[Initial Perspective] 'Tachogyeongsa' and the Balloon Effect

[Asia Economy Reporter Jo Gang-wook] The phrase 'Tachogyeongsa (打草驚蛇),' which means startling a snake by beating the grass, is used in two ways. First, it refers to carefully observing a suspicious enemy situation and thoroughly examining the circumstances before taking action, corresponding to the 13th stratagem among the 36 stratagems in Sun Tzu's Art of War. Preventing and blocking danger in advance is the core of 'Tachogyeongsa.'

Conversely, it also means unnecessarily causing trouble and inviting disaster. In this case, it is commonly used to describe committing the folly (愚) of 'Tachogyeongsa.' It implies making a problem worse by needless interference.

Neologisms such as 'Yeongkkeul (pulling together one's soul to buy a house),' 'Bittou (borrowing to invest),' and 'panic buying' emerged during the Moon Jae-in administration. Already reaching the 24th term, these are closely related to the relentless real estate policies under the current government. Recently, the neologism 'Byeorakgeoji' has also been circulating. It refers to people who postponed buying apartments, trusting the government's promise that housing prices would fall, only to find both sale and jeonse prices rising, leaving them stuck. Unlike 'Byeorakbuja,' who suddenly become wealthy, it describes non-homeowners whose assets have declined due to rising surrounding housing prices despite no significant change in their income.

According to the '3rd Quarter Metropolitan City and Province Service Industry Production and Retail Sales Trends' released recently by Statistics Korea, service industry production was particularly sluggish in transportation and storage, accommodation, and food services. This was due to the strengthening of social distancing measures amid the COVID-19 pandemic, which severely impacted face-to-face service industries.

However, despite the overall downturn in the service industry, some sectors recorded significant growth. Real estate and finance & insurance rose sharply across all 16 metropolitan cities and provinces. Especially in Seoul, finance & insurance (27.6%) and real estate (16.2%) both posted double-digit increases compared to a year ago. Thanks to this, overall service production (2.2%) actually increased.

The increase in real estate production is due to real estate 'panic buying.' In the third quarter, apartment prices surged again, mainly in Seoul and the metropolitan area, prompting many non-homeowners to rush to purchase apartments. According to the Ministry of Land, Infrastructure and Transport, nationwide housing transactions in July (141,419 cases) recorded the highest July volume since related statistics began in 2006. Additionally, the stock 'Bittou' craze led by 'Donghak Ants' further boosted finance & insurance production.

Loans in the financial sector are inseparable from real estate policies. The government's persistent tightening of loan regulations following real estate measures is a case in point. Although financial regulations are used as a card to control real estate, the reality is challenging. When financial authorities announced credit loan restrictions targeting high-income earners, a 'loan hoarding' phenomenon emerged as people tried to borrow as much as possible before the regulations took effect. After the announcement of credit loan restrictions for high-income earners, credit loans at the five major banks increased by more than 1.5 trillion won within a week, and the issuance of overdraft accounts also nearly doubled. Many people opened overdraft accounts in advance to catch the 'last train' before the credit loan regulations were implemented.

Despite the Moon Jae-in administration's various measures to curb soaring real estate prices, doubts are growing about whether the government can truly control the 'market (市場).' Critics argue that tightening regulations on the financial market has only caused a balloon effect, akin to 'Tachogyeongsa.' Amid ongoing controversies over bureaucratic and political circles' influence, why does the financial sector prefer 'competent' former bureaucrats or politicians as association heads? It may be in hopes that they can express the market's voice on behalf of authorities who do not listen.