Tips for this weeks economic issues

Former President Chun Doo-Hwan was a believer in Dr. Fisher and introduced the exchange equation created by Fisher, an economist specialized in foreign currency exchange. The economic policy of Chun`s administration followed the theory for seven years. He explained Fisher`s equation even to the news media. He must have been influenced by the late Kim Jae-Ik, the late economic Senior Secretary President.

Fisher¡¯s exchange equation is a function that shows the relationship between currency and price. It features that the total amount of money in circulation (M) multiplied by the speed of currency circulation (V) is equal to the price (P) multiplied by trading volume (T). It is often expressed by MV=PT. The equation emphasizes that the price changes along with currency. Dr. Freedman, the leader of the Chicago school, said that inflation is a currency-oriented phenomenon. In short, the amount of currency in circulation is equal to price. This week, it will be necessary to examine the Fisher equation. The price has been rising abruptly because of the increase in currency in the course of restructuring during the past six months, as well as currency demand for the Chuseok holidays. The Monetary Policy Committee will hold a meeting September 7, and according to Fisher` s theory, a tight-money policy is vital.

Rumors are spreading that interest rates will rise. The problem is that an interest rate hike could lead to crash of the stock market and an economic slump. Also, it is burdensome that the fund demand for Chuseok is on the rise. Therefore, government policy under such circumstances will play a critical role in what happens next. In particular, the decision will show the first measure of the new economic team led by Finance-Economy Minister Jin Nyum. Also, North Korea`s membership in the Asian Development Bank will be discussed. Other issues of interest will include the soaring exchange value of the won and policy to curb it, official resignation of Lee Ik-Chi, policy to nurture venture businesses and the KOSDAQ market, questioning of Daewoo executives and South-North Korea economic cooperation.