[Column] An alliance defending against an exchange rate crisis

Chae Byung-gun

The author is an international, diplomatic and security news editor of the JoongAng Ilbo.

Concerns about the exchange rate are growing due to the interest rates difference between Korea and the United States and the current account deficit. The crisis of the skyrocketing exchange rate is not just about economy, but security. The 1998 foreign currency crisis, when the won-dollar rate hit 1,900-won per dollar, occurred when the country’s economy was shaken.

When national security is shaken, the Korean currency loses its value. Fortunately, there was never a security crisis as serious as the 1998 foreign exchange crisis. The currency market was temporarily shaken in 2010 when North Korea shelled Yeonpyeong Island and the South announced the outcome of the investigation into the sinking of the warship Cheonan by North Korea, but it eventually recovered. As far as the currency market goes, the words of Jerome Powell is more frightening than threats from North Korea.

Of course, a security crisis is a far more serious issue than an economic crisis. When the market thinks that the armistice line between the two Koreas will be broken in the next few days, the South Korean assets market will collapse instantly. Investors will withdraw all at once — a situation that you cannot compare to a bank run. And yet, they are not selling Korean assets to leave the country, although the North threatens to attack the South with tactical nukes.

Why? That is because the South has prepared a double-layered safety mechanism. In contrast to the 1950 Korean War, the South has secured more advanced conventional capabilities than the North Korean military thanks to its economic strength. There is almost no possibility that South Korean troops will be forced to retreat to the Nakdong River by the North Korean military today.

Another factor is the combined defense system that minimizes the possibility that the North will start another war. It was not the South but the North that brought U.S. troops to the Korean Peninsula. If the North had not started the Korean War, there was no reason for the 30,000 U.S. troops to stay on the peninsula until today.

If the North decides to stage a second Korean War and advances to Seoul from the western border, it cannot avoid facing the 210th Field Artillery Brigade of the U.S. Forces Korea stationed in Dongducheon. For the North Korean military to come down to Seoul through the triangle of Munsan, Dongducheon and Euijeongbu, it would have had to face not only Korean troops but also U.S. forces.

The U.S. 2nd Infantry Division, which was defending the areas north of Seoul, has relocated to Pyeongtaek, a southern city, and the Korean military became fully responsible for defending the western front, but the Korea-U.S. Combined Forces Command is still operating. The North has to go to war against the U.S. if it wants a war with the South. Because the South has beefed up its capabilities over the past decades based on the wealth collected by the people’s blood and sweat, and because U.S. troops play a role of tripwire as the South pays for their stationing expense, the currency market just fluctuates temporarily when the North stages a provocation.

To really understand the North, you should think from the perspective of the North. If you think from the perspective of a Workers’ Party member in the headquarters in Pyongyang about what you need to do for the country’s survival, the answer is clear. Here is an example. “The war to liberate the South failed due to the U.S. intervention just before the victory,” he would think. “The U.S. imperialist army is still defending the South’s regime. To complete the liberation, we have to remove the United States and dismantle the South-U.S. alliance. To this end, we have to make U.S. Forces Korea withdraw from the South.”

Differently from the North, the South is a country that guarantees freedom of speech. You won’t be indicted by hanging a banner demanding the withdrawal of U.S. Forces Korea at the center of Seoul. It is not illegal, but it is not normal or common sense, either. Listening to such an argument is just a waste of time. If you want to see how high the foreign exchange rate will go, you can just imagine the chaotic collaboration of a North Korean shelling after the U.S. troops withdraw from the South.