Slowing of Money Circulation in Korea Sparks Fears of Recession
D-Bo , Oct. 24, 2014, 11:32 a.m.
The circulation of money has slowed considerably despite the Bank of Korea frantically printing more, raising fears of a deep recession. According to a report by the Chosun Ilbo, the Korean economy is in worse shape than the Japanese when it entered a prolonged slump in the early 1990s.
The speed of currency circulation in Korea as of the second quarter this year stood at 0.74, slower than the 0.95 Japan experienced in 1992 as it entered a decade-long deflationary period. The average speed of currency circulation in Korea over the last 25 years has been 1.9.
No matter how much more money the BOK prints and puts into circulation, more and more people are simply stuffing it into their mattresses. This has led to a marked slowdown in inflation. Consumer prices rose 1.6 percent in the second quarter, which is even lower than in Japan (1.7 percent) in 1992.
Japan experienced low inflation for several years in the early 1990s before deflation got properly underway. Inflation in Korea has been at below two percent for 23 consecutive months. Money circulation has slowed around the world. Economists say if this trend is left unaddressed, consumer spending and facilities investments could weaken further, driving the world economy into a long slump.