Don’t panic

Lehman Brothers and Merrill Lynch, giants in the global financial market, vanished overnight. The rumor that Korea would face a financial crisis in September proved much ado about nothing but an unexpected tsunami swept across the Pacific instead.

The Kospi and the Kosdaq hit record lows for the year. The won plunged to 1,160 against the dollar.

When the dust settles, it will be clear the bankruptcy of Lehman Brothers had been expected and moves to sort out the Merrill Lynch debacle were faster than expected.

So there are positives, not least of which is that we can start to remove obstacles in the financial market that we need to be rid of.

That said, it is difficult to predict how far the U.S. financial crisis will spread. It is possible that financial insecurity will spread into the economy. After all, the U.S. consumer market is in a coma and is sustained merely by tax stimulus payments.

The New York stock market is desperately dependent on the profits that multinational companies earn in foreign markets. If the financial crisis from New York pummels the Asian and the European markets, the U.S. economy will plummet even further. If the U.S. economy nosedives, the foundations of global capitalism might be threatened.

There are two preconditions for the U.S. financial crisis to be resolved. First, the housing market, which has been slowing down with no end in sight, has to rebound. The second condition is international cooperation, which, fortunately, is going well.

But the possibility of even healthy assets within American financial institutions growing sick can’t be ruled out. We may see problems on credit card loans and installments on auto loans.

But there is no need to panic. Considering the complicated system of the global financial market and investment sentiment, Korea can’t avoid what’s going on. But from an objective perspective, Korean domestic financial institutions are healthy, despite what’s happening in the U.S.

Regulations on household loans and real estate loans have been enhanced, so Korean financial companies shouldn’t be hit so hard by the U.S. crisis.

But, yes, the Korean market is suffering and the only reason for suffering must be the lack of trust.

To get out of this mess, the government must take a leading role and each economic participant must respond calmly. They should persuade the entire populace to endure and overcome the crisis.