thing. It would be pointlessly wasteful to set their own money on fire. Storing $3 trillion IOUs in a vault is already a terrible way to use money. It would be better for that money to be in the Chinese economy.
If China starts spending more of its trade surplus on helping people at home instead of stockpiling useless green pieces of paper, all the better. This will have an expansionary effect on the United States, since that’s where the dollars will eventually be spent, and they’re not doing anyone any good being frozen in China’s vault.
Comments
First of all, the headline is wrong. "China" has proposed no such thing as that. One private Chinese banker has proposed it.
China selling all its dollars at once would depress the dollar significantly. That’s why China won’t do any such thing. It would be pointlessly wasteful to set their own money on fire. Storing $3 trillion IOUs in a vault is already a terrible way to use money. It would be better for that money to be in the Chinese economy.
If China starts spending more of its trade surplus on helping people at home instead of stockpiling useless green pieces of paper, all the better. This will have an expansionary effect on the United States, since that’s where the dollars will eventually be spent, and they’re not doing anyone any good being frozen in China’s vault.