There are a lot of issues that need to be addressed. Let’s talk about one more topic when there are no specific issues in the essay during the week. Today, I’m going to briefly discuss about three topics. First of all, let’s talk about the exchange rate. The exchange rate has risen sharply. As it jumped to KRW 1475, there was a fact sheet announcement in a very difficult situation, and the authorities seem to have intervened to a certain level. As a result, the dollar went down to the early KRW 1450 level. First of all, seeing the exchange rate surge, especially the dollar exchange rate, it seems that it is a sign of a crisis. We have to see a lot of things together, but… The Korean CDS premium, which represents the risk of national bankruptcy, is stabilizing. It rose to the 70bp level during the Legoland crisis back in 2022. And it rose to 45bp in the first half of this year. It’s currently going sideways in the early 20bp range. It’s worth noting that the CDS premium does not accompany the rise of the exchange rate. I’m quoting an article for a moment.
“CDS Premium Stabilizes Despite Rising Exchange Rate… Good External Health”
“According to the CDS premium (screen number 2485) by unionized Infomax country on the 14th, the 5-year Korean CDS premium closed at 21.91bp in the New York market on the 13th (local time). According to the recent trend, it has been on the decline for four consecutive trading days since the 10th.
Korea’s CDS premium, which soared to 45.87bp in April this year in conjunction with the impeachment, fell to 17.59bp in mid-September as political uncertainty was resolved by the launch of the new government. Since then, it has continued to flow stably in the early and mid-20bp range.” (Yonhap Infomax, 25.11.14)
What’s the reason for this phenomenon? There’s a lot of things, but… After all, we are now on the verge of bankruptcy due to massive outflow of capital by foreigners. This means that there is a difference from this. Foreign capital outflows and domestic overseas investments are different in nature. Of course, funds go abroad. Capital outflows are not coming in if you go out, but… Overseas investment is the money that goes out continuously generates interest and dividends, which makes reverse remittances to Korea. For your information, our current account surplus is at an all-time high in the January-September period. Again, again, again.. The current surplus is at an all-time high. The balance of goods… No… I thought it would be more convenient to call it a trade surplus. The surplus from the trade of goods is also huge. Semiconductors carried it hard. It’s a service balance… Well, the possibility of a deficit in Korea is very high, so this time it was also a deficit. Personally, what was unexpected was the principal income balance, which was about $17 billion in accumulation between January and September of last year, and this time it’s increased significantly to $24 billion in surpluses. This is… It’s about making overseas investments and getting interest dividends, etc… Is it Seo Hak-ant fighting? The National Pension Service’s overseas investment also ends up making profits overseas.
Oh, one of them asked me this question. Why is that investment fund coming back to Korea… I’m sure they’re all going to leave…. After going abroad, shouldn’t the National Pension Service come back someday? It’s going to be a retirement fund for Koreans. Second… Of course, I’m sure some of you want to send money abroad, some of you want to immigrate later, but… 10 million won… 20 million won… Wouldn’t it be very unlikely that people who have invested in U.S. stocks like this… would believe that money and immigrate abroad? Yes, investing abroad.. It’s worth noting that capital outflows are different in nature. Of course, overseas investment… There is definitely a side effect of weakening the domestic industrial base. However, I went on for a long time to explain the difference between increasing foreign investment and increasing foreign net bonds and suffering from dollar shortage risk due to capital outflow.
Next… Let’s take a look at these news.
“Taiwan dollar jumps in agreement with U.S. to ‘not manipulate exchange rate’ (Yonhap Infomax, 25.11.15)
“U.S.-Taiwan ‘will not manipulate exchange rate, floating competition purpose’ (Yonhap Infomax, 25.11.15)
“Koo Yoon-chul ‘National Pension Service – Discuss closely with exporters to come up with measures to stabilize exchange rates’” (Yonhap Infomax, 25.11.14)
Yes… First of all, the National Pension Service is talking about establishing a plan to stabilize the exchange rate through close discussion with exporters. The demand to exchange dollars is preferably carried out after the exchange rate is stabilized. Wouldn’t these be talking about these kinds of things? In the title of the last article, you will read the nuances. Rather than that, I should pay attention to the previous two articles. The U.S. and Taiwan agreed on the exchange rate. They promised not to manipulate the exchange rate. Yes.. It’s nothing short of a declaration that we’re not going to weaken the Taiwanese dollar on purpose to favor exports. We’ve reached similar exchange rate agreements with Japan, Switzerland, South Korea, and this time Taiwan. This may sound like a formality, but in the process of increasing investment in the U.S., we’re going to buy dollars. And then… It’s nice to have investments in the United States, but the United States has to accept a huge dollar appreciation.
So… in Taiwan, Japan, Korea, etc… They are also saying that huge funds such as pension funds invested in the U.S. should not generate much demand for currency exchange. What if we exchange $350 billion in one shot? Yes, so if you look at the Korea-U.S. negotiations… I’m sending 20 billion dollars a year… to minimize exchange…So that’s what we’re talking about. Yes, the exchange rate is a burden on us, but the strong dollar could put the U.S. under pressure. So, what you’re reading here is… The U.S. is also burdened by excessive dollar strength. In the July-August period, the dollar weakened so much that it would be a breakaway… or the collapse of dollar hegemony…That’s what I’m saying.. Now, there are other things going in the opposite direction. The volatility of the exchange rate… It’s going to get higher..
This is the last one. In this article