Quote:
Originally posted by Sidd Finch
They keep the currency pegged to the dollar. It does not float on the free market. The kinds of mechanisms that you identify are relevant only to a currency that floats, not to one that is pegged.
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You can say a currency is "pegged", but you have to back that up with something too, usually by convincing someone to buy your currency. If it's pegged, yet you run inflationary policies, holders of other currency aren't about to keep giving you a dollar for a yuan. The country's central bank just won't get any foreign currency, at which point you become known as Argentina.
