South Korea's Reverse Alchemy

SEOUL: Just as it shows signs of stabilizing its leaky financial ship, the South Korean government may be headed for an iceberg. For the past few weeks, South Korea has been propping up its sagging currency by furiously exporting gold donated by Koreans in ring-and-trinket form. But the flood of gold from Korea has actually driven down prices worldwide.

Now the government wants to buy the gold itself and hold onto it. The country "can sell later, when the prices are higher," Yoon Jong-hwa, an economic secretary, said Wednesday.

But TIME Wall Street columnist Daniel Kadlec says the Korean solution is dogmatic and potentially doomed. Gold prices have been dropping for more than 10 years. "Seoul may be grasping at the age-old rule, which is buy gold in times of crisis because it's a hedge against inflation," Kadlec says. "But the world has changed. Prices everywhere are dropping; the concern is for de-flation." In a year, the government may open its reserves and find a vault filled with lead.