A Holiday on a Locked Sea
It is Chuseok. Over the five-day special transportation measures period from September 23 to 27, 30.93 million people will move, and on the 25th, the day of the holiday itself, 6.84 million vehicles took to the expressways in a single day. The government will not collect tolls for four days. Ten and a half hours from Seoul to Busan, nine and a half hours to Gwangju. Calculating these hours, we often say, "The holidays are hard." But across this stretch I was holding on to a different calculation. Over the same few days, the won's value jumped from the 1,350 range to near 1,390 and then fell back, WTI swung around 90 dollars, and the maritime shipping cost of crude oil bound for Asia soared to 22 dollars per barrel. A year ago that figure was 2 dollars. That is not double, it is tenfold. If the holiday expressway is this country's internal landscape, the price that sustains that landscape is set across the sea off Incheon. About 70 percent of the crude oil South Korea uses and about 60 percent of its naphtha come from the Gulf. If that sea is locked, exempting tolls does not exempt fuel prices.
The numbers across this stretch seem to speak different languages, but they speak the same sentence. The reason the won-dollar exchange rate is again eyeing 1,390 won is that importers' dollar settlement demand, high oil prices, and the National Pension Service's move to reduce currency hedging on overseas investment assets all acted as pressure in the same direction. The money for strategic investment in the United States that I confirmed in the previous stretch, the U.S. long-term interest rate in the 5 percent range created by the Fed's September 16 hike, and the dollar negotiating by exporters, whose whether-or-not-to-sell before the holiday break became a matter of keenest interest. These four are one accounting. The 350 billion dollars in investment in the United States is a plan to deploy domestic savings and labor abroad; when that deployment becomes settlement demand, the exchange rate rises; when the exchange rate rises, the price of imported raw materials rises; and that price, layered atop temporary measures such as the temporary fuel tax cut and the petroleum price ceiling, comes down into the holiday shopping basket and charter bus fares. In the meantime, no government ministry asks, "Is this money good money?" The only question asked is "How fast can we send it?" and that pressure comes not from the National Assembly but from the counterparty to the U.S. investment agreement.
So the way we read the poll numbers of this period must also change. In surveys confirmed across this stretch, negative assessment of the president's job performance was 51 percent, and positive assessment was between 34.8 percent and 37 percent. Compared with Seollal, negative assessment rose 24 percentage points, and 69 percent responded that government real estate policy "has no effect." Party support was 35 percent for the Democratic Party and 28 percent for the People Power Party. If you read these numbers merely as a season of judgment, you miss the analysis. Approval ratings are not a result but a channel. What moves public sentiment now is not ideology but real estate prices, interest rates, raw material prices, and the weight of the shopping basket felt during the holiday. That weight is not determined by the political process inside this country alone. The Fed's decision to raise rates for the first time in three years and leave the door open to further hikes, the Gulf blockade and tanker freight rates, the pressure to carry out investment in the United States. These three reach households through the won and prices, and at that point of arrival approval ratings fluctuate. The moment we read the rise and fall of approval ratings as political achievement, we mistake the wobbling of a dependent variable for democracy's self-expression.
There is one thing I must hold on to to the end across this holiday stretch. The state has no language with which to explain to its people prices it cannot set itself. So it uses the device of the holiday. It exempts tolls, creates temporary public holidays, and rolls out price measures. I am not saying that is bad. The problem is the accounting beneath it. A country that has hung 70 percent of its crude oil on a single strait, an industry that has placed 60 percent of its naphtha on that sea, and a plan to deploy its own savings into overseas assets in return. The holiday landscape is not outside this structure but inside it. On a locked sea the holiday does not disappear. Only those who know where the price sustaining that holiday is set can calculate which accounting column the cost of the toll exemption is ultimately booked to.
The numbers across this stretch seem to speak different languages, but they speak the same sentence. The reason the won-dollar exchange rate is again eyeing 1,390 won is that importers' dollar settlement demand, high oil prices, and the National Pension Service's move to reduce currency hedging on overseas investment assets all acted as pressure in the same direction. The money for strategic investment in the United States that I confirmed in the previous stretch, the U.S. long-term interest rate in the 5 percent range created by the Fed's September 16 hike, and the dollar negotiating by exporters, whose whether-or-not-to-sell before the holiday break became a matter of keenest interest. These four are one accounting. The 350 billion dollars in investment in the United States is a plan to deploy domestic savings and labor abroad; when that deployment becomes settlement demand, the exchange rate rises; when the exchange rate rises, the price of imported raw materials rises; and that price, layered atop temporary measures such as the temporary fuel tax cut and the petroleum price ceiling, comes down into the holiday shopping basket and charter bus fares. In the meantime, no government ministry asks, "Is this money good money?" The only question asked is "How fast can we send it?" and that pressure comes not from the National Assembly but from the counterparty to the U.S. investment agreement.
So the way we read the poll numbers of this period must also change. In surveys confirmed across this stretch, negative assessment of the president's job performance was 51 percent, and positive assessment was between 34.8 percent and 37 percent. Compared with Seollal, negative assessment rose 24 percentage points, and 69 percent responded that government real estate policy "has no effect." Party support was 35 percent for the Democratic Party and 28 percent for the People Power Party. If you read these numbers merely as a season of judgment, you miss the analysis. Approval ratings are not a result but a channel. What moves public sentiment now is not ideology but real estate prices, interest rates, raw material prices, and the weight of the shopping basket felt during the holiday. That weight is not determined by the political process inside this country alone. The Fed's decision to raise rates for the first time in three years and leave the door open to further hikes, the Gulf blockade and tanker freight rates, the pressure to carry out investment in the United States. These three reach households through the won and prices, and at that point of arrival approval ratings fluctuate. The moment we read the rise and fall of approval ratings as political achievement, we mistake the wobbling of a dependent variable for democracy's self-expression.
There is one thing I must hold on to to the end across this holiday stretch. The state has no language with which to explain to its people prices it cannot set itself. So it uses the device of the holiday. It exempts tolls, creates temporary public holidays, and rolls out price measures. I am not saying that is bad. The problem is the accounting beneath it. A country that has hung 70 percent of its crude oil on a single strait, an industry that has placed 60 percent of its naphtha on that sea, and a plan to deploy its own savings into overseas assets in return. The holiday landscape is not outside this structure but inside it. On a locked sea the holiday does not disappear. Only those who know where the price sustaining that holiday is set can calculate which accounting column the cost of the toll exemption is ultimately booked to.