South Korea looks to the U.S federal reserves for a $30 billion swap line to buy out the bad debts from its banks. South Korean banks has been hit hard by this economic down turn due to its reliance on short term credit market, and has become increasingly reluctant to give out loans in fears for further bad debts. The banking crisis has lead to difficulties for small and medium sized business to borrow money as banks tightens up in this weakening market.
The Won(south Korea Currency) has loss nearly 36% of its value against the U.S dollar, lowest level in the past decade reflecting investors' worries about the South Korean economy. Bank of Korea has spend $10.2 billion since October to supply its local traders with foreign currency liquidity through swap deals, depleting its foreign reserves.
$4 billion of the $30 billion swap with be injected into the banking system via an auction. Some analysts were predicting that the nation could go into recession next year, and other criticise that it is to early to be talking about such financial moves for South Korea.
2 comments:
Just more evidence of how intermingled our economies are. This is the reality of the world. For anyone who don't want globalization to come I have two words for you. TOO LATE!! I hope people take this financial crisis that started with a few banks that gave out bad loans on houses in America and spread the the whole world, as a sign that we can't keep think individual countries are in it alone. Because they are not. We cannot think in terms of me against the world anymore. Because "me" is the world.
The main reason that South Korea is suffering this much is because of the "especially" close relationship of Korea economy with US, I would say even "dependency". Korea has to diversify its economic relationship with foreign countries though word is always easier than action.
I'm worried about my tuition anyway. :(
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