In today's Khan Academy video, "Debt Loops Rationale and Effects," Sal looks at the positives and negatives--for both China and the U.S.--of the on-going pegging of the Yuan on global markets. He discusses the likely outcome once the process is halted and the result when it is reversed. Very simply, it has held interest rates low and enabled the U.S. to finance its massive debt at historically low interest rates. Understanding this whole dynamic is crucial, IMHO, for the DIY investor going forward because it will be a driving force. In fact, it could be the driving force of the next big crisis - banks hold Treasuries! Central banks around the world hold the dollar as a reserve currency in the form of Treasuries.
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