Government's power to debase currency is unlimited


11:49p ET Friday, December 22, 2006

Dear Friend of GATA and Gold:

Here's a case of a government financial official telling the truth -- that government has unlimited power in one respect, the power to debase its own currency, and that currency debasement has become virtually international policy.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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S. Korea Has 'Unlimited Resources'
to Prevent Rise in its Currency

From Agence France-Presse
Thursday, December 21, 2006

South Korea has "unlimited resources" if it decides to curb the local currency's rise against the dollar which is hurting exporters, a senior government official has announced.

The won has risen nearly 10 percent against the dollar this year, raising concern among exporters who fear their goods will be priced out of overseas markets. It hit a nine-year high against the Japanese yen this month.

"To stabilize the economy, it is essential to maintain the currency at a certain level and the government will make its best efforts to achieve that," Kim Sung-Jin, a deputy finance minister, was quoted by Yonhap news agency as telling a radio programme. "If the government consults with the central bank and intervenes in the currency market, our resources are unlimited."

The nation's foreign reserves totalled $234.3 billion as of the end of November.

Kim also said investors may make a mistake if they assume the won will continue to rise lopsidely next year.

"In 2007 the US twin (fiscal and trade) deficits and the ascent of the yen and the yuan will put upward pressure on the won, while the shrinking current account surplus may be a downward factor," Kim said. "Investors may make a mistake if they expect a lopsided ascent by the Korean currency next year, as seen in recent months."

On Thursday, Lim Young-Rok, another deputy finance minister, said business leaders had urged the government to stabilise the local unit.

"As the won rose sharply since 2004, South Korea's small- and medium-sized businesses have been struggling to maintain their bottom lines," he said.

South Korea's comments echo others elsewhere in Asia where governments are increasingly concerned that their export-driven economies could be hit if their currencies continue to rise against the dollar.

Earlier this week Thailand introduced stringent capital controls in an effort to halt a sharp rise in the baht but the government was then forced to backtrack when the measures sparked a stockmarket collapse.

Despite the chaos, the Thai government insisted it was right in acting to limit the baht's gains and said many other countries face the same problem.

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at the
2007 Vancouver Resource Investment Conference
Vancouver Convention and Exhibition Centre
Sunday and Monday, January 21 and 22, 2007

Admission is free for those who register in advance. The conference has arranged discount rates at the Pan Pacific Hotel adjacent to the convention center.

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