Read the Economic Code of Wealth E-Book
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- Herausgeber: YH Partners
- Kategorie: Fachliteratur
- Sprache: Englisch
The daily average foreign exchange transaction volume in 2023, as announced by the Bank of Korea, is $65.9 billion.
Excluding spot and forward exchange transactions, most of the transactions are conducted by forces aiming for currency speculation.
Funds move at the speed of light, and if 0.1% of $3 billion moves, it results in a profit of $3 million.
Due to financial liberalization through globalization, exchange rates are determined not only by the movement of goods and services but also by the flow of capital.
International financial transactions precede trade transactions, and money exceeding fifty times the real economy seeks higher returns, searching every corner of the globe.
As it becomes harder to find good returns due to overinvestment and overproduction, companies rely on 'technical trading' and 'momentum investing' for very short-term gains rather than investing based on long-term outlooks and intrinsic value.
Thus, a financial crisis in a specific country spreads to our exchange rate fluctuations or financial crises.
Stiglitz won the Nobel Prize in Economics for his work on the asymmetry of information and the imperfection of markets.
Market imperfections arise from game-theoretic environments caused by gaps in information, leading to interactions between uncertain elements in the understanding of markets and events.
Our decisions, based on human knowledge, result in unintended consequences, but the amount of information gained from failure is greater than from success.
Based on a philosophical understanding of wealth, we read the codes of the economy, amplifying the bidirectional feedback mechanism of error and recursion.
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Seitenzahl: 176
Veröffentlichungsjahr: 2024
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Prologue.
Read the Economic Code of Wealth.
The daily average foreign exchange transaction volume in 2023, as announced by the Bank of Korea, is $65.9 billion.
Excluding spot and forward exchange transactions, most of the transactions are conducted by forces aiming for currency speculation.
Funds move at the speed of light, and if 0.1% of $3 billion moves,
it results in a profit of $3 million.
Due to financial liberalization through globalization, exchange rates are determined not only by the movement of goods and services but also by the flow of capital.
International financial transactions precede trade transactions, and money exceeding fifty times the real economy seeks higher returns, searching every corner of the globe.
As it becomes harder to find good returns due to overinvestment and overproduction, companies rely on 'technical trading' and 'momentum investing' for very short-term gains rather than investing based on long-term outlooks and intrinsic value.
Thus, a financial crisis in a specific country spreads to our exchange rate fluctuations or financial crises.
Stiglitz won the Nobel Prize in Economics for his work on the asymmetry of information and the imperfection of markets.
Market imperfections arise from game-theoretic environments caused by gaps in information, leading to interactions between uncertain elements in the understanding of markets and events.
Our decisions, based on human knowledge, result in unintended consequences, but the amount of information gained from failure is greater than from success.
Based on a philosophical understanding of wealth, we read the codes of the economy, amplifying the bidirectional feedback mechanism of error and recursion.
I dedicate this book to Margarete, who is like Beatrice.
On June 18, 2024, in Woohakjae by Nomadsirius.
Author 'NomadSirius' Introduction.
'Sirius' is the brightest star in the night sky.
Its name is derived from the Greek word "Seirios," meaning 'glowing' or 'scorching.'
Imagining Sirius rising just before sunrise, I embark on the classic and humanities-inspired 'Nomad' journey.
With the aim of introducing the essence of Oriental culture to the West, I am planning to publish a series of 333 eBooks, an English Oriental Humanities Glossary, and an aesthetically pleasing English Fantasy novel.
A series of 333 eBooks.
1. 노자의 언어로 세상을 성찰하다(In Korean, 2022).
2. We permeate into The Tao Te Ching(In English, 2022).
3. 화이트헤드의 언어로 세상을 성찰하다(In Korean, 2022).
4. We permeate into The Function of Reason(In English, 2022).
5. 장자의 언어로 세상을 성찰하다(In Korean, 2022).
6. We permeate into The Zhuangzi(In English, 2022).
7. 칼 구스타프 융의 언어로 세상을 성찰하다(In Korean, 2022).
8. We permeate into Psychology of the Unconscious(In English, 2022).
9. 붓다의 언어로 세상을 성찰하다(In Korean, 2022).
10. We permeate into The Diamond Sutra(In English, 2022).
11. 니체의 언어로 세상을 성찰하다(In Korean, 2022).
12. We permeate into On The Genealogy of Morality(In English, 2022).
13. 예수의 언어로 세상을 성찰하다(In Korean, 2023).
14. We delve into Romans(In English, 2023).
15. 인문잡학으로 소통하다 1(In Korean, 2023).
16. East communicates with West 1(In English, 2023).
17. 화이트헤드의 언어로 세상을 성찰하다(In Korean, 2023 개정판).
18. We delve into The Function of Reason(In English, 2023 Revision).
19. 노자의 언어로 세상을 성찰하다(In Korean, 2023 개정판).
20. We delve into The Tao Te Ching(In English, 2023 Revision).
21. 칼 구스타프 융의 언어로 세상을 성찰하다.(In Korean, 2023 개정판).
22. We delve into Psychology of the Unconscious(In English, 2023 Revision).
23. 장자의 언어로 세상을 성찰하다(In Korean, 2023 개정판).
24. We delve into The Zhuangzi(In English, 2023 Revision).
25. 니체의 언어로 세상을 성찰하다(In Korean, 2023 개정판).
26. We delve into On The Genealogy of Morality(In English, 2023 Revision).
27. 붓다의 언어로 세상을 성찰하다(In Korean, 2023 개정판).
28. We delve into The Diamond Sutra(In English, 2023 Revision).
29. 퇴계退溪, 겸재謙齋, 추사秋史(In Korean, 2023).
30. Toegye, Gyeomjae, Chusa(In English, 2023).
31. 영화이야기로 세상의 한 축 미국을 읽다(In Korean, 2023).
32. View America as an axis of the world through movie stories(In English, 2023).
33. 인문잡학으로 소통하다 2(In Korean, 2023).
34. East communicates with West 2(In English, 2023).
35. 인문학여행으로 세상을 노닐다(In Korean, 2023).
36. Explore the world through humanities travel(In English, 2023).
37. 영화이야기로 세상의 한 축 중국을 읽다(In Korean, 2023).
38. View China as an axis of the world through movie stories(In English, 2023).
39. MBTI와 음양오행으로 클래식에 몰입하다(In Korean, 2024).
40. Immerse yourself in Classical Music with MBTI and the Yin-Yang Five Elements(In English, 2024).
41. 야구와 축구의 숲을 삼국지의 책사와 거닐다(In Korean, 2024).
42. Wander through the forests of baseball and soccer with strategists from the Three Kingdoms(In English, 2024).
43. 천문, 풍수, 지리로 세상을 보다(In Korean, 2024).
44. The world is viewed through Astronomy, Feng Shui, and Geography(In English, 2024).
45. 돈과 대화하다(In Korean, 2024).
46. Understand the Abstractness and Concreteness of Money(In English, 2024).
47. 환타지 소설에 빠지다(In Korean, 2024).
48. Fall in love with Fantasy novels(In English, 2024).
49. 부의 경제코드를 읽다(In Korean, 2024).
50. Read the Economic Code of Wealth(In English, 2024).
E-mail. [email protected]
Publication Right.
Fall in love with Fantasy novels
Read the Economic Code of Wealth(In Korean, 2024).
ⓒ YH Partners 2022
The Date of Publication. 2024.6.21.
Author. nomadsirius.
Publisher. YH Partners.
The Registration Number of Publisher. 2022000013.
Price of eBook. $10.
Address. 20 Landmark-ro, Songdo-dong, Yeonsu-gu, Incheon, Republic of Korea.
E-mail. [email protected]
ISBN. 979-11-92838-39-7.
This book is copyrighted by the author and YH partners.
1. 1997 Foreign Exchange Crisis vs. 2024 Economic Crisis.
Read the Economic Code of Wealth.
In 1997, we faced the most severe foreign exchange crisis.
The government announced that it held $25.1 billion in foreign exchange reserves, but the actual reserves were estimated to be around $3.6 billion.
To overcome the foreign exchange crisis, we received a bailout package of $58.5 billion from the IMF, subjecting us to economic oversight.
The IMF demanded the implementation of a contractionary economic policy package, which included financial austerity, fiscal balance, financial system reform, privatization of public enterprises, and the restructuring of financial institutions.
The IMF adhered to a monetarist mindset known as the quantity theory of money.
This monetarist tendency is closely associated with the neoclassical economic school represented by figures like Milton Friedman and Robert Lucas.
The Washington Consensus, based on 'market omnipotence,' emphasized appropriate macroeconomic policies, and the liberalization of trade and capital.
The IMF lacked understanding of the errors (fallibility) and reflexivity in markets with imperfect credit, as well as the history, culture, and economy of Asia.
The currency crises in South Korea, Thailand, and Indonesia were caused by the sudden withdrawal of short-term capital investors who had been covering the current account deficits.
East Asia, excluding its current account deficits, has generally strong macroeconomic fundamentals.
However, in any country, a foreign exchange crisis arises from the deterioration of the current account and capital account balances.
When fiscal and monetary expansion overheats the economy, imports surge, leading to an accumulated deficit in the balance of payments.
Apart from 1997, foreign exchange crises have occurred repeatedly but have often been concealed.
In fact, at the end of 1962, when foreign exchange reserves fell from $210 million to $170 million,
Kim Jong-pil, then head of the Central Intelligence Agency, went to Japan.
Through a humiliating Korea-Japan negotiation, he secured cooperation funds to avert the crisis of foreign exchange depletion.
Foreign exchange crises recurred in 1966, 1970, 1980, and 1982.
The failure to reflect on these crises and the attempts to cover them up led to the most severe crisis in the history of the global economy in 1997.
Tens of thousands of companies went bankrupt, financial institutions failed, and over a million people lost their jobs, resulting in the destruction of many families.
As of 2024, foreign exchange reserves are $413.2 billion, but household debt has surged from the insignificant levels of 1997 to 1,882 trillion won (as of Q1 2024), and the growth rate has dropped from 7.6% to 1.3%.
Despite the competitiveness in automobiles, shipbuilding, and chemicals, the second battery sector lags in price competitiveness, and the excessive focus on semiconductors and the localization of production facilities in the U.S. pose significant risks.
The decline in the working-age population has contracted the domestic market, and a sharp adjustment in the real estate market could rapidly amplify destructive effects.
Although there were issues with the efficiency of investment due to overinvestment and duplication by companies, the growth momentum in 1997 was relatively strong.
In contrast, the growth momentum in 2024 is weak due to a decline in export competitiveness.
During the 1997 foreign exchange crisis, the government was able to implement expansionary fiscal policies due to a budget surplus, but now, due to accumulated exchange rate failures, failed fiscal policies, welfare policies, and public enterprise debt, the government's fiscal capability is weak.
Additionally, unlike the relatively stable global economy of 1997, various adverse factors now surround the Korean Peninsula.
The sudden collapse of the North Korean regime and the potential decline of the Chinese economy are increasing, while Japan maintains its bond issuance through low-interest rate yen carry trade.
The U.S. also faces challenges from its own debt and Middle East issues.
In 2024, Korea is navigating through turbulent waters.
Read the Economic Code of Wealth.
2. The Yuan Crisis China Faces.
Read the Economic Code of Wealth.
During the 2008 financial crisis, most countries devalued their currencies to boost exports and curb imports.
However, despite pressure to increase the value of the yuan, China maintained a low yuan through dollar intervention and later appreciated the yuan at the request of the United States.
The exchange rate of 7.5671 yuan per dollar in 2007 fell to 6.8280 yuan per dollar in 2008.
Unlike the collapsing U.S. economy amid the financial crisis, China continued to enjoy high growth, and yuan appreciation became commonplace.
China strongly expressed its intention to emerge as a superpower surpassing the United States.
Needing 20 million new jobs annually, high growth was essential for China.
When U.S. economic woes made exports difficult, China drove growth through investment and consumption.
At the end of 2012, Xi Jinping rose to power, transforming the collective leadership system into a single-person rule.
He prioritized economic logic driven by political logic and focused all efforts on boosting domestic demand through infrastructure investment.
China made massive investments in heavy and chemical industries such as shipbuilding, steel, and chemicals, and in 2014 appreciated the yuan to 6.0401 yuan per dollar to expand domestic demand through infrastructure investment.
To reduce the total amount of debt, China announced the 'Shanghai-Hong Kong Stock Connect' to link the stock markets of Hong Kong and mainland China, heating up the stock market.
'Shanghai-Hong Kong Stock Connect' means connecting 'Shanghai' (沪) and 'Hong Kong' (港).
With efforts to attract foreign investment, promote inflows, and ease various regulations, the Shanghai Composite Index rose from 2,500 points in the second half of 2014 to 5,000 points within a year.
In 2015, Xi Jinping announced the land-based Silk Road and the maritime Silk Road through the One Belt, One Road initiative.
The scale of this initiative, totaling $12 trillion (1.3 quadrillion won), is 600 times larger than South Korea's Four Major Rivers Project ($22 trillion) and 8 times larger than its GDP ($1.5 trillion).
Seeking to control the center of Eurasia and the African continent, Xi Jinping aimed to revive the glory of the Chinese empire.
Despite failing to recognize the end of the boom in domestic demand driven by infrastructure and abandoning territorial ambitions,
China stood against the United States, the loser in the global maritime power play.
With China's high growth and Japan's benefit from Abenomics coinciding, our automotive, chemical, and oil sectors, known as 'Car-Chem-Oil,' emerged as themes in the stock market.
Benefiting from the effects of the currency devaluation policy, China's export remained strong, allowing us to escape from the low-growth global economy turmoil since the eurozone financial crisis.
Pouring enormous amounts of money into infrastructure investment led to a surge in domestic demand, but China faced overcapacity, overproduction, excessive inventory, and excessive debt.
The Shanghai Composite Index, which had risen to 5,100 points, fell to 3,000 points in early 2016.
Despite China cutting interest rates six times amid the Federal Reserve's rate hikes and the strong dollar, debt risks increased due to the failure of stock market support measures, leading foreign investors to sell off the yuan.
Amid the yuan's devaluation, China, which had maintained the yuan's appreciation, devalued the yuan as Japan and Europe increased exports through the depreciation of the yen and the euro.
Abandoning the role of global demand driven by yuan appreciation, China entered into export competition.
As foreign investors who had entered the market expecting yuan appreciation withdrew due to the anticipated collapse of the yuan's value, anxiety spread in emerging markets.
As import prices rose due to the depreciation of the yuan, emerging countries faced blocked export routes for Chinese exports.
As the yuan found stability and rebounded when the United States stopped raising interest rates and China strengthened capital controls, it continued to decline steadily, reaching 7.2425 yuan per dollar as of May 2024.
Feeling the impact of the U.S. interest rate hikes, China fell into the trap of the dollar and entered a period of adjustment, leading to a rapid decline.
Read the Economic Code of Wealth.
3. Japan Rising from the Bubble Collapse.
Read the Economic Code of Wealth.
Following the second oil crisis (1979-1981), the global economy fell into a severe recession.
As inflation worsened, the U.S. economy suffered from stagflation, damaging its international competitiveness and growth potential.
Paul Volcker, who took office as Chairman of the Federal Reserve in 1979, caused a downturn by implementing an extreme monetary tightening policy that led to high interest rates.
Volcker showed a strong determination to control inflation, even if it meant sacrificing valuable economic growth.
With the benchmark interest rate reaching nearly 20%, over 40% of U.S. small businesses went bankrupt and unemployment soared.
Fortunately, the depressed demand stabilized prices, and the inflation rate dropped to 3.2%.
However, as the economy still did not improve, the Reagan administration stimulated the economy through aggressive tax cuts and interest rate cuts.
As a result of the economic stimulus, the U.S. faced serious deficits, a strong dollar, and the rise of Japan and Germany, leading to a decline in U.S. manufacturing exports and a trade deficit.
To address the twin deficits of fiscal and trade deficits, finance ministers from the G5 advanced countries gathered at the Plaza Hotel in New York in September 1985.
The U.S. demanded Japan and Germany to appreciate their currencies, leading to a significant depreciation of the yen and the mark against the dollar.
With the Plaza Accord, when Japan and Germany agreed to appreciate their currencies, the yen and the mark greatly appreciated.
Especially, the yen's exchange rate against the dollar dropped from 250 yen to around 120 yen within a year.
However, despite the yen's doubling in value, the U.S. maintained a trade deficit, prompting it to call for Japan and Germany to stimulate domestic demand through the Louvre Accord in Paris in February 1987.
To alleviate chronic global demand shortages, it called for domestic demand stimulation within the stability of the dollar value.
As Japan implemented radical easing measures such as low interest rates and real estate secured loans, a huge bubble formed in the real estate and stock markets.
As both individuals and corporations plunged into speculation, leading to overheating of assets and the domestic market, Japan and Germany introduced interest rate hike plans.
As fears of a global demand market slump emerged, Black Monday burst in 1987, with a more than 22% decline in one day.
Ultimately, Japan abandoned its interest rate hike plans amid fears of an economic downturn, and the U.S. and Germany also took measures to lower interest rates.
The Bank of Japan delays curbing asset and domestic market overheating, focusing on price stability.
In December 1989, the Nikkei 225 index in Japan soared to 38,957 points, reaching the peak of the bubble.
After the shock of Black Monday subsided, the Bank of Japan quickly raised the discount rate to reduce the pressure from asset bubbles and rising prices.
Unable to cope with the soaring loan rates, home sellers flocked, leading to a collapse in housing prices and a contraction in consumption.
Japan's insistence on raising the benchmark interest rate led to a rapid collapse of the stock market, plunging Japan into chronic deflation.
Amid growing concerns about the Japanese economy following the 1995 Kobe earthquake and the yen's strength, the U.S. allowed yen depreciation and dollar appreciation through the Reverse Plaza Accord at the G7 summit in April.
With the favorable environment of yen appreciation, Korean companies that had made excessive investments faced the 1997 financial crisis amid a rapid depreciation of the yen.
During the 2008 financial crisis, the Nikkei 225 index was cut to 6,994.90 points, down to 1/6 of its level, and struggled around the 10,000-point level in 2011.
Despite experiencing another calamity with the March 2011 Tohoku earthquake, Japan returned to a yen depreciation by selling overseas assets to pay insurance claims and buying yen with received dollars.
Shinzo Abe, appointed as the new prime minister, implemented Abenomics, a stimulus package, to escape long-term deflation by printing yen and buying long-term Japanese government bonds.
With the unlimited quantitative easing of the yen, the currency supply expanded, leading to a depreciation of the yen and a turnaround in Japan's export companies.
After enduring three decades of long recession and two major earthquakes, Japan is racing under the international community's tolerance for yen depreciation.
As of May 2024, the Nikkei 225 index has recovered to 38,846 points, reaching its peak in December 1989.
Japan sees the current period as a timely opportunity to bet on the yen, viewing it as a period of optimism and opportunity to penetrate its destiny's summer.
Read the Economic Code of Wealth.
4. Eurozone Crisis.
Read the Economic Code of Wealth.
West Germany rapidly emerges from the war damage, receiving aid for reconstruction according to the U.S.'s European Recovery Program, the Marshall Plan.
The U.S. provides over $13 billion in aid to Europe in the form of grants, helping to offset trade deficits and activate transatlantic trade.
Benefiting from long-term economic growth since the early 1950s, West Germany joins the North Atlantic Treaty Organization (NATO) in 1955 and becomes a founding member of the European Economic Community (EEC) in 1957.
With sustained growth in international trade and exchange rate stability, West Germany accelerates its pace of growth.
Through modern industrial facilities, West Germany enhances its growth potential and international competitiveness, catching up with U.S. products in the global market.
Despite facing stagflation due to the 1st and 2nd oil crises (1973-1981), West Germany quickly recovers due to the competitiveness of its goods.
As the U.S. trade deficit grows, West Germany agrees to currency appreciation through the Plaza Accord (1985), leading to a significant increase in the value of the Deutsche Mark.
