Stephen Roach: "Korea’s Economic Resilience Weakening"

The regular readers would know that Dr. Stephen Roach is not saying anything new here.  We've discussed the flaws of the export-dependent economy based on mercantilism many times, not to mention the current state of the global economy.  Korea's trade surplus has kept its economy going, masking the reality.  We also pointed out how Korea could have quickly recovered from the 1997 financial crisis, at least on the surface.  Besides, we discussed the impact of the 1985 Plaza Accord on Japan.

From Korea Times:

The Korean economy is expected to stay in a trough for a considerable period of time due to weakening resilience, according to a renowned global economist, Thursday.

Stephen Roach, a senior fellow at Yale University, said Thursday that it will take some time for the Korean economy to recover fully from the subdued growth because the lingering sluggish global economy still remains an obstacle for the export-driven country.

The former chairman of Morgan Stanley Asia said that Korea quickly weathered the Asian financial crisis in the late 1990s, but this global crisis will impact more strongly on the nation, whose trade volume accounts for more than 80 percent of its gross domestic product.

“The Global output problem has more impact on Korea than was the case in the late 1990s. The protracted sluggish global economy is actually more challenging for export-driven economies like Korea than the developed countries,” said Roach at a conference in Seoul hosted by the Korea Institute of Finance.

The Yale professor, meanwhile, criticized both U.S. President Barack Obama and his Republican challenger Mitt Romney, for making China a scapegoat for their country’s economic woes. He said the problem of the world’s biggest economy is that Americans do not save enough, and not that China manipulates its currency rate.

He argued that the Chinese yuan, in fact, has appreciated by more than 30 percent to the dollar since July 2005, a big change in the short term. The U.S. economist said that China is going in the right direction in terms of currency policy, citing the example of Japan, which made a huge mistake by listening to the West in the Plaza Accord in 1985, which appreciated the yen drastically in a short time. The consequence was a longstanding economic downturn for the world’s third-largest economy, he said.

http://www.koreatimes.co.kr/www/news/biz/2012/10/123_123130.html