The Economy Now Is Just Like the Itaewon Disaster... In Short, the System Has Collapsed

Kim Ki-sik, Director of The Future Research Institute
"First time in 30 years of power oversight that the system has collapsed like this"
"Even with different views from Mofia, it's not this incompetent; the system isn't working"
"If it leads to a credit crunch, all remedies will be ineffective"
"To restore market confidence, the current government's economic team must be replaced"

Kim Ki-sik, director of the The Future Research Institute, is presenting at the 2022 presidential and local election evaluation forum hosted by 'The Better Future' (The Future), the largest parliamentary group within the Democratic Party, at the National Assembly Members' Office Building on the 15th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Naju-seok] "In short, the system has collapsed."

Kim Ki-sik, director of The Future Research Institute, asserted this in an interview on the 8th, saying, "Having monitored power since the days of People’s Solidarity for Participatory Democracy for nearly 30 years, this is the first time I have seen the system collapse and become paralyzed like this." Referring to the absurd reporting system during the Itaewon disaster, Kim said, "The current economy is exactly the same."

He said, "The economic situation of high interest rates, high exchange rates, and high oil prices did not come as a shock from a sudden event but was already anticipated since last year," adding, "After the presidential election, there were no measures for two months, then only mid- to long-term reform tasks such as labor reform, education reform, and public sector reform were presented, and when the household debt problem surfaced, it took three months to come up with countermeasures."

Regarding the so-called Kim Jin-tae-triggered economic crisis incident (Legoland incident), which caused a liquidity crisis in the bond market, he said, "The Financial Supervisory Service has a daily monitoring team that would have reported daily on capital and bond market trends, but appropriate measures were not taken accordingly."

Kim raised doubts about whether the current government’s economic crisis response team has lost its touch. He said, "Chairman Kim Joo-hyun of the Financial Services Commission, Chief Secretary Kim Dae-gi of the Presidential Office, and Chief Economic Secretary Choi Sang-mok have been outside for a long time and then came in, so it seems their sense has declined," adding, "Even though situation reports were made, the contingency system did not operate." Regarding the controversial call option issue at Heungkuk Life Insurance, he criticized, "They insensitively judged the possible repercussions if the call option was not exercised." Kim said, "Although positions differ, Korea’s 'mofia' (bureaucrats from the Ministry of Economy and Finance, etc.) are not usually this incompetent, so it is incomprehensible that even the operating system is not functioning."

Kim said, "Governor Kim declared default on September 28, and the final default was on October 4, so what was done during that week, and what was done until the first measure was announced on October 22?" He criticized, "How can Deputy Prime Minister for Economy Choo Kyung-ho say, ‘The problem of Gangwon Province should be dealt with by Gangwon Province. The ripple effect is not at a stage to spread’?" He demanded, "It must be investigated what was reported, what judgments were made, and why there was a delay."

Kim expressed concern that a series of sporadic crisis phases could lead to a credit crunch. He said, "A credit crunch means simply that trust is lost, and even sound companies can collapse if short-term liquidity arises," adding, "As the ultimate lender, the state has lost market trust in the Legoland and Heungkuk Life Insurance incidents," warning, "If the state loses market trust, it can be driven into a situation where all remedies are ineffective."

Kim said, "Initially, there were concerns that real estate maturity bridges and other maturities would cluster in June next year, causing a crisis around the second quarter, but this could come forward to the first half of next year," adding, "It could be as early as the end of this year or the beginning of next year."

He criticized the government’s measures, saying, "The government is complacent and lukewarm in responding to the situation." He said, "Instead of calming the anxiety perceived by the market, the government’s actions have rather amplified it, so the urgent task for the government now is to restore market trust."

Regarding the Bank of Korea’s intervention, Kim said, "In the past COVID-19 phase, the Bank of Korea could supply liquidity to the market through low interest rates and bond purchases, but now, as the Bank of Korea is taking big steps with a high interest rate stance, supplying liquidity through bond purchases would negate its raison d'?tre as a unique institution and is not an option." He added, "The current situation is more difficult than the 2008 Lehman Brothers bankruptcy because that was caused by a specific event and recovered after a certain period, whereas this situation stems from long-term low interest rates and liquidity supply during the COVID-19 phase causing inflation, and the U.S. Federal Reserve has decided to maintain a high interest rate policy for a long time, so the situation could be prolonged."

He said, "Even if interest rates do not rise further, just maintaining a non-lowering situation could lead to a more serious situation than the 2008 financial crisis, and corporate funding crunches could also be prolonged." Kim said, "The situation will not end in the short term and will last for about two years," adding, "The government needs to present how it will respond to short-term credit crunches and mid-term measures." He said, "However, the government is presenting economic policies that do not fit the current situation and shows no willingness, ability, or attitude to change, so the market will lose trust in the government," and added, "Replacing the current government’s economic team could be a way to regain such market trust."

Kim, who has been active in People’s Solidarity for Participatory Democracy since 1994, served as a Democratic Party lawmaker in the 19th National Assembly and was known as the ‘Grim Reaper of the Financial Sector’ for his expertise in finance, fair trade, and chaebol reform policies. He served as the Financial Supervisory Service chief under the Moon Jae-in administration and is currently the director of The Future Research Institute, a think tank affiliated with the Democratic Party. Recently, the Democratic Party formed a fact-finding team on the Kim Jin-tae-triggered liquidity crisis in the bond market, and unusually, Kim was included as an outside member despite not being a sitting lawmaker.

This content was produced with the assistance of AI translation services.