Central Banks throughout the world are devaluing to adjust the intrinsic demands that come with current account payments. With capital outflows hemorrhaging most Central Banks have used various legal instruments to contain unsustainable hemorrhaging.
Except for Seoul, South Korea.
Why is this significant?
It flies in face of contemporary macro professional thinking. Last week Seoul decided to keep its interest rates steady amid global panic. Could South Korea teach the Japanese something about strong currencies, capital balances and domestic reform?
South Korea is teaching anyone willing to learn that devaluation to sustain export competitiveness is a fallacy.
Despite another weakening of the Japanese Yen, the South Korean Won has continued to hold its own, even with a 3.9% annual growth rate.
What does this say about the politics underwriting the South Korean Central Bank?
It says that the Central Bank of Seoul will not finance the stupidity of its political class. It will maintain a strong currency as a bulwark against tyranny! It will permit its citizens the nobility to sustain capital/equity formation.
Note to business executives: Korean companies are competing globally by improving quality.
One word: Samsung!
Translation: market share is more about innovation than price!