[A Sip of Books] Financial Crisis Racing Toward Economic Catastrophe

Some sentences encapsulate the entire content of the book itself, while others instantly reach the reader’s heart, creating a connection with the book. We introduce such meaningful sentences excerpted from the book. - Editor’s note

This book diagnoses the global economy and the Korean economy in 2023. The author scientifically analyzes and diagnoses domestic and international financial crises through economic pathology. The economic disasters caused by financial crises are explained through various statistics and historical cases. Furthermore, the author emphasizes that the most decisive factor currently affecting Korea’s economic crisis is the exchange rate, and explains the economic principles of exchange rate fluctuations in an easy and detailed manner.

It is better to briefly explain why I described the current economic situation as a “runaway train rushing toward catastrophe.” In fact, it is almost certain that the global economy will experience a severe economic crisis in 2023. China’s growth rate, if not for the Chinese government’s statistical manipulation, will record a low of just over -5%, and Japan, whose economic structure has weakened considerably over the past 30 years, is expected to record an even lower growth rate in the late -5% range. To understand how devastating this is, one can easily recall that when Korea’s growth rate was -5.5% in 1998, homelessness surged, hundreds of thousands of self-employed businesses went bankrupt, and countless families were destroyed. Besides this, my prediction is that almost all countries, including Korea, will record negative economic growth rates. - From the “Prologue”

Then why does the United States continue its strong dollar policy? It is commonly said that this is because the U.S. is continuously raising interest rates to combat severe inflation. Indeed, the Federal Reserve (Fed), the U.S. central bank, maintains the stance that it will keep raising the benchmark interest rate until inflation reaches 2%. In other words, the U.S.’s high-interest-rate policy to resolve inflation is causing the strong dollar. But is that really the case? My analysis suggests it is not only due to inflation concerns. Rather, the U.S. current account deficit has become so enormous that if it does not pursue a strong dollar policy, the dollar’s weakness cannot be avoided, which would lead to even more severe economic difficulties. Therefore, the U.S. has no choice but to implement a strong dollar policy. In fact, the U.S. current account deficit already reached $616.1 billion in 2020 and surged further to $821.6 billion in 2021. The 2021 figure amounts to 3.6% of the U.S. GDP. - From “Chapter 5. Economic Diagnosis for Economic Forecasting, and Exchange Rate Fluctuations”

Why has the global economy reached this state? First, the stock market began to show signs of a bubble starting in the late 2010s. For example, in the U.S., the Dow Jones Industrial Average, which had fallen to the 7,000 level in 2008, once surpassed 36,000. More importantly, during this period, a speculative frenzy swept the real estate market, and by 2020, the bubble had swollen to its maximum. This was a global phenomenon. Even in Europe, where the economy was relatively stable, real estate speculation caused large bubbles in Germany, France, the Netherlands, Belgium, Luxembourg, Denmark, Sweden, Switzerland, Croatia, and others. Along the Pacific coast, countries such as Korea, China, New Zealand, Australia, the U.S., and Canada experienced the same. Many developing countries that had shown relatively good economic performance also followed suit. The real estate bubble described above began to deflate in earnest from the second half of 2022. This indicates that the principle of credit destruction will soon be fully activated. Therefore, financial crises will rapidly progress in various countries’ economies, and not only the real estate bubble but also the stock market bubble is either rapidly deflating or will do so soon. Consequently, the global economy will experience a severe recession. - From “Chapter 9. The Global Economy 2023: The Runaway Train”

Financial Crisis Racing Toward Economic Catastrophe | Written by Choi Yong-sik | Saebit | 336 pages | 18,000 KRW