<p>This wouldn't work - for the money to have any value abroad, it has to find its way back to the source country.</p>

<p>Consider an example; the President of Ruritania wants a Swiss watch. He prints a thousand Ruritanian dingbats and sends them to his ambassador in Bern with the instruction to buy him a watch. However, the Swiss watch-maker doesn't want to be paid in dingbats - he wants Swiss Francs. So the ambassador goes to a Foreign Exchange (Forex) broker and asks to buy Swiss Francs using Ruritanian dingbats. What rate does the Forex broker give him? The broker has to consider what he could do with the dingbats - all he can do is sell them to some Swiss guy who needs dingbats for some reason. So it's the demand for dingbats in Switzerland that determines the rate.</p>

<p>Let's assume the Forex broker gives the ambassador some Swiss Francs and off he goes and gets the watch. What happens next? The broker <em>sells</em> the dingbats to a Swiss importer who is buying Ruritanian apples. The Swiss guy uses the dingbats to pay his supplier in Ruritania and now, the dingbats have ended up back in Ruritania!</p>

<p>So the Ruritanian money supply has increased and, despite the best efforts of the President, inflation is stoked.</p>

CC BY-SA 4.0
2019-07-24T13:16:03.777Z
Ruritania could make purchasing with RD illegal internally, but then the RD would have value to almost no one.
IllusiveBrian
CC BY-SA 4.0
2019-07-24T14:46:55.810Z
@IllusiveBrian Exactly. If it were illegal to spend dingbats in Ruritania, there would be no reason for anyone abroad to buy them. So the Forex broker would not be able to sell them at any price. Therefore he would not take them off the ambassador, who would not be able to get his Swiss Francs. So the President would remain watchless. The whole scheme can't work.
Oscar Bravo
CC BY-SA 4.0
2024-11-05T15:56:30.153Z
There is a parable I once read about a millionaire who visited a small island, where he paid for everything by writing cheques. Instead of depositing the cheques the islanders merely endorsed them and from then on used them as paper currency between each other.
Paul Johnson
CC BY-SA 4.0
2019-07-22T07:17:55.723Z
2019-07-23T04:00:25.237Z
2019-07-23T04:00:25.237Z
Oscar Bravo
<p>China does, in fact, do something like this! It has two currencies - one for use internally and one internationally. It was explained better than I could by Adam Townsend on Twitter: <a href="https://twitter.com/adamscrabble/status/1094717028009689089" rel="nofollow noreferrer">https://twitter.com/adamscrabble/status/1094717028009689089</a></p>

<p>Thread unrolled: <a href="https://threadreaderapp.com/thread/1094717028009689089.html" rel="nofollow noreferrer">https://threadreaderapp.com/thread/1094717028009689089.html</a></p>

<blockquote>
  <ol>
  <li><p>The ‘onshore’ currency is the Renminbi (RMB) or yuan and also called the CNY. It is only used to pay bills on the mainland. The onshore currency can’t be used for international transactions. There...
  is no real market for the exchange rate, instead the People’s Bank of China (PBOC) comes up with a price every day thru an unknown equation, and then trades around it. </p></li>
  <li><p>The “offshore” currency, also called the yuan or CNH, is used for international clearing and trading.</p></li>
  </ol>
  
  <p>The CNH has a completely separate set of demand and supply conditions from the onshore RMB.</p>
  
  <p>The Chinese have it both ways, huge inner stimulation to appease the people. Strong external currency to maintain purchasing power outside.
  By controlling the supply of CNH (offshore money) outstanding China can create a CNH shortage. They’d just buy the offshore currency to drive the value/price up.
  Alternatively they can sell the offshore currency, flooding the market with CNH to drive the value/price down. For example, when a foreign Purchaser of goods has to settle the transaction, and there’s a shortage of settlement currency (CNH), his/her cost goes up.</p>
  
  <p>Conversely, if there are boatloads of CNH available his/her cost goes down.</p>
</blockquote>

CC BY-SA 4.0
2019-07-22T07:53:24.867Z
We're looking for full answers here, rather than pointers elsewhere. Also, Townsend's case completely falls apart: just look at the history of the [CNH-CNY exchange rate](https://uk.investing.com/currencies/cny-cnh-historical-data), which is pretty much static. Just because Townsend writes long tweet threads and sounds clever, doesn't mean he knows what he's talking about.
410 gone
CC BY-SA 4.0
2019-07-23T20:58:22.863Z
What foreign purchaser of Chinese goods is so significant that they'd manipulate the exchange rate for just one payment? That sounds like nonsense, to me.
David Richerby
CC BY-SA 4.0
2019-07-22T07:13:47.477Z
2019-07-23T06:30:03.433Z
2019-07-23T06:30:03.433Z
Sander
<p>Something close to what you want would be <a href="https://en.wikipedia.org/wiki/Special_drawing_rights" rel="nofollow noreferrer">Special Drawing Rights</a>, which were created by the IMF to serve as an international currency without the problem of a national currency having to both meet the needs of international trade and domestic economic goals.</p>

CC BY-SA 4.0
2019-07-23T14:04:38.517Z
Perhaps you could clarify how SDRs are related to the question the OP asked. SDRs aren't printed by a country, they aren't distributed to people, they aren't for spending "abroad" (or at all), and they aren't to allow a country to buy things.
Sneftel
CC BY-SA 4.0
2019-07-22T20:03:23.187Z
2019-07-22T20:03:23.187Z
AlaskaRon
<p>Its pretty simple. If you print more money, for any reason, the supply goes up. More the supply, lower the price. For example, you will still have to sell your own country's currency to buy the foreign currency to use it abroad. And selling your own currency adds to buying pressure on your currency leading to devaluing of currency and inflation due to you currency becoming of less value.</p>

CC BY-SA 4.0
2024-08-22T10:37:31.007Z
2024-08-22T10:37:31.007Z
Kevin R.A
<p>A country cannot simply print its own currency and use it to purchase goods and services in other countries for a few key reasons:</p>
<ol>
<li><p>Lack of international acceptance: For a country's currency to be usable abroad, it needs to be widely accepted and trusted by other nations and market participants. Currencies without strong domestic economies and stable monetary policies behind them typically lack this international recognition and acceptance.</p>
</li>
<li><p>Currency exchange rates: When a country prints excessive amounts of its own currency, it drives down the exchange rate of that currency relative to other, more established foreign currencies. This makes the printed domestic currency less valuable and less useful for international transactions.</p>
</li>
<li><p>Foreign exchange controls: Most countries have restrictions and controls in place to regulate the flow of their currency across borders. Excessively printing money to spend abroad would likely violate these foreign exchange controls and invite economic sanctions.</p>
</li>
<li><p>Inflationary pressures: Indiscriminate printing of domestic currency, whether for domestic or foreign use, tends to create significant inflationary pressures within the home country. This undermines the purchasing power and real value of the currency.</p>
</li>
<li><p>Lack of trust and credibility: Attempting to use a country's currency only externally, while avoiding its use domestically, would severely undermine the credibility and trust in that currency both at home and abroad.</p>
</li>
</ol>

CC BY-SA 4.0
2024-08-23T13:32:38.170Z
Please disclose and reference AI generated content as per [the site policy](https://economics.stackexchange.com/help/gen-ai-policy) on such matters.
Herr K.
CC BY-SA 4.0
2024-08-22T10:32:36.353Z
2024-08-22T10:32:36.353Z
Liam090785
<p>In order for one country to spend in another, it needs to exchange its currency for the currency of the other nation. This is done through something called the foreign exchange market. Like most markets however, the laws of supply and demand apply here too. If a country suddenly starts printing a lot of money, the actual value of its money in the foreign exchange market will go down (due to its increased supply). This will ultimately mean the currency will depreciate with respect to others, and will thus have lower buying power.</p>

CC BY-SA 4.0
2019-07-21T21:26:22.813Z
A difficult issue is that if I go abroad and give somebody bits of paper in exchange for stuff, the person accepting the pieces of paper presumably needs to find some value in them.  If they have no intrinsic or exchange value (they apparently cannot be used in my country to buy stuff) then I am unlikely to be able to use them.  On the other hand, if my money has some kind of intrinsic value as [silver trade dollars](https://en.wikipedia.org/wiki/Trade_dollar) did, then they may prove to be acceptable
Henry
CC BY-SA 4.0
2019-07-21T22:28:54.750Z
@Henry Please post answers as answers.
Giskard
CC BY-SA 4.0
2019-07-23T09:42:40.113Z
@Henry Yes, but that goes against the basic premise of the question - if you *could* print silver coins the way you print fiat money, they would be just as worthless (without the country guaranteeing their value etc. etc.).
Luaan
CC BY-SA 4.0
2019-07-24T19:58:11.143Z
@Henry, What makes you think silver has intrinsic value?
eclipz905
CC BY-SA 4.0
2019-07-24T20:14:05.963Z
@eclipz905 - I don't particularly apart from its use in photography, jewellery and tableware, but the 19th century Chinese did.  It was their refusal to accept much else in trade which led to various conflicts in that period
Henry
CC BY-SA 4.0
2019-07-21T19:59:34.767Z
2019-07-21T21:18:23.630Z
2019-07-21T21:18:23.630Z
Sam
<p>If a country prints money and distributes it between the people, it causes inflation. But what if a country prints its own money to spend ONLY abroad, which would allow a country to buy whatever it wants. What's wrong with this logic? </p>

CC BY-SA 4.0
2019-07-22T08:45:06.823Z
You might be interested in the [Koban](https://www.youtube.com/watch?v=8skPSelBta0&t=189).
Theraot
CC BY-SA 4.0
2019-07-22T10:12:13.513Z
Where do you think that country is going to spend that money?
Aron
CC BY-SA 4.0
2019-07-23T01:13:20.320Z
You might be interested: Why can't countries print another country's currency? https://economics.stackexchange.com/questions/19774/why-cant-countries-print-another-countrys-currency
Allure
<inflation>
Why can't a country print its own money to spend it only abroad?
Dylan Zammit
# Why can't a country print its own money to spend it only abroad?

(Asked by: username_0 on 2019-07-21)

If a country prints money and distributes it between the people, it causes inflation. But what if a country prints its own money to spend ONLY abroad, which would allow a country to buy whatever it wants. What's wrong with this logic?

**Tags:** inflation

> **Comments:**
> **username_1**: You might be interested in the [Koban](https://www.youtube.com/watch?v=8skPSelBta0&t=189).  
> **username_2**: Where do you think that country is going to spend that money?  
> **username_3**: You might be interested: Why can't countries print another country's currency? https://economics.stackexchange.com/questions/19774/why-cant-countries-print-another-countrys-currency  

---

## 6 answers

### Answer by username_15 on 2019-07-21. Score: 42 | Accepted answer

In order for one country to spend in another, it needs to exchange its currency for the currency of the other nation. This is done through something called the foreign exchange market. Like most markets however, the laws of supply and demand apply here too. If a country suddenly starts printing a lot of money, the actual value of its money in the foreign exchange market will go down (due to its increased supply). This will ultimately mean the currency will depreciate with respect to others, and will thus have lower buying power.

> **Comments:**
> **username_16**: A difficult issue is that if I go abroad and give somebody bits of paper in exchange for stuff, the person accepting the pieces of paper presumably needs to find some value in them.  If they have no intrinsic or exchange value (they apparently cannot be used in my country to buy stuff) then I am unlikely to be able to use them.  On the other hand, if my money has some kind of intrinsic value as [silver trade dollars](https://en.wikipedia.org/wiki/Trade_dollar) did, then they may prove to be acceptable  
> **username_17**: @username_16 Please post answers as answers.  
> **username_18**: @username_16 Yes, but that goes against the basic premise of the question - if you *could* print silver coins the way you print fiat money, they would be just as worthless (without the country guaranteeing their value etc. etc.).  
> **username_19**: @username_16, What makes you think silver has intrinsic value?  
> **username_16**: @username_19 - I don't particularly apart from its use in photography, jewellery and tableware, but the 19th century Chinese did.  It was their refusal to accept much else in trade which led to various conflicts in that period  

---

### Answer by username_4 on 2019-07-22. Score: 44

This wouldn't work - for the money to have any value abroad, it has to find its way back to the source country.

Consider an example; the President of Ruritania wants a Swiss watch. He prints a thousand Ruritanian dingbats and sends them to his ambassador in Bern with the instruction to buy him a watch. However, the Swiss watch-maker doesn't want to be paid in dingbats - he wants Swiss Francs. So the ambassador goes to a Foreign Exchange (Forex) broker and asks to buy Swiss Francs using Ruritanian dingbats. What rate does the Forex broker give him? The broker has to consider what he could do with the dingbats - all he can do is sell them to some Swiss guy who needs dingbats for some reason. So it's the demand for dingbats in Switzerland that determines the rate.

Let's assume the Forex broker gives the ambassador some Swiss Francs and off he goes and gets the watch. What happens next? The broker *sells* the dingbats to a Swiss importer who is buying Ruritanian apples. The Swiss guy uses the dingbats to pay his supplier in Ruritania and now, the dingbats have ended up back in Ruritania!

So the Ruritanian money supply has increased and, despite the best efforts of the President, inflation is stoked.

> **Comments:**
> **username_5**: Ruritania could make purchasing with RD illegal internally, but then the RD would have value to almost no one.  
> **username_4**: @username_5 Exactly. If it were illegal to spend dingbats in Ruritania, there would be no reason for anyone abroad to buy them. So the Forex broker would not be able to sell them at any price. Therefore he would not take them off the ambassador, who would not be able to get his Swiss Francs. So the President would remain watchless. The whole scheme can't work.  
> **username_6**: There is a parable I once read about a millionaire who visited a small island, where he paid for everything by writing cheques. Instead of depositing the cheques the islanders merely endorsed them and from then on used them as paper currency between each other.  

---

### Answer by username_7 on 2019-07-22. Score: 3

China does, in fact, do something like this! It has two currencies - one for use internally and one internationally. It was explained better than I could by Adam Townsend on Twitter: <https://twitter.com/adamscrabble/status/1094717028009689089>

Thread unrolled: <https://threadreaderapp.com/thread/1094717028009689089.html>

> 1. The ‘onshore’ currency is the Renminbi (RMB) or yuan and also called the CNY. It is only used to pay bills on the mainland. The onshore currency can’t be used for international transactions. There...
>    is no real market for the exchange rate, instead the People’s Bank of China (PBOC) comes up with a price every day thru an unknown equation, and then trades around it.
> 2. The “offshore” currency, also called the yuan or CNH, is used for international clearing and trading.
>
> The CNH has a completely separate set of demand and supply conditions from the onshore RMB.
>
> The Chinese have it both ways, huge inner stimulation to appease the people. Strong external currency to maintain purchasing power outside.
> By controlling the supply of CNH (offshore money) outstanding China can create a CNH shortage. They’d just buy the offshore currency to drive the value/price up.
> Alternatively they can sell the offshore currency, flooding the market with CNH to drive the value/price down. For example, when a foreign Purchaser of goods has to settle the transaction, and there’s a shortage of settlement currency (CNH), his/her cost goes up.
>
> Conversely, if there are boatloads of CNH available his/her cost goes down.

> **Comments:**
> **username_8**: We're looking for full answers here, rather than pointers elsewhere. Also, Townsend's case completely falls apart: just look at the history of the [CNH-CNY exchange rate](https://uk.investing.com/currencies/cny-cnh-historical-data), which is pretty much static. Just because Townsend writes long tweet threads and sounds clever, doesn't mean he knows what he's talking about.  
> **username_9**: What foreign purchaser of Chinese goods is so significant that they'd manipulate the exchange rate for just one payment? That sounds like nonsense, to me.  

---

### Answer by username_10 on 2019-07-22. Score: 2

Something close to what you want would be [Special Drawing Rights](https://en.wikipedia.org/wiki/Special_drawing_rights), which were created by the IMF to serve as an international currency without the problem of a national currency having to both meet the needs of international trade and domestic economic goals.

> **Comments:**
> **username_11**: Perhaps you could clarify how SDRs are related to the question the OP asked. SDRs aren't printed by a country, they aren't distributed to people, they aren't for spending "abroad" (or at all), and they aren't to allow a country to buy things.  

---

### Answer by username_12 on 2024-08-22. Score: 0

Its pretty simple. If you print more money, for any reason, the supply goes up. More the supply, lower the price. For example, you will still have to sell your own country's currency to buy the foreign currency to use it abroad. And selling your own currency adds to buying pressure on your currency leading to devaluing of currency and inflation due to you currency becoming of less value.


---

### Answer by username_13 on 2024-08-22. Score: -1

A country cannot simply print its own currency and use it to purchase goods and services in other countries for a few key reasons:

1. Lack of international acceptance: For a country's currency to be usable abroad, it needs to be widely accepted and trusted by other nations and market participants. Currencies without strong domestic economies and stable monetary policies behind them typically lack this international recognition and acceptance.
2. Currency exchange rates: When a country prints excessive amounts of its own currency, it drives down the exchange rate of that currency relative to other, more established foreign currencies. This makes the printed domestic currency less valuable and less useful for international transactions.
3. Foreign exchange controls: Most countries have restrictions and controls in place to regulate the flow of their currency across borders. Excessively printing money to spend abroad would likely violate these foreign exchange controls and invite economic sanctions.
4. Inflationary pressures: Indiscriminate printing of domestic currency, whether for domestic or foreign use, tends to create significant inflationary pressures within the home country. This undermines the purchasing power and real value of the currency.
5. Lack of trust and credibility: Attempting to use a country's currency only externally, while avoiding its use domestically, would severely undermine the credibility and trust in that currency both at home and abroad.

> **Comments:**
> **username_14**: Please disclose and reference AI generated content as per [the site policy](https://economics.stackexchange.com/help/gen-ai-policy) on such matters.  

---

