A sick economyThe government’s reasoning on the so-called September financial crisis is convincing on its own term.
It is true that short-term foreign loans will expire this month, but money is not that likely to leave the country all at once.
Our interest rate is definitely not low compared to the United States, Europe and Japan. The high oil prices are clearly dropping. We should agree with the government that inflation and the capital deficit will be reduced.
Nonetheless, the strange story of what will happen in September is not going away because foreigners are selling Korean stocks in droves. However, it would be too much to interpret this as “Sell Korea.”
The sale of dangerous capital is a global phenomenon. International finance companies are trying their hardest to circulate the U.S. dollar as they suffer from a lack of cash because of the country’s subprime crisis.
However, Blue House Senior Secretary for State Affairs Planning Bahk Jae-wan’s insistence that Korea is becoming a developed country is shameful.
We mean that the current slowdown is not likely to evolve into a major economic crisis, but the insecurity spread throughout our economy is a clear reality.
Prices and the unemployment rate have spent some time reaching their current positions. The coincident composite index that shows the state of the current economy and the composite leading indicators that predict the future of the economy have both dropped for six months running.
The economy is now in recession and is not likely to recover for some time.
Although the volume of the Korean economy has grown, it is still dependent. We are swayed by the external environment. If there is an oil shock or if two U.S. public mortgage companies collapse, we cannot guarantee the welfare of the Korean economy.
If the Chinese economy steps back, it is the same. Protecting the economy, and not saving the economy, is more impending.
This is difficult with old Keynesian methods such as artificially intervening in the market with changes in the exchange rate and interest rate. Such steps only temporarily cure symptoms.
Instead, we should take the right path. We should let the economy run according to market principles with minimum government intervention.
The government should revive domestic demand and induce investment in plants and equipment through promised tax cuts and drastic regulation relaxation.
Even if it takes time, the best medicine is building the economy’s basic health.
We are more worried about the economy’s basic health than the so-called September crisis.