OK, to take a break from the sex-crimes for just a sec, now i’m seeing a “Basic Rate” (middle rate) of w1,029 = $1 on my computer, and that’s just outrageous, worrisome, damaging (and kind of sickening in the pit of the gut for anyone who lived through the financial crisis that started just 10 years and 4 months ago). I believe that last year at the best point that basic rate hit w904, and we were optimistic that we could see something below 900 before the end of the year… Whooo man, was that ever wrong. Damn. This isn’t some future-abstraction like worrying about what’s going to happen to North Korea — this is real, painful, right now, changing my plans for the worse… I was invited to something in Europe next month but may now cancel 
So I’m just wondering if any of you who know something about economics and finances might tell us what the hell is going on in a plain language — we all know the vast pit that America is rapidly sinking into, and how that endangers Korea’s export-led system. But every other significant currency in the world is getting stronger against the US dollar, the Yen and the Euro in particular our darling Won seems to be the only one that’s actually weakening against it and becoming nearly worthless against the Euro… Even the Philippine Peso, supposed joke of a currency, remains about 15% stronger against the dollar than it was a year ago! All the newspapers tell us is that foreign investors are selling Korean stocks and that’s why the Won is weakening so much — blame those profiteering forerunners again! — but are they selling that many more stocks than in any other medium-economy around the world?? It still doesn’t seem to me to explain why we should lose something over 10% in value in just a few months… 2% I could believe… Seems like propaganda, like something else big is being covered-up. Again.
Is this a deliberate policy by the new Lee government to boost exports and therefore jobs, not caring if it brings explosive inflation…? Can any informed person tell us what’s going on, and make reasoned speculation on where this is going…? I would thank you.
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1.00 USD = 996.165 KRW
http://www.xe.com/ucc/
1.00 AUD = 934.883 KRW
Holy Shit! You’re Right! AAAAAAAAAAAAAGGGGGGGHHHHHHHH!!!
Currency markets fluctuate depending on the confidence in the country of origin. Korea is considered more volatile than Europe, Japan, and even China. If the dollar is sinking and people are not trading for wons, then the won sinks with the dollar as well. The Yen and the Euro are trading stronger because people who dump dollars are buying those currencies instead, making them more expensive. The Won might just be stuck in a strange place where it is not considered a high-risk high reward currency like many developing currencies are but it isn’t considered a safe haven currency like the Euro or the Yen.
If the Won gets too cheap, people will just buy it to stabilize it back. Also, a cheaper won would induce more exports and tourism which would just balance it much later. In the short term, I would just hold on because it might be a bumpy ride for the Won. In the long term, don’t worry so much.
I’m using Woori Banks’ front web-page…
and ahm a-woorryin’.
things we should have done:
buy Euro
buy gold
go long on commodities futures
now, money is literally evaporating into thin air…
sigh
Uh I’m not sure where you’re getting this info but…
1. your exchange rate is wrong and way off.
2. Won’s expected future rate has the currency appreciating not depreciating.
Exports become endangered if the Won doesn’t depreciate along with the USD not the opposite that you claim.
Forbes is reporting the won trading at 1029.2 to the dollar at the close of business today.
The won probably ought to be around W850-860 = US$1.00. With Japanese Yen at 99 to the dollar, that’s where the won should be. I am positive that Bank of Korea, protestations notwithstanding, is buying dollars now in an effort to continue managing the exchange rate for the benefit of exporters (the US is still a major export market for Korea’s high-value exports), and to the detriment of Korea’s man-on-the-street (me) who is a consumer of imported products like food and oil.
The current inflation is being accepted as a lesser-evil alternative to reduced corporate earnings and possible defaults on loans which policymakers believe will also harm the man on the street. $10-a-gallon gas, no problem! Take the bus, Chulsoo.
What’s really interesting is that the Korean currency is depreciating against a backdrop of already-high interest rates. Looks like rates will be headed higher still soon, even as US rates are headed back toward the 1% level.
Anyone here in the currency game?
-Stacked
Your logic is off.
And, go to a bank and check the exchange rate.
I hope to be someday… but the currency game is nothing more than just money masturbation imo… it doesn’t actually produce anything real, just stimulates and regresses economies…
Looks like my wife and I cashed out of Korea at just the right time. And yesterday’s headlins of 100 yen to the dollar was music to our ears.
I’ve stopped paying attention to any Korean headline about foreign investors. One week they all scream “foreign investors buy Korea!” then next week they all say “foreign investors sell Korea!” Rinse, wash, repeat.
I also think Bank of Korea’s active today. Another big thing was the continuing bad news in the US with Bear Sterns disappearance. Dow fell 1.6% today, a big drop for the Dow. Kospi also down 1.6%, not so big for the Kospi.
I think what happened was: People (foreigners) don’t trust anything but cash anymore. The Kospi, having gone from 1400 to 2000 this year, held a lot of profits for foreigners. Today a lot of Americans said fuckit, and sold everything to get their hands on cash. US banks also need cash, but that’s too big a story to address now. Anyway, to get that cash they sold their Korean holdings for profit. To get that cash back home they had to buy US dollars. That created a big blip in demand for USD. The won will rise again.
That said, I do kinda feel a bit dumb for holding on at 920 a few months ago, believing that 890 was possible. I do want dollars before summer.
korea will have its fourth straight month of trade deficits due to oil prices. if you want quick relief chew on some tums.
as for me, i’m gonna try and get some stock in popcorn. it’s gonna go through the roof in a few hours with all the people sitting around watching the markets go nuts.
As far the comparison to the Yen, the Yen had remained steady with the dollar for the last five years until just recently.
http://finance.yahoo.com/q/bc?s=USDJPY=X&t=5y
The Won on the other hand has steadily appreciated (even taking into account the recent depreciation).
http://finance.yahoo.com/curre.....1&t=5y
Not sure what it all means, it’s just an observation.
Japan’s interest rates were effectively zero during all that time.
just you wait and see. looks like it could be far worse on your tuesday.
Yuppers, glad I did a major money wire 4 weeks ago……
Ghostyoon,
Yes, if people are selling dollars to buy Euros and Yen, then I would expect the won to also decrease in value against the euro and the yen since the value of the won is largely tied to the dollar, but why would the won be losing value against the dollar? Considering Korea’s high interest rates, I would expect Europeans and Japanese to be putting more of their money into Korea, or did Roh Mu-hyun and his crew totally ruin Korea as an investment consideration?
I know next to nothing about currency markets, but I was thinking the same thing that Brendon is thinking in regard to the possibility that Korean officials are munipulating the value of the won to boost exports, regardless of what it may mean for Korean consumers. Or is it just a coincidence that the won started its freefall after Lee came into office?
There is something about President Lee’s recent comments that make me think that he wants to be the next Park Chung-hee, who was a man that expected Korean consumers and workers to sacrifice for the good of the nation (i.e “big business”). Isn’t that what Lee meant when he said, “…everyone will have to pitch in to pull through the hard times”?
Anyway, if the Korean government is buying dollars to depress the value of the won, then it would seem that she is getting a lousy deal since the value of the dollar is falling in world markets. I do not see how it would be worth it.
Woori just closed slightly better:
US$ Euro
Basic 1,026 1,621
Buy cash 1,044 1,653.5
Sell cash 1,008 1,588.7
Sucks bad!
High Inflation sucks real bad, too.
As the bard said, a hard rain’s a-gonna fall.
It’s a-fallin’, i guess…
Thanks to all who are making substansive comments — i understand a bit better now.
> The won will rise again.
I sure hope so, and freakin’ soon!!
If there is a silver lining, Roh’s efforts to choke off supply of new apartments means that the poor guys whose assets are mostly tied up in Korean real estate (me again) probably won’t be facing a price crash unless and until chaebol start going belly up. But at that time, as I am in legal services — the demand for which explodes when chaebol start going belly up — the decline in asset value will be more than covered by the increased earning potential.
Weakness in the dollar and recession in the US means that inbound US investments will slow (as if Lone Star didn’t mean this already), but the freakish strength of the Euro and Pound will bring increased European investment interest.
Good times.
#9
it doesn’t actually produce anything real, just stimulates and regresses economies
wouldnt stimulating and regressing be considered doing something????
like creating jobs and retail, driving up exports and the like
The housing market has tumbled the world over except Japan and Germany. The number of unsold apartments in Korea hit 11-year high. The Korean housing bubble will soon burst leading to far more serious recession than in the US. The currency market has just started incorporating the consequences.
There is a caveat to this information, which I concede is a factual statement: More than 90% of unsold apartments nationwide are outside the Seoul metropolitan area. There are signs that Seoul apartments may start to build inventory, but just as many signs (i.e., rising prices) that there is more demand than supply of new apartments in the capital.
I recently wrote about this on Korea Law Blog, in an entry concerning physical construction costs as compared to the cost of land, which entry also has links to others in the series.
The only thing that would produce a bursting of the apartment-price bubble in Seoul would be an economic shock that produces increased joblessness and migration back to the provinces. It could happen — maybe it happened today.
Just you wait — the yen can go to 80 to the dollar too. I remember those days (1995-1996). At that time the won traded around W750 to the dollar which is overvalued but still possible as a near-term move for us. A lot depends on how much more the dollar declines, and the strength of Korea’s competitors (i.e., Japan).
The worm turns. I remember Sterling at both US$2.55 and US$1.00.
sanshinseon, please don’t take what I’m going to say next as criticism, because it’s only intended to help clarify your situation.
Here goes: consider what assets you have that are ‘Korean-based’; consider how long you’ve been in Korea, and how long you intend to remain in Korea. Possibly, you are in the habit of comparing the US Dollar and the South Korean Won, and considering your worth, in one currency relative to the other; probably, you are not in the practice of pairing currencies in forex trading.
If, after several years, the majority of your assets are in Korea, and you intend to continue to live and work in Korea, then my advice is not to sweat this. In other words, you’ve already been ‘going long’ on the KRW/USD pair, and you should ride this out unless you think the Korean economy’s going to tank for the long term. And, FWIW, I do not believe that’s what’s happening here.
However, if you’re leaving Korea in the near future and need your assets elsewhere, or if you’re bullish on the US Dollar, then go ahead and sell. Personally, I don’t think shorting the Won’s a wise move unless you need to do it.
I believe in the relative strength of this economy and intend no changes based on the current situation. In other words, the current change in the exchange rate has caused no change in my long-term stategy. However, one important thing to remember is that a financial strategy which works for one person may not work for another; you need to consider your own position. I hope that the ideas above will you to make the decision best suited to your needs.
Thanks for the good comments and the long-term hope, gbnhj — no criticism detected
No, i’m not considering cashing out / moving out of Korea anytime soon, so can also wait patiently in my office for this to recover — if and when it’s going to — professors of practical subjects aren’t too likely to lose their jobs unless it gets REAL bad.
My personal problem of the moment is only that I’ve been invited to present a major paper to a big Conference in Portugal near the end of April, and it would involve my own money being spent for several days of transport, food and lodging there — and with the Euro at w1620+, i just might have to withdraw my paper and tell them i can’t come over — and that would really suck — Portugal in late April must be really nice; i was gonna see Fatima…
Interesting post and great comments. The dollar is sinking and that could mean trouble for exporting countries like Japan. Yet, the Won-Yen rate is crazy too in the past weeks.
http://www.yen2won.com/
For what it is worth, maybe staying put is the best advice. I don’t think presidents or politicians have much control over these matters…
I would love to see a 15-year chart on won-yen.
According to the press, the won-yen rate that has been “comfortable” for the two states has been something like 11 won = 1 yen. That’s what the Koreans had said was comfortable; there’s no telling whether the Japanese like it. Recently, the won has been strong against yen — like 7.5 won = 1 yen. Maybe we’re moving back to parity.
If that’s so, and the won-yen-dollar triangular trade is correct at 10.5 to 11, that looks like 1000 won = 91-95 yen = US$1.00. It looks like we’re approaching that level now. If yen strengthens further, to the Y85 = US$1.00 level, won will be pulled back toward W900 to the dollar.
I brought this up here a few days ago. Still no solid answers though, but that’s life.
Jeez, sanshinseon, is that what this is all about? I can solve that for you: Just go to Portugal. Hell, you know that if you were 20 years younger you wouldn’t even think twice about it. Put on your Nikes and Just Do It.
Mrs. Linkd once spent a month in Lisbon for a course. She sent more than one email marvelling at the perfectly sculpted beauty of Portuguese women’s asses.
Take pictures.
15-year chart, won/yen
Aha! The pre-1998 won-yen rate averaged closer to 8; the 11 rate so beloved by the Korean business press is not “parity”, but undervalued won allowing an export advantage to Korea.
If we find our way back to the pre-1998 (and 2005-2007) parity rate of 8, then a more appropriate won-yen-dollar balance would be W800 = Y100 = US$1.00. And a move of the yen to Y85 = US$1.00 pulls won down below 700 to the dollar (a rate I remember from my salad days in the Navy).
If won hits 700, I am selling out and taking my million-dollar-plus fortune back to Missouri. Why, I can buy 50 meth houses with that kind of money.
Dear Korea,
Please keep it together until after I leave in three months. Please, please, please.
Your favorite ESL migrant worker,
- William G
I have to agree w/Brendon on this one. Korea has plenty of foreign currency reserves (basically awash in it) and the underlying economy is still strong. Korean exports still drive the economy and for the large part (particularly with cars), still compete more effectively on solely a cost basis.
Going back to 1,100 won a dollar ratio will help LMB meet his goal of 7% GNP growth without Korean companies actually having to do anything to improve their business.
50 meth houses in Missouri? I suppose you can, but that investment won’t grow. Get real estate on a sunny coast. That will grow.
Reading some of the concerns here. Ask yourself what the exit plan may be. If you need to convert won to dollars in the next six months, I’d get your minds confortable around the notion that it’s going to be 1,100-1,000 won to a dollar.
There is a point where a weak dollar will begin to hurt the Korean economy. Remember, key commodities, such as oil and food, are traded in dollars. Letting the won fall too much is going to make inflation a bitch so if it falls too much, expect the central bank to mount a vigorous defense, which it will win.
If you guys are going to be in Korea for three or more years, you should be fine.
But the buying opportunities for spending our won on your dollar assets are coming up rather sooner than that.
gbevers
I would imagine that people are trading dollars and it is true that the won would depreciate along with the dollar to the Euro/Yen. And yes if only dollars were being traded, then it would mean they would stay equivalent.
But because Korea is based largely on the health of the US economy, foreign currency traders would trade Korean Wons away too. If anything, they would trade that away just as fast or faster than the US dollar since the US dollar is still the base unit of trade for commodities.
So the Won sinks along with the dollar due to the dollar trade and sinks further with currency traders trading the Won as well. It’s a multiplier effect. In the long run, it just means incredible bargains for investors when the Euro and the Yen peak and they need somewhere else to put their money. See in the summer/fall, the Won will go back down I imagine.
Brendon, I think 700Won to the dollar is a bit of a wishful thinking
With money in both Korea and America, I could really go either way on this… If the Won grows to 1100-1200, I’m gonna buy me some won and trade it back when it actually stabilizes around 900-1000
I’m from Missouri, where I used to live in a Goat House™. What would I do on one of the sunny coasts, except feel out of place? Maybe Seattle or something.
But if you ask me, that West Coast real estate done already growed. Except if you think down is a way to grow.
I don’t want any body to read this thread and then go out and become overnight currency speculators. I can’t tell anybody WHAT to do, but whatever you do, think about it this way. If you can loose the money and it won’t affect your lifestyle or your ability to pay for rent, mortgage and food, then you have the ability to at least try it out. For investment opps you don’t understand very well, only use money you can afford to loose.
That’s my two cents.
Maybe, but the day that comes to pass, my mortgage is paid off and I will be strongly tempted to say AMF to HMP and the ROK. Nice people, all, but come on now — a million bucks is a million bucks. I would almost be compelled to take that money to the States.
Dallas seems like a nice place to live.
Brendon,
My advice on real estate is pick areas where the key word is “geriatrification.” That’s where the ability to make value-add comes to play. Not knocking your home state but Missouri there just isn’t a lot of out-of-staters that have a burning desire to move there. It’s out of state (or out of country) migration of wealthy and middle-class people that cause real estate prices to rise.
I don’t know much about Seattle, but for my area, the greater LA and OC area, there are still some interesting opportunities. Big areas of growth are in LA downtown, Pico-Union and Mid-Wilshire. These are “geriatrifying” places. With the money you are talking about, get a house in South Pasadena, send the kids to Harvard-Westlake. The wife can drive to Koreatown to socialize and hit a day spa. You? We can grab a beer at Old Town as I have a weekend condo in South Pas.
There are too much concerns and confusions here…
The reason why Korean Won is sinking is simply because there are few to sell dollars in the FX market but too many to buy dollars now.
Why?
First, wrong hedging strategies.
korean companies,for example ship building ones, were selling dollars before they get the money from the buyers by forward contracts since they thought Won will be expensive. So they can’t sell now.
Second, FX options sold last year in korea.
whoever bought those options now need dollars to pay back.
So ironically even though USD is plummeting now there are few koreans who are selling dollars.
Third, major investment banks in the states need dollars right now to avoid margin calls.. and they do invest in korea last year for some reasons like korean stocks boom,Interest rate difference between korea and US. Anyway, liquidity is too good in korean financial markets.
other minor factors are trading deficit and the fact that too many koreans are spending or sending money overseas etc.
why not yen?
who would have borrowed money from
US to buy bonds in Japan?
and not many people in japan were selling dollars by forward contracts.
These are the reasons that I am thinking why Won is sinking together with USD.
It’s not like another IMF.
So don’t worry.
As long as you don’t mind minorities complaining about how they’re getting pushed out by “The Plan” I would recommend the same.
Brendon,
Yes, the Dallas/Fort Worth area is nice, and if you bought now, you could get some good real estate deals.
Ghostyoon,
The won is losing value to the dollar, yet currencies like the Phiippine peso is not, so there must be other factors. Are the Filipinos working abroad trading in their yen and euros for pesos while Koreans are still buying dollars to support their overseas study and travel crazes?
Good luck trying to make money on exchange differences. I think I will just buy the dollars I will need for this year as soon as I can and hope that the rate comes back down by next year.
how do you think obama won missouri???
the meth house vote is strong there
Are retirees flocking to LA downtown, Pico-Union and Mid-Wilshire? I think the key word is “gentrification.”
It could be that money is being put into such currencies and people are flighting away from the won like I said before. I really don’t think there is something nefarious going on. I mean sure, this is the Korean government we’re talking about, but let’s keep the conspiracy theories at a minimum, or at least believe in Ockham’s razor.
As for your example, Filipinos abroad probably are sending their money back into their country and foreign investors could be feeling more confident in the Philippines.
Now that Korea is the 15th biggest GDP country instead of the 13th thanks to the weak Won, what do proud Koreans have to say about it.
In the last few months the Korean current account has been in red due to huge deficit in tourism and spending on studing abroad. I wonder if Koreans wild investments in studing abroad would pay dividends?
I’m from Missouri, where I used to live in a Goat House™.
See, that’s the difference between Seattle and St. Louis - in the Midwest, you might have lived in a goat house, but in the Pacific Northwest, you could have grown up in a boathouse. Just ask Dale Chihuly: think glass, not grass.
The Goat House™ wasn’t in suburban St. Louis — it was in an unincorporated area of Boone County.
# 47,
Yes it’s gentrification. I was lazy w/my spelling but can always depend on the good people in the hole to remind me how dumb I am.
natto,
Currencies decline. Nations that have oil (Russia & Mexico) or rapid population growth (Brazil) also have faster growing economies so will naturally outpace a country like ROK.
All I gotta say is growth is a marathon, not a race. By the way, Japan hasn’t really done much since 1989 in terms of real GDP growth. Still behind the U.S. and many of the better Western European states I’m afraid.
Yadayada makes some good points on the won, although I think the trade deficit is also becoming important as it reduces the demand for won from exporters and increases the demand for dollars from importers. There is also a perception that the trade deficit will get worse, which offers the prospect of a weaker won. As Korea’s economy is highly export dependent it is more sensitive to an economic slowdown overseas that some other Asian economies.
Making the supply/demand worse is that the Korean government adopted various measures last year to encourage overseas investment in order to check the won’s strength. For example removing the tax disadvantage for funds that invest overseas. As a result, there has been a boom in sales of funds that send money overseas plus Korean institutional investors such as the pension funds are also expanding their overseas investments.
In the short term, there are also significant payments of dividend to foreign shareholders around March/April as it is the dividend payment season.
So all in all there are a lot of fundamental reasons why the won has weakened - without the need for any conspiracy theories about the actions of the authorities - who seem to have been trying to talk the won up.
Been there, done that. Chasing goats out of a derelict house is the purest form of gentrification. Goats out, gents in.
Huh, it’s back slightly better now — Basic Rate 1014. So no further “collapse” today at least…
Thanks everybody for the deep discussion, i now understand better and feel slightly reassured.
This is all about whether or not those of us whose income is mostly or entirely in Won will soon end up selling pencils on street-corners (apples being too expensive in this country) — my current acute concern was only intended as an example.
By now it takes several more shots of Scotch than it used to to get me to feel 20 years younger — and my Nikes don’t hardly wanna Do It anymore…
Excellent, thanks! I shall inform Mrs. Sanshinseon of this new justification for spending 30% more than previously budgeted on this trip to Euro-shores. I’ll let you know what she has to say about it…
but i heard that that lake of the ozarks was the new playground of the midwest.
#54 wangkong “Japan hasn’t really done much since 1989 in terms of real GDP growth. Still behind the U.S. and many of the better Western Europearn states.”
From the March 15th-21th issue of The Economist magazine;
Which economy has enjoyed the best economic performance over the past five years: America or Japan? Most people will pick America. The popular perception is that America’s vibrant economy was sprinting ahead, whereas Japan crawled along at a snail’s pace. And it is true that America’s average annual real GDP growth of 2.9% was much faster than Japan’s 2.1%. However, the single best gauge of economic performance is not growth in GDP, but GDP per person, which is a rough guide to average living standards. It tells a completely different story. America’s population is rising by 1% a year while Japan’s population has been shrinking since 2005. Japan’s GDP per head increased at an annual rate of 2.1% in the five years to 2007, faster than America’s 1.9% and much better than Germany’s 1.4%.
In other words, contrary to the popular pessimism about Japan’s economy, it has actually enjoyed the biggest gain in average income among the big three rich economies. Among all the G7 economies it ranks second only to Britain(2.2%). UNQUOTE.
Wangkong, it’s too early to count Japan out.
So, natto, what’s the plan for GDP growth in 20 years when a third of Japan’s population has died of old age and there’s hardly anyone left in the country below the age of 40?
“It’s not like another IMF.”
Those were the good ole days…..1,900+ to the dollar, Korean girls (not Filipinas & Russians) working in the juicy bars and 2,000 won taeji kalbi dinners.
For those of us who get paid in $, it was the best of times.
Here’s my little take on the won’s recent fall and a few questions. (I largely agree with Brendon, except I wouldn’t call the European currencies “freakishly strong,” I’d call them normal…) On to the won.
The Bank of Korea was already paddling upstream, for about a year admittedly trying to weaken the won through its gov’t bond market, fighting a strong won that had gained 25% in the last five years. They were succeeding moving against the current (at a rumored cost of $3 billion for the last year) while simultaneously propping up interest rates. What a cool trick! It seems the secret ingredient is currency controls, though I’m not sure. (Higher rates usually strengthen a currency, but here the accompanying sell-off in treasuries was far more important. I’d like to know more about the Korean capital markets, and also about how the currency controls may affect the won’s price. Can foreigners not lend in won to take advantage of the interest rates but only buy treasuries? Is that it?)
Anyway a weak money makes sense if you’re trying to win an export rivalry. It’s like hot-rodding your Hyundai for the drag race, or gearing up for a good bout of export fishing. Design the car. Lower the currency. Ratify the FTA if there’s a chance. Let’s roll…
So they were paddling upstream, against the weak dollar, preparing to hunt for a whale of market share at a time when everyone else’s currency would be gaining, even the yen. The BoK’s latest big manoever was to signal it would still not cut interest rates, which made the BoK’s bonds go down in price, which facilitated a sell-off in paper as well as equity and index markets when the global tide turned decisively against the won, during “triple witching” options and futures expiration no less, by means of a true shift in market sentiment away from emerging markets, increasing scrutiny on balance of payments (the FX meme of the quarter), along with the secondary effects of a US credit crunch, and the great cash hungry sucking sounds that fill offices soon after a few calls from that mysterious Mr Margin, not to mention the “technical” picture — a decisive medium term trend reversal on the charts with footprints of massive selling volume. Well the BoK unexpectedly caught itself paddling not against but along with a fast-reversed current, and while practically surfing the new wave, wow, they really moved.
The Bank itself was surprised; they’d outdone themselves. It was too fast and now they might have to be careful. This is basically what the bank said. “It went too far too fast.” Next day they said the move was “too fast,” and said maybe in the next few months it might change direction for a little bit. Meaning: We might stop paddling, or even paddle the other way a bit, we’ll see, and don’t worry, we are rational, we won’t sink the boat. For a year now they’ve been signaling in the press that they wanted a weaker won. It was a policy, not a conspiracy.
Chonsool and his companions are paying for it through higher prices (shrinking won plus demand-driven commodity price increases. It’s a semi-hidden tax on the people, shifting the public’s resources toward chaebol export operations as well as small exporters. Privatize the gains, socialize the losses. But there’s a social compact involved I think, because it’s implied that Chonsool’s suffering now is for the sake of his and the nation’s children who will benefit from the rising prosperity of their export-driven future. Isn’t it a well-tested, old Japanese model? Maybe it will work.
Despite a crumpling dollar, Korean cars and electronics actually manufactured in Korea may stay competitive or outperform Japanese cars made in the rural US (and in large part designed in Pasadena CA) in part because of a weaker won, and that’s just the US market.
For US consumers this may mean resistance to inflation in the form of Korean imports that go up in price less, or even don’t go up at all. It wouldn’t seem to be a stupid idea to try and manage the won to the effect that sticker prices on Korean goods in America don’t have to change, and can actually fall in Europe.
By the way I was wrong about the won. I thought it would have to strengthen, that it would be pulled up by the yen and the Chinese yuan, Korea’s main trading partners. I think that in the long run this is still probable. But nobody knows what will happen before the long run starts… 1400?
As Borat says, “Why not?”
Really? You’d call them “normal”?
If so, the cost of living in Europe is astonishingly dear — I visited Belgium, the Netherlands, France, Germany and Austria during the period when the Euro was trading at $0.85-1.10 and found that daily living costs (run to the supermarket, etc.) and the cost of housing still felt expensive in dollar terms.
Eighty-five cents to the Euro and a Big Mac, fries and a Coke in Austria still cost five bucks.
At $1.60, unless the cost of essentials somehow drops because Europe imports from the US, it would be freakishly expensive.
I’ll find out soon enough: Got a trip coming up in June.
Hehe, the strong euro (and cousins) works both ways — imported goods become cheaper, and consumer purchasing power rises… Go to Europe with dollars, won or other trash and you’ll, uh, pay the price for Bernanke and Greenspan’s sins… If you’re already European, it’s not as bad, right?
What I’m getting at is the incredible weakness of the USD which is what gives the illusion that the euro is so strong. It’s like it almost doesn’t make sense comparing euro to the USD, because USD is being treated like it’s toilet paper. I have a sneaking suspicion that if you chart the increase in commodity prices in euro terms that you will get a kind of back of the envelope picture of real demand growth related price increases, as opposed to charting commodities in USD, where a lot o the gain is just dollar weakness. But Bernanke seems to have entirely capitulated and given in to a dead dollar policy.
The yen’s been in a low-to-no-interest, funding currency, super-cheap environment, so it’s not a great indicator. The Chinese have forced their yuan to be super cheap. It’s like a race to the bottom. The only real currencies left seem to be the Europeans, Singapore dollar, HK dollar I bet is generally strong…
#26 “i was gonna see Fatima…”
No worries mate, I heard she’s moved to the XXXXXX Bar in Itaewon!!!! No need to go all the way to Portugal.
Two good articles today on the won:
S Korean won bolstered by intervention
http://www.ft.com/cms/s/0/8812.....07658.html
South Korean Won Climbs After Fed Reduces Rate; Bonds Decline
http://www.bloomberg.com/apps/.....refer=home
Are you watching, Sanshinseon? Below 980 already. Don’t cancel that trip to Portugal yet!
Yep i am, like a hawk, and no i haven’t yet… Thinking it over, what it’d be worth for my career & pleasure vs. how nice a few extra million in the savings-account would be… “retirement” ain’t that far away, gotta get that sweet tropical piece of land bought…
There’s a friend of mine back in the states who is very well-versed in economics and financial history, studied it hard for years so that i do have to respect his opinion… And he warns me in private letters that this current crap is still going to get much worse, for most all of us around the world. He strongly recommends being conservative with spending now, make sure you have plenty of reserve saved in a liquid way, don’t trust the markets, and hyper-inflation hedges like gold are still a very good idea for investments right now… Dunno if things are going to get that much worse, myself, but with the heavy uncertainty among all the experts and continuing bad news coming in, it does seem that being financially cautious would be quite prudent now.
We shall see…
Well, from that point of view, I guess you just want to make a conservative projection of how many more books you could sell or paid speaking engagements you could book if you do go, and see how it balances out.
There’s broad agreement that worse is on the horizon. I’m also into accumulating cash, which for me means leaning on delinquent customers to pay up, cuz like your friend, I’m hoping to time my buy-in for what I hopefully guess correctly to be the “bottom”.
That said, if there’s an asset you want to buy, like a piece of tropical land, then it’s a good idea to sign that contract when prices have collapsed and inflation is about to start eating away at cash. Maybe you’d be better off buying a ticket to your chosen retirement destination to do some shopping.
Glad I’m not as near retirement just yet. Stressful time to be making big decisions.
Yup, our views are in agreement.
I’d like to buy a nice piece of land in the Philippines, but real estate prices have not yet declined there, and their Peso is currently quite strong against the dollar, opposite from us — so does not yet seen to be a good time to buy. They have endless serious political crisis going on already, but that hasn’t crashed the economy. Will it crash at all, and for that matter will Korea’s? We just have to wait and see…
Honestly, we are all in wishful thinking mode one way or another. Being paid in dollars like me, obviously I want a stronger dollar. Any Korean source is suspect and likely tainted. Koreans are emotional ie Evil US Beef.
So just read the news about Korea trade deficets and think about the impact of the Iraq war on the US economy and the Bush freefall mentality of the US dollar. It is a strong bet the democrats will win the upcoming election and an Iraq pullout will happen but not overnight. This war has drained US resources and the american economy as a whole.
I have seen Korean experts say the won was going to be ~800 to 1 USD last year and look at it now. The Korean economy is to irrational to predict but IMF would be a good case study to find leading indicators. Korea is the only country in the world that beleives in FAN DEATH so you need to understand all the data int he world still can be bent till it meets your criteria.
Oil prices are going up, the dollar wlll be stronger come the next election, and the Korean economy isnt doing that well. My gut tells me their sub-prime/bad loans havent been exposed.
1200 by summer, 1300+ if Obama wins, 1000 if McCain wins as he thinks Iraq is 10 more years of work. Stay the course…ya rite.
Logic doesnt apply in an emotionally based society.
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[...] Here we go again. The won has hit a new low against the dollar, falling to it’s weakest point in the past 30 months to 1,049.6 won to a dollar, a fact that has to be disconcerting to anyone getting their paychecks in the Korean currency and doing a mental calculation in another currency (i.e. foreigners). [...]