Korea searches for Dollars

Last Saturday, The Wall Street Journal published an article concerning the (South) Korean economy. The South Korean government and banks are asking the citizens to search for Dollars in their houses and to deposit them in banks. The banks can loan that money to small companies.
Korea wants to attract foreign money so they can use it for loans to businesses that deal with foreign customers, who have an other currency. Especially the small manufacturers need foreign money because the don’t bank overseas like big companies do.

Just like a lot of banks in other countries in the world, South Korea has problems to obtain foreign currencies and especially Dollars. The South Korean government understands that problem and wants to help their local economy. This month they provided $8.5 billion to banks so they can help the smaller businesses with their Dollar liquidity problems.

I think it’s a nice initiative from the South Korean government but it doesn’t solve the problems on the long term. The government isn’t able to give that amount of money to the banks every month. So I think they have to find a new solution because the liquidity crisis all over the world will damage the banks’ foreign-currency funding and their creditworthiness.

source: http://online.wsj.com/article/SB122428493988946393.html