-May I speak frankly? I’m a man who used to work at the IMF.
In any debate, the most ignorant remarks are invariably those that lean on authority. Whether at a company or a school, when people fail to persuade logically, they tend to shove their rank insignia forward.
-As someone with that background, I see the current exchange rate as nothing more than a short-term shock. Domestic prices are currently at a level the Bank of Korea can sufficiently control, and there is no reason our interest rate must necessarily be higher than America’s going forward. Therefore, this Monetary Policy Board has decided to freeze the base rate.
The day after Europe announced its rate freeze.
Governor Shin announced the rate freeze with the most illogical words possible.
Questions from economic reporters came pouring in.
If Korea’s interest rate was lower than America’s, domestic assets would all head toward safe U.S. assets, so how could he guarantee the exchange rate?
The exchange rate had already broken past 1,250 won due to the giant shock from the U.S., so on what basis was he calling this a short-term shock?
Even if they released foreign currency reserves, how long would that be effective?
All of these were perfectly reasonable points, things even a freshman economics major—no, even a college entrance exam student who had chosen economics in social studies—would know.
-Do not worry. I am a man who used to work at the IMF.
But whenever Governor Shin found himself at a disadvantage, he shoved his rank insignia forward.
He said, “There is a high possibility that the Fed will raise rates further,” while also defending the decision by saying, “Korea’s interest rate is safe.”
Aside from the fact that he was from the IMF, everything he said was pure sophistry.
*
-Governor Shin Huiseop’s eyes are overflowing with lust for power~ ^^
Looks like what he learned at the IMF was political maneuvering~ Saying he’ll keep rates low because he wants to be liked by the Blue House—is that something the Governor of the Bank of Korea should be saying? Judging by the way he talks, he’ll be entering politics soon~ In the end, he bartered the Korean economy for a gold badge, didn’t he?
⌞For real lol all he does is talk about the IMF whenever he’s losing ㅡㅡ
⌞How is that guy the BOK governor? He’s a Blue House puppet!
⌞If buying dollars gives you higher interest too, what kind of lunatic would buy government bonds lolololololololololol
-Everyone, do you still not understand Governor Shin’s grand intention?
How many people have been tortured with false hope all this time and failed to leave Korea? Governor Shin has taken the bullet for us. He took the respirator off the hopeless Korean economy... In a way, he’s the messiah of young people. It’s not too late. Escaping Hell Joseon happens in order of intelligence.
⌞Hear, hear! Let’s liquidate all savings, deposits, and government bonds and go to our American big brothers! The era of 2,000 won to the dollar is not far off!
⌞If you buy dollars, you get higher interest, plus a double exchange-rate event? Anyone holding won is a sucker, no?
-???: We’re sorry, sir. We do not accept Zimbabwean dollars.
Oh, it was Korean money... But is there any difference?
⌞For real lol exchange rate explosion, won turning into toilet paper, let’s go!
The day after the Bank of Korea’s rate announcement, all the executives of the pension fund’s investment management headquarters gathered in the director’s office.
Europe catching up, Korea being overtaken... The interest rate trends of each country after the SB incident had ushered in an age of uncertainty that was difficult even for the pension fund to keep up with.
After Governor Shin’s freeze announcement, complaints poured out among netizens that Korea would soon collapse, and the mood among internal employees was not much different.
“That rookie was right. To think the ECB and the BOK would freeze rates.”
The director began the meeting in a self-mocking tone.
No matter how uncertain the times were, to think a report written by a mere junior associate would be more accurate than his own prediction...
If the meeting that day had ended early, and if they had taken preemptive action, the pension fund would have nearly suffered losses of at least tens of billions of won.
The global stock market was currently in an era of uncertainty where yesterday differed from today—no, where the morning differed from the afternoon.
“Division Head Kim. How was the exchange rate yesterday and today?”
He asked the strategy division head in charge of foreign exchange operations.
“...It’s being defended better than expected.”
His answer once again went against everyone’s expectations.
“The BOK implied a rate freeze, but the exchange rate didn’t soar as much as expected.”
“Didn’t it rise a bit yesterday, on the day itself?”
“At one point during trading, it did break past 1,280, but it was quickly brought down to the 1,260-won range. And today, the exchange rate fell to 1,240 won.”
“...Does that make any sense? The Korea-U.S. interest rate gap has now definitely reversed. So how did the exchange rate get controlled in a single day?”
“For now, as Governor Shin mentioned, we assume the BOK released foreign currency reserves. But looking at the trend... an exchange rate explosion seems unlikely.”
It was strange.
Yesterday’s rate announcement by Governor Shin had contained no logic whatsoever—only boasts about his IMF career. And yet, strangely enough, the exchange rate had been suppressed in just one day.
Did he really have something he was relying on?
In truth, this was not simply because they had released foreign currency reserves. The fact that the exchange rate withstood panic selling despite high U.S. rates meant that anti-U.S. sentiment among investors was unexpectedly strong.
The Fed’s repeated failures, distrust toward long-term U.S. bonds, a price index roughly twice as high as the OECD average. All of these circumstances made investors begin to wonder.
Just how many dollars did they print during COVID...
“Division Head Kim. Then how long do you think the BOK’s freeze stance will last? From what I see, U.S. rates look likely to hit over 4%.”
“They’re saying the domestic real estate market has gone beyond a cold snap and entered an ice age. Most observers believe the BOK froze rates because of home mortgage loans.”
“So even if America keeps raising rates, we’ll hold out?”
“Yes. At least until signs of a soft landing appear in the real estate market, I think the BOK will hold out too.”
The director turned his gaze and examined the other executives.
Even the hardliners who had been saying until just the day before yesterday that Korea’s interest rate would rise higher seemed to accept this opinion.
“It’s a relief that meeting didn’t end early that day. If we’d taken preemptive action, how much would we have lost...”
The director patted his chest in relief, but at the same time, a vague fear crept over him.
The current market was so unpredictable that it made his thirty years in the industry feel meaningless.
Past experience was no longer important. He had to discard vague expectations about America’s future as well.
How much money each country had released during COVID, how much economic stamina they had to endure... All of these matters had to be analyzed coldly, and only visible indicators could be trusted.
“But Director. Even with the Fed raising rates like that, the Nasdaq and S&P are holding firm. We don’t know what kind of variable this might become either.”
“That’s why it’s driving me even crazier. Why is the Nasdaq market so good when the Fed is dropping rate bombs on it? Conversely, why is our KOSPI falling even though we froze rates?”
“...”
“Is the U.S. stock market in a bubble, or are we discounted? Anyone want to answer?”
All the executives kept their mouths shut.
The Korea discount that had continued for already ten years, the KOSPI that stumbled and fell whenever it seemed about to rise... This was probably a realm even God did not know.
The director let out a short sigh and said,
“Fine, let’s not ask useless questions. We’re busy enough responding to interest rates. Office heads.”
-Yes.
“For our pension fund, safety comes first, safety comes second, and safety comes third. For the time being, structure our portfolio entirely around safe assets.”
-Yes.
“This is an age of uncertainty where nothing can be trusted. Each office is to draft a portfolio and submit a report by tomorrow.”
The executives left their seats with determined expressions.
In truth, the National Pension Service had always been strong in recessions. During the subprime crisis, when other sovereign wealth funds were being cut in half, the pension fund alone recorded returns in the zero-percent range and took first place in performance. The secret was its safety-oriented portfolio that fled at the slightest sign of danger.
Now, when nothing could be trusted, if a global recession came instead, the pension fund’s true value might be displayed once again.
As the executives began leaving one by one, the director called Office Head Oh to a stop.
“Office Head Oh, wait a moment.”
“Ah, yes.”
“The guy who raised his hand at the last seminar was him, right? The one who wrote the report you brought me?”
“Yes. That’s right. Junior Associate Lee Sejun.”
“I’ll have to remember him. Lee Sejun, Lee Sejun... It’s nothing else. Bring me the portfolio that guy submits directly, just once.”
“Understood. But may I ask why...?”
The director, who had remained stiff-faced the entire time, smiled faintly for the first time.
“No special reason. I’m just a little curious.”
*
“...Pardon? Directly to the director?”
“Yes, there’s no special meaning. He’s just a little curious.”
“Ah... yes.”
“But don’t get too full of yourself. Even when he was a division head, he often read reports from low-ranking employees. It doesn’t mean he thinks you’re special.”
“O-of course. I’ll devote myself to the report with even more responsibility.”
That was what I said, but in truth, I was a little flushed with excitement.
How often did a low-ranking employee’s report get delivered directly to the director? In corporate terms, it was like the chairman personally saying he would read a new hire’s report. There was no way anyone wouldn’t be nervous.
“Then I’ll return to my desk and quickly write the report...”
“Wait, Junior Associate Lee.”
Office Head Oh stopped me just as I was about to leave.
“I’m saying this just in case. What our pension fund pursues is safe assets, no matter what. You understand what I mean, right?”
“Of course. No matter how much profit is expected, I won’t put high-risk eggs in the basket. Then I’ll be going...”
“Wait, Junior Associate Lee.”
“...Yes?”
“But what the director wants is not something that is ‘only’ safe. He wants you to bring a real gem—something safe while also having high returns. You understand what I mean, right?”
I understood Office Head Oh’s intention and grinned.
“Office Head. Are you worried?”
“A little... No matter how open-minded the director is, he doesn’t easily read reports from low-ranking employees. If you submit a completely absurd report, even I’ll be put in an awkward position.”
“Don’t worry. I’m not that much of an idiot. Then I’ll be going...”
“Wait, Junior Associate Lee!”
It seemed that dozing off three times in front of the office head had seriously damaged my reputation.
Office Head Oh looked me over with undisguised distrust, then spoke a little more frankly.
“Let’s at least hear it. Seeing your confidence, it seems you already have the whole portfolio in your head. What exactly are you thinking?”
Office Head Oh fired off words like a machine gun.
“Surely it isn’t some obvious sector like airlines or entertainment, right? Those are already priced in and have recovered to pre-COVID levels. In fact, the Nasdaq itself can’t be called normal either. Prices and rates are skyrocketing, so that market feels a bit overheated to me. What do you think, Junior Associate Lee?”
“I think similarly...”
“Then in the end, the only remaining choice is bonds, but from what I see, U.S. bonds are risk assets right now. If the Fed raises rates further, the SB incident will happen to us.”
“...Yes.”
“Let’s speak openly. No matter how I look at it, whether stocks or bonds, I don’t see any safe assets overseas right now. So why do you look so confident, Junior Associate Lee?”
Apparently, the fact that I didn’t look particularly anxious had instead made Office Head Oh worry.
When his machine-gun barrage of concerns finally ended, I scratched my head and said,
“Office Head. Actually, there is exactly one.”
“Exactly one?”
“But this is an asset class our pension fund has treated as taboo until now.”
“We’ve treated it as taboo until now, but in the current situation, it’s the safest? What on earth is it?”
I spoke in a slightly trembling voice.
“Gold...”