If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

Main content
Current time:0:00Total duration:3:41

Video transcript

in the last video we saw that China had increased its m1 money supply from November of 2009 to November of 2010 by roughly 700 billion dollars what I want to do in this video is compare that to its increase in foreign assets so if we move up here and once again all of this data is straight from the website of the People's Bank of China and this is the URL right over here and so you could get it from multiple years and actually have a ton of other statistics and so this chart tells us there are foreign assets and foreign exchange and I'm actually gonna focus on foreign assets because when they print currency and says they say with their printed when they go by dollars with that dollars they could buy well they could keep it in dollars they could buy Treasury bonds or they could just go buy US assets so you so assets are the best are the best measure of what they're holding that is denominated in other currencies so let's look at their growth from November of 2009 to November of 2010 and this is why I picked November because we didn't have December of 2010 in this chart so foreign assets and once again this is in a hundred million UN foreign assets in November 2009 183 thousand six hundred fifty one and that's in hundred million UN and then you fast forward to November 2010 it is two hundred and twelve thousand seven hundred thirty three so let's let's once again put that in terms that make a little bit more sense at least for someone who's used to dollars so when I used a very rough approximation for the u.s. UN exchange rate in the last minutes actually closer to six point five eight now but it gets us to about 700 billion dollars increase in money supply that we got in the last video now let's check this out so we end up at two hundred and twelve thousand seven hundred and thirty three hundred million when in foreign assets November 2010 - 183 183 thousand six hundred and fifty-one so that's the difference now this is in hundred million un so let's multiply by a hundred and so this will be in million un now if we divide this by a thousand this will give us a billion when billion when so it's actually close to its two thousand nine hundred billion UN so it's almost three trillion UN and if we want to convert this into dollars I'll just use the same six point five I could use six point five eight now let me just do six point five eight so divided by six point five eight to put it into billions of US dollars so you see that there's a 440 440 billion increase in foreign assets when denominated in dollars so let's think about that so let's think about this m1 so from November November 2009 to November November 2010 m1 m1 was up by approximately seven hundred billion seven hundred billion dollars and foreign assets foreign assets were up by approximately what was that number that I just had there approximately four hundred and forty billion four hundred and forty billion so most of the expansion of their monetary base of their m1 base was to go out and buy foreign assets over the course of 2010 and the balance is really just to kind of support the growth of the actual Chinese economy but most of it is to go out there buy foreign assets in other and other currencies and actually help keep the UN devalued this is some on Khan of the Khan Academy for CNBC