On the other hand, if the government borrows from the Fed and the Fed does not raise IOER, the government will be printing money – literally – to cover the gap, expanding the quantity of currency.
Its central bank has bought huge quantities of foreign currency to stop the yuan from rising too quickly.
Gold farmers, largely players in developing nations, amass large quantities of the currency and sell it online (typically at valuations of around $10 for 10,000 gold pieces).
Jordan said the central bank was prepared to buy unlimited quantities of foreign currency – and take further measures if required – to enforce the minimum exchange rate.
They kept it down by selling vast quantities of the currency, acquiring in return an enormous hoard of foreign assets, mostly in dollars, currently worth about $2.1 trillion.
The head of the Swiss National Bank, Thomas Jordan, promised to buy "unlimited quantities" of foreign currency to prevent the Swiss franc from rising further as investors fled the euro.
To achieve this goal, the SNB had promised to sell as many Swiss francs as necessary (in exchange for "unlimited quantities" of foreign currency).
Announcing a "minimum" exchange rate of SFr1.20 per euro (in effect, a ceiling), the SNB said it would buy "unlimited quantities" of foreign currency in exchange for Swiss francs, which have become a haven for investors fleeing the euro zone's debt crisis.
The province had been suffering for many years with inflation caused by issuance of increasing quantities of paper currency.
So if output grows and the quantity of money is fixed then prices must fall as the same amount of currency chases more and more goods and services.
