It’s already been more than 20

[Iranian War] It’s already been more than 20 days. There have been a lot of changes in the financial markets over the last 20 days. And the most notable of them is international oil prices. Not just West Texas Intermediate, which is approaching $100 a barrel, but Brent crude, which is going for $110, and Dubai crude, which is above its peak at $120-130. And the differential rise in international oil prices, which are different types of crude oil, is that each country’s burden can vary greatly depending on where the oil is used. And the burden on Asian countries that use Dubai oil could be even greater, particularly in the case of energy-importing countries, which could have an impact on their trade balance. And this deterioration in trade balance not only dampened growth, but also boosted interest rates in those countries, lowered currency values. And in Korea, the most popular phrase in the second half of ’22 was ‘three high.’ It stood for ‘high prices, high interest rates, high exchange rates.’ It stood for ‘high prices,’ ‘high prices,’ ‘high prices,’ ‘high exchange rates.’ So the 10-year Treasury yield, which is at 3.7 percent, and the consumer price index, which is looking up again, will rise higher if oil prices are reflected in the upward trend, and finally, the exchange rate, which is going to be over 1,500 won. So we’re going through a period of three high prices.

So… with the money released, it’s probably going to be a little bit of an area where growth is good. That is, there’s no choice but to be a lot of money going into areas that are less hit. Wouldn’t there be a lot of money going into the dollar and energy? So, the U.S. is going to have high oil prices… Because of the high oil prices… It’s going to be hard to lower the benchmark interest rate as you saw at the FOMC yesterday, so you can’t avoid the rise in government bond rates. If you look at the two-year U.S. Treasury bond rate, the rate that was less than 3.4% is now at 3.8%, and it’s going to be close to 40 basis points in just three weeks. And given that the U.S. benchmark interest rate is 3.5 to 3.75%, the market interest rate is higher than the benchmark interest rate. It can be interpreted that it even has the possibility of a future increase in the benchmark interest rate.

Well, high oil prices, high interest rates, if the U.S. interest rates are high, if the impact of the U.S. is relatively weak, the U.S. dollar will be strong, and the U.S. dollar will be strong. And the U.S. economy will have a triple whammy of high oil prices, high prices, strong dollars, domestic demand will be high, exports will be hard pressed against the strong dollar. So, in a polarized U.S. economy, the low-income class, the bottom of the letter k, will be struggling. The bigger their pain, the slower the growth of the U.S. economy may become. Despite the surge in U.S. short-term government bonds, the 30-year U.S. government bond rate is gradually lowering its head. In the distant future… I think it reflects that U.S. growth may slow down.

So let’s think about it like this. Is the rise in international oil prices a factor that’s going to increase interest rates? Is it a factor that’s going to cause interest rates to rise? Well, what if… If these elevated prices and interest rates cause a sharp slowdown in the real economy… If they touch a weak link in the financial system, it will cause a sharp shock and a destabilizing factor in the financial system. In September 2022, the Bank of England conducted quantitative easing to stabilize the government bond market in the middle of a phase of raising the benchmark interest rate to respond to the financial system instability caused by the instability in the government bond market. Yes, price stability is important, but… Financial stability… That’s the point where the role of the final lender to prevent the spread of the crisis was emphasized. When private equity credit and high interest rates are combined now… What kind of issues will arise… I think it’s a point where you can see it carefully.

The Trump administration is making great efforts to boost growth in these circumstances. First of all, it seems that they are doing everything in their power to stabilize international oil prices even a little bit. They’re just letting Iranian oil pass through, lifting sanctions on Russia, inducing the production of crude oil. At the same time, they’re making efforts to quickly ease various regulations. Financial deregulation is a case in point. The policy on virtual assets was also announced. It’s a point to pay attention to personally. And due to the impact of the tax cuts, tax refunds are also being made quickly. And I think this is helping ease the impact of high oil prices, high inflation, and the strong dollar. However, if these shocks are prolonged, it will not be easy for me even in the United States. Rising interest rates, oil prices, and even the strong dollar… I think it will be an important point of tension in the U.S. financial market. Thank you.