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South Korea Starts Currency War Rumblings; Has Japan In Its Sights
While the rest of the developed (read trade deficit) world's foray into the currency wars was completely predictable and expected, there was one country that had so far kept very silent on the topic of Japan's attempts to crush its currency: its main export competitor, South Korea. Recall that for this Asian nation exports are everything, and as Yonhap reminds us, "exports of goods and services amounted to 538.5 trillion won (US$506 billion) in the January-September period, or 57.3 percent of the nation's gross domestic product (GDP), according to the data by the Bank of Korea. The reading was higher than 56.2 percent tallied for all of 2011 and the highest since the central bank began compiling related data in 1970, and South Korea's exports accounted for 13.2 percent of its GDP." The reason for South Korea's relative silence is that, as we showed yesterday, in the global race to debase launched with the end of the Bretton Woods, it was the undisputed leader, outdoing even the US.
Moments ago South Korea may have just had enough and broke the seal on its code of silence. As Reuters reports, "South Korea said that while the Group of 20 nations at their meeting last weekend did not single out Japan for monetary and fiscal measures that have weakened the yen, the group did not exactly endorse Japan's quantitative easing policy, which in fact stirred controversy."
"The message from Moscow should not be understood as that the leaders endorsed Japan's quantitative easing," Choi Hee Nam, a finance ministry director general, told a briefing in South Korea. "The G-20 also didn't officially oppose Japan's policies, but the topic was very controversial."
The yen has fallen more than 20 percent against the Korean won over the last six months, a big boost for Japanese exporters competing against South Korean manufacturers.
Why this departure? Because in the modern world, where all gains are marginal and all historic benefits due to weak or strong currencies are long forgotten, and thus irrelevant, the fact that the Yen has fallen over 20% against the Korean Won in the past 6 months means a direct loss to Korean exporters, most of whom compete directly with the neighboring island nation. Furthermore, since trade is zero sum, all Japanese gains mean Korean losses, and accenuated and direct hits to Korea's GDP.
Which means that all eyes now turn to Seoul in anticipation when this final bastion of monetary stability will cave to the global onslaught and its central bank proceeds to engage Japan directly in the most acute case of global currency warfare since the Great Depression. However, as C-grade financial tabloids have explained, the currency wars, and trade wars that result, will be a win-win for everyone.... Just please to ignore the last time they resulted in war-war.
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Currency Rawr!
G20 pledge: "No currency war"
/sarcnth
By Mark Thompson, CNNIf Japan and China are doing currency wars vs. each other, it is DEFINITELY in MY interest for South Korea to depreciate their currency too!
(Talking my book here...)
Cheaper bearingz, bitchez!
I am pretty sure the only thing they agreed on was the feel good move of putting another trading bottom in gold.
Actually, CURRENCY WARS...
It's a great idea for a board game!!
US is Boardwalk. South Korea might be Marvin Gardens.
Who is Park Place?
[From our US game of "Monopoly", SD! Actually, a monopoly would do me some good! :) ]
Or the other Marvin G......Let's get it Won https://www.youtube.com/watch?v=yhBAJHzIkQk
China, and it's Park Prace.
Forward! Japan is allowed to devalue as long as they will buy 500 bln. USTs over the next year, making it possible for Bernanke to print by proxy, and also give german exporters the finger as retribution for the german gold request. Its a very smart scheme.
And then Germany will bend that finger backward by printing Volkswagens (aaaagain) and landing them on the East Coast (aaaagain).
I'm surprised they haven't engineered an actual Volkswagen cannon for just such an assault.
I know, I know, strong Euro = harder time flooding export markets but, who knows what their parts and service supply contracts are priced at and when they were signed and sealed and how far out they may stretch. Perhaps Germany has their own TBTF industries.
That article out there that a "German auto company" was stockpiling silver bullion in Switzerland got me to thinking that maybe the German industrialists know WTF they are doing and have built up munitions for a trade war in the event that acts of currency collusion would be unfavorable towards them.
I think North Korea threatens South Korea with destruction more often than I eat vegetables.
SK is a beautiful country....clean, safe, Fuki-free and nice people. But for Americans it is fairly expensive. If they devalue I'd visit again.
+ 1 Nice comment. I found the same.
Good food too!
I propose a Hunger Games on the Senkaku Islands. Put all of the G20 governments and bankers along with their economists and media surrogates there for a fight to the end. Aside from solving most of the world's problems, it would be "must see TV."
Trade is not zero sum. That's about the dumbest thing ever posted on this website.
ZeroHedge rarely writes about korea....I don't know the reason.
The country is totally broke after 2009....All its multinational companies (such as samsung, lg, financial, insurance, etc) went bust & no longer korean. More than 50% of the stocks of these companies are held by foreignors....mainly US financial firms.
Also, the more korea exports, the bigger the trade deficit with Japan increases. Most of the rare material, machineries & technology (patent fees) come from Japan. Is used to have the highest suicide rate & inflation is out of control (though it did subside recently). Pure stagflation & the standard of living went down the toilet....
Check me if I am wrong.
hero
But they have that sweet FTA with the US now, right? So...problem solved.
NO....By signing the FTA, the US took over the country and made Korea its colony. In other words, korea lost its sovereignty. The US media is quiet about this because of its sensitive nature.
hero
I was being sarcastic.
Sorry....my English is poor & I'm typing fast.
hero
Germany's INA now owns Korean bearing manufacturer KBC.
Yes, korea is not a manufacturer but rather just an assembler of parts. (although samsung does have quite a number of electronic patents......but a lot of them originally came from Japan such as toshiba & hitachi).
hero
More about korean bankruptcy, see this link (see thread #26):
Use auto-translator if you can't read Japanese.
http://www.logsoku.com/r/poverty/1328966296/
hero
Among OECD nations, korea has the worst type of keynsian economy. Unfortunately, it is never mentioned in western media.
Correct me if I am wrong.
hero
That andthe fact that they conned all their old ladies into turning in their gold during the currency crisis, "for the country." What a bunch of sheep...but at least they had gold. Japan has to be THE worst at recognizing the value of gold...personally or nationally.
Korea devalue the Won to make Samsung, LG et al products competitive? No, you can't be serious!!!!
nt
Kospi having a major trend day right now. At least stock markets are having a race to the top. sarc.
North Korea is aggressive now they tested their nukes.....Notably its reported that China and Russia taken a side “As the saying goes, a newborn puppy knows no fear of a tiger. South Korea’s erratic behavior would only herald its final destruction,” Mr. Jon said at the conference.
http://www.washingtontimes.com/news/2013/feb/19/north-korea-threat-triggers-global-backlash/