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Vagabundo
Joined: 26 Aug 2010
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 Posted: Fri Nov 19, 2010 10:05 am Post subject: |
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| The current policies around the world is a race to the bottom, to see who can devalue their currency the most. Everyone complained at the G20 that the US was devaluing, and Obama said "GFyourself" so they are all trying to beat the US to the bottom. The first one lowest wins (taking the smallest hit from the devaluations, having the cheapest currency to encourage exports). So it's not accurate to say Korea "manipulates it more than most." They engage in Open Market Operations (OMO) just like everyone else. |
wrong and wrong.
Bond OMO isn't the same as active buying on the interbank currency market. Korea has been heavily intervening on the open interbank currency market.
and in 2008, they actively intervened, very very heavily over several days to help out the banks and chaebols screwed on their currency strangles they sold.
in the race "to the bottom" as you say... Korea is winning.
and by a mile.
did you not understand the currency tables I posted or should I post them again and post some more?
most other currencies have regained their 2007 levels vs USD, while the Korean ddong (they should change names with Vietnam) remains 15% under.
lastly, the American's aren't being all that hypocritical. There's a savings/expenditure imbalance in the global economy caused by Asia's saving/ export everything and America consumes everything model.
America's finished being the world's insatiable consumer for now.
and Asian currencies, it can be argued have been heavily undervalued for years. |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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atwood
Joined: 26 Dec 2009
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| Posted: Fri Nov 19, 2010 8:05 pm Post subject: |
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| nathanrutledge wrote: |
Define "manipulating." EVERY country buys and sells bonds on the open market in order to inject or remove currency from circulation. That's nothing new, everyone does it and has been doing it since central banking began. The complaint with the Chinese is that they do MORE than that. By virtue of controlling the entire banking system, they can and do sell the yuan ONLY at the level they want to. They are holding the value of the yuan artificially low.
If they let it float, they could still play with the level of currency in the market, but they could not control it the way they do now.
The current policies around the world is a race to the bottom, to see who can devalue their currency the most. Everyone complained at the G20 that the US was devaluing, and Obama said "GFyourself" so they are all trying to beat the US to the bottom. The first one lowest wins (taking the smallest hit from the devaluations, having the cheapest currency to encourage exports). So it's not accurate to say Korea "manipulates it more than most." They engage in Open Market Operations (OMO) just like everyone else.
The situation in December of 2008 was NOT buying won, it was selling dollars. The Korean government spent its ENTIRE surplus of US dollars in an effort to stop the dollar from appreciating. There was a whole series of articles in the papers about it. I'll find them and post them if you find and post your conspiracy theory evidence.
The won is worth less now versus other currencies because of OMO. The interest rates are too low. The effect is locals are spending more than saving, and exports are cheap. During the recession, it was the governments stated policy to keep the won weak for exports. Again, every country does this and is currently attempting to do.
What's really funny is not the Koreans and Japanese, but the Americans who complain about the week won while our government is screwing the hell out of every bondholder in the world by destroying the dollar. Hypocrisy at it's best. |
Korea is not an open market. The article you linked to says Korea is limiting investment by foreigners, which helps keep the won weak. More investment would strenghten the economy and the won. Koea is refusing to let that happen, which is manipulation.
Your argument is that because China is better at manipulating its currrency, Korea is not manipulating its currency. You can see the problem with that. Just because Kobe Bryant is a better basketball player than Dwayne Wade doesn't mean Wade is a bad basketball palyer.
To blame this all on the U.S. is ludicrous. The emerging markets have been bleeding the U.S. dry for years, and the U.S. is merely trying to level the playing field. It's way past time they started playing hard ball with the likes of China and Korea. |
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Vagabundo
Joined: 26 Aug 2010
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| Posted: Fri Nov 19, 2010 10:03 pm Post subject: |
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nathan, once again, I have to politely and strenuously disagree.
Venezuela has had a forced controlled and way too high exchange rate for years. That's why Chavez is forced to devalue, as his econony outside oil is in tatters (see Argentina of old)
re problems within the eurozone, once again the euro is kind of a forced political project. The fact that various countries within the eurozone had different economies and would need different interest rate policies was a problem with the euro that economists had pointed out since its inception.
Japan cannot do anything with its currency, it is sky high since it has been globally played in the currency global carry trade. The won is toilet paper outside of Korea and a rinky dinky regional currency. Yen will be exchanged and taken anywhere in the world.
Thailand PROVES my case. The baht is about 10% stronger than its 2007 peaks against the USD. The won is about 15%-20% WEAKER still than its 2007 peaks. Thailand has legitimate reasons to be concerned as it is just as export driven as Korea.
my POINT is that Korea has never allowed the won to bounce back to its mean following its disastrous fall to 1600 which made it the world's crappiest currency, except for the bankrupt Iceland krona.
everyone is trying to keep their currencies from appreciating too much, but Korea is the most active at ensuring it continues to LAG and be weaker than everyone else.
Understand?
1/1/2007 - 26.23 won per 1 baht
1/1/2008 - 31.85 won per 1 baht
1/1/2009 - 36.58 won per 1 baht
1/1/2010 - 34.90 won per 1 baht
11/19/2010 - 37.80 won per 1 baht
p.s. and buying bonds and active interbank manipulation are NOT the same. One has an indirect effect but the other effect is direct and immediate. |
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southernman
Joined: 15 Jan 2010
Location: On the mainland again
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| Posted: Sat Nov 20, 2010 5:23 am Post subject: |
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Vagabudo is right and Thailand is an excellent example.
That the Korean Won has dived against the Baht, speaks for itself there is no rational whatsoever apart from Government interference that would cause that.
Damn.... glad I haven't got student debts to pay off. I stopped sending money back home in June. I'm fully prepared to hold onto my savings until the world economy, and hense the Korean Won, will strengthen.
On a side note how much can you legally send back home? I'm hoping that as long as its proven saved wages that its as much as you've got. I'm meaning at one go to avoid paying to much in bank charges. Yes I am tight.....  |
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