[HN Gopher] Legoland bond crisis threatens South Korea's economy
___________________________________________________________________
Legoland bond crisis threatens South Korea's economy
Author : lawrenceyan
Score : 165 points
Date : 2022-11-16 11:15 UTC (1 days ago)
(HTM) web link (foreignpolicy.com)
(TXT) w3m dump (foreignpolicy.com)
| jontro wrote:
| How is even possible to retract a loan guarantee? I doubt that's
| possible in other countries
| anm89 wrote:
| I'm always confused by this type of perspective. It's like
| asking "how is it possible to lie" or "how is it possible to
| say xyz"
|
| What laws of physics prevent people from reneging on financial
| agreements? It happens a million times a day. It's one of the
| most believable human interactions. What part of it doesn't
| feel possible to you?
| everybodyknows wrote:
| This is a question for an expert in the South Korean legal
| system.
|
| If a US state governor OTOH tried such a move, I'd expect
| litigation.
| 0x4d464d48 wrote:
| Dear lord! Talk about an own goal...
| GauntletWizard wrote:
| I'm headed to Korea in a week, and my main takeaway from this is
| that I am considering going and checking out this boondoggle
| instead of Lotte World
| anm89 wrote:
| I strongly recommend this. Lotte world is ultra over rated. Go
| explore the country side. Endless cool stuff out there.
| pigtailgirl wrote:
| -- Lotte world is pretty fun if you're already staying in
| Seoul and want to visit amusement park - if lover of
| amusement parks tho - E-World in Daegu = a lot of fun - tho
| Daegu is a boring city generally - but - Chuncheon is super
| easy to get to - the dakgalbi there is actually much better
| --
| legitster wrote:
| Wow. All over a tiny $150 million dollar bond.
|
| A good reminder how we take for granted systems that are stable.
| When often time they are only stable because of vigilance.
| HWR_14 wrote:
| No, all over interest payments for 4 months on a $150 MM bond.
| So, even at 12% APR, $6 MM.
|
| But it became unstable because it suddenly made government
| bonds suspect. Like, if the US Treasury announced it was just
| not going to pay back a $1MM bond issue, the US and world
| markets would tank. Size is irrelevant.
| woah wrote:
| Is this the end of Legos?
| djbusby wrote:
| Obviously not.
| goto11 wrote:
| The Legoland theme parks are not even owned by Lego anymore.
|
| Edit: Apparently I was wrong. Lego sold the themeparks during a
| downturn 20 years ago, but actually bought them back a few
| years ago, and now consider them a strategic part of the brand.
| bombcar wrote:
| Lego was in a pretty bad place 20 years ago, now they're the
| largest toy company in the world, with revenues of around
| $8billion.
| fbdab103 wrote:
| Wild. I would have guessed those Funco Pop toys that I see
| for seemingly every possible movie, game, comic book,
| anime, etc. That chunk of plastic feels like it must be
| selling for a ridiculously good margin.
| bombcar wrote:
| I still have never EVER seen someone actually _buy_ one
| of those. I swear they stock the shelves with them and
| then return them.
| lovich wrote:
| This was a fascinating read. Is there any sort of explanation or
| analysis out there on why so many political leaders as of late
| believe they can alter the deal and then keep the same level of
| trust immediately afterwards?
|
| I know this happens occasionally and I may just be seeing a
| pattern that's not there, but it seems like a noticeable uptick
| in leaders who don't understand why people they just fucked over
| won't trust their IOUs anymore
| rvba wrote:
| People vote incompetent populists who lie to get elected (tell
| people what they want to hear or false promises).
|
| When they win, they are bad at their jobs.
| hn_throwaway_99 wrote:
| This is my personal theory: modern technology and media has
| made it more possible to surround yourself with only like-
| minded views that share your "fairy tale thinking", even if the
| eventual outcomes are obvious from the outset.
|
| Was really glad that this article mentioned Liz Truss at the
| end, because I think the dynamics are absolutely the same. It
| was painfully obvious (indeed, the current PM made it clear in
| the summer) that cutting taxes, and having no way to pay for
| them, in the midst of rampant inflation is an idiotic idea. I
| read elsewhere that it's almost as if Truss and Kwarteng formed
| a pact in college saying, "if we ever make it to the top of
| government, we'll prove that supply side ideology works!", and
| then completely disregarded the current economic climate.
|
| I just see it more and more over the past decade or so that
| things that you know are not going to end well (see also crypto
| deposits paying 10% interest) somehow snowball because it's
| easier to surround yourself with "ideological cultism".
| phkahler wrote:
| >> that cutting taxes, and having no way to pay for them, in
| the midst of rampant inflation is an idiotic idea.
|
| Let's see what happens here in the U.S. :-/
| halpmeh wrote:
| Modern monetary theory, most likely.
| cool_dude85 wrote:
| This far-right politician believes in MMT?
| anm89 wrote:
| I think you'd be surprised the degree to which many far
| right politicians would be supportive of some versions of
| MMT.
|
| MMT is attractive to essentially all politicians. It says
| you can spend without consequences. You don't have to spend
| that on a welfare state although many MMT advocates take
| this line. You could just as easy spend it on the military
| or surveillance.
| madhadron wrote:
| > [MMT] says you can spend without consequences.
|
| Really? I thought it said that money exists because a
| government prints it, so a government cannot default on a
| debt denominated in its currency unless it chooses to,
| and that inflation is a second order effect resulting
| from the money supply increasing faster than the pool of
| goods and services it's chasing.
| halpmeh wrote:
| It's unlikely that this politician explicitly believes in
| MMT, but the belief that you can somehow wish debt away in
| in-line with MMT. And of course, any philosophy exists
| within the zeitgeist of the times. After the GFC, a lot of
| people in the world started to believe that money is
| somehow imaginary.
| downrightmike wrote:
| Only because they think it means "Its __My__ Money Today!"
| Guthur wrote:
| Everyone is trying desperately to escape the financialisation
| tyranny that has been imposed upon us all.
|
| We have no sovereignty it's been taken at gun point and
| replaced by debt based colonialism.
| IAmEveryone wrote:
| Yea, ,,those people" making provincial governments go into
| debt for... toy-based theme parks? Musk be terrible.
| curiousllama wrote:
| Anyone confident in any answer here is too confident to listen
| to. But I generally think of it as a natural result of big
| change.
|
| Big economic/political/tech shifts leave people mistrusting old
| institutions that naturally aren't well equipped to handle the
| new situation. The institutions screw up, electors lose trust,
| and new folks take over. The new folks (being new, and
| sometimes being the less-competent rejects) tend to
| misunderstand the institution, and change things that aren't
| necessary; they overreact.
|
| What you're seeing is just the overreactions: they're knocking
| out walls, and sometimes they hit the wrong wall.
|
| But you also don't see the benefits because effective
| bureaucratic adaptation is boring.
|
| The thing I wonder about is if the seeming endless screw ups
| are because we have more change today, more morons, or we just
| see it all more.
| elmomle wrote:
| I agree mostly but would amend one thing: I think there is a
| mix of well-meaning overreaction and often substantial
| hubris. Politicians tend to have big egos, and many,
| especially of the upstart class, seem to mistake popular
| appeal for efficacy ("people seem to really like this
| platform--I must be on to something here"). So in these cases
| they'll ignore their lack of understanding of finance and do
| random or inadvisable things in the hope that the outcome
| will be good--and if so they'll be heroes. I don't think they
| realize that awful outcomes are actually quite possible when
| pulling big levers in complex systems you don't understand,
| and that awful outcomes had previously been avoided because,
| in recent memory, policy decisions tended to be made with a
| measure of respect, at least, for the things that might
| absolutely, causally wreck the economy.
| gsatic wrote:
| Not new. Lot of examples from history under the Theory of
| Bounded Rationality. Theory says there is an upper limit to
| the complexity any group of chimps can handle.
| [deleted]
| Night_Thastus wrote:
| Very interesting stuff. The kind of domino effect shown here is a
| really great example of how much of modern economics is based off
| of mutual trust of the parties involved, and how that trust binds
| together so many disparate individuals, companies and other
| groups that you wouldn't otherwise expect to be involved at all.
| gnabgib wrote:
| https://archive.ph/pURO3
| Victerius wrote:
| > But Legoland Korea struggled out of the gate, too far from
| Seoul and too expensive for what was on offer, and it did not
| generate enough revenue to honor the bonds. Also, as South
| Korea's real estate market softened, the value of the real estate
| backing the bonds began falling below the amount of the debt.
|
| This is the heart of the problem.
|
| I know the current South Korean president owes his victory in
| part to popular resentment in the face of the Moon
| administration's inability to stem the explosive growth of
| housing costs in Seoul.
|
| Could it be that the target demographic for this Legoland just
| doesn't have enough disposable income or free time to make the
| asset profitable? It sure seems like it. Other Legolands around
| the world don't struggle with profitability. Distance isn't an
| issue for car owners. But cars are more expensive than ever. And
| shelter costs in SK are too high in proportion to household
| incomes.
|
| Housing speculators and NIMBYs are going to kill capitalism.
| yongjik wrote:
| I do think Legoland should never have been built there (they
| found one of the largest bronze age settlements ever found in
| Korea - they built freaking Legoland on top of it anyway), but
| it was built, and defaulting on bonds was probably the
| stupidest thing anyone could have done with it. I mean, someone
| could've sneaked in with a can of gasoline at night and burnt
| the whole thing down, and it would have cost _less_ on the
| Korean economy.
| crunchyfrog wrote:
| This is definitely not the heart of the problem. Governments
| issue bonds for what turn out to be bad investments all the
| time.
|
| The heart of the problem was the completely unnecessary default
| which seems to have been done for petty and self-defeating
| political reasons.
| summerlight wrote:
| > Governments issue bonds for what turn out to be bad
| investments all the time.
|
| Yeah, and this is even worse since Gangwon-do is an extremely
| rural and aging area without any hope of future growth. It
| only contributes 2% of the total GDP in South Korea and is
| rapidly shrinking. No sane private entity would go there
| without government supports since none of significant
| development there would make financial feasibility. It's
| where a government is supposed to intervene.
|
| The current governor (who was a prosecutor like Yoon anyway)
| seems to consider this as a really good chance to put their
| political opponents into jail and they need to access
| confidential information to make the case. The default is a
| necessary part for the grand scheme and he probably was
| willing to make that sacrifice. He was just not competent
| enough to understand its implication.
| wins32767 wrote:
| I'm not sure how you see that a small piece of bad debt is the
| heart of the problem versus a government repudiating a loan
| guarantee during increasingly severe global contraction thus
| destroying the market for more risky (e.g. corporate) debt.
| prottog wrote:
| > Housing speculators and NIMBYs are going to kill capitalism.
|
| No arguments with the sentiment, but keep in mind that South
| Korea is roughly the size of Indiana (the 12th-smallest state)
| and over two-thirds of what land they have is mountainous,
| populated by over 50 million people. It's hard not to have
| relatively expensive housing in that country, just based on the
| sheer lack of availability of land.
|
| Of course, it doesn't help that half the country lives in the
| Seoul Capital Area.
| vkou wrote:
| > Imagine the turmoil if a newly elected president of the United
| States announced that the U.S. government would no longer honor
| any outstanding Treasury bills because most of them were issued
| under his profligate predecessor.
|
| Actually, I think the reason that the Gangwon government is not
| going to honor outstanding debts, here, is because the value of
| the collateral[1] has fallen below the outstanding cost of the
| debt. In such a situation, any rational economic actor would at
| least contemplate defaulting.
|
| [1] In this case, the collateral was land (which has plummeted in
| value, and the creditors are welcome to), and his government
| assurances (to which Kim Jin-tae seems to assign a value of
| ~zero.[2])
|
| [2] Which is the real scandal, and his constituents should be
| looking into hemp and lamp-posts. He, in his stewardship of the
| region burnt down an asset of significant value for a pittance of
| a budget line item. Burning the furniture to stay warm, and all
| that.
| fbdab103 wrote:
| >Gangwon government is not going to honor outstanding debts,
| here, is because the value of the collateral[1] has fallen
| below the outstanding cost of the debt.
|
| Just because a deal goes badly for you, rarely do you get to
| kick over the table and walk away.
| vkou wrote:
| But sometimes you do, which is why lenders get to charge a
| premium, to deal with that kind of risk.
| ender341341 wrote:
| That's a reasonable take for private businesses, and it would
| reflect poorly on that businesses reputation, when the
| government does it the trust is also lost, but there's also
| more consequences the bigger the starting trust was. There's a
| reason even with low interest rates US bonds are popular, if
| they default the rest of your investments are likely SOL too.
|
| The US faced similar issues previously before the federal
| government stepped in and outlawed states defaulting.
| https://en.wikipedia.org/wiki/State_defaults_in_the_United_S...
| Apocryphon wrote:
| When I heard of this story, two fanciful case studies came to
| mind-
|
| The Kingdom of Scotland attempts to build a colony in modern day
| Panama, goes bankrupt, looks to the English for support, leading
| to the creation of modern day Britain as well know it.
|
| https://en.wikipedia.org/wiki/Darien_scheme
|
| The Soviets being scared by Reagan's far out orbital SDI promises
| ("the Star Wars program"), causing them to overspend on defense
| and eventually go bust.
|
| https://en.wikipedia.org/wiki/Strategic_Defense_Initiative
|
| Not saying anything this drastic will necessarily happen to South
| Korea, but it's not the first time in history that a ridiculous
| boondoggle led to problems for an entire nation's finances.
| fbdab103 wrote:
| >...causing them to overspend on defense and eventually go
| bust.
|
| I heard this in school, but it felt like post-Cold war
| propaganda. Is this considered a true rendition of events? By
| all accounts, both sides just kept ramping up spending, it was
| just that Russia's line of credit ended sooner.
| PaulHoule wrote:
| ... the Soviet Union spent a tremendous amount on S-300
| antiaircraft missiles, probably enough to shoot down all the
| planes on Earth because they were afraid of getting bombed.
| This is why they won't run out in the Ukraine war and even
| use them against ground targets.
| [deleted]
| RC_ITR wrote:
| The US just outgrew the USSR and there's no single event that
| caused that. [0 - keep in mind that's a log scale]
|
| It became untenable for a relatively small economy like the
| USSR to compete with the US, and Regan 'turning up the heat'
| may have had some impact, but it was likely negligable.
|
| The Cold War was lost because Soviet-style economic
| management failed vs. US Style economic management.
|
| What _may_ have been a somewhat equal fight in 1950 was a
| joke by 1988.
|
| [0] https://cepr.org/sites/default/files/styles/flexible_wysi
| wyg...
| p_l wrote:
| Similarly, I've heard opinions attributed to Gorbachev that
| the thing that really broke the system was costs of Chornobyl
| cleanup.
|
| Another thing usually missed in the "West" is that Soviet
| Union pretty much never stopped being in crash
| industrialization mode due to how poor its starting position
| was.
| Apocryphon wrote:
| I don't think Star Wars by itself caused the Soviets to
| defense spend themselves into oblivion, but it was probably a
| high-profile example of Reagan saber-rattling that pushed
| them towards that direction.
|
| It's one of those history is fantastical examples where an
| odd factoid is part of a greater trend. Like how American
| entry into World War I is partially because of the Zimmerman
| Telegram- the publicizing of German diplomatic efforts to
| entice Mexico into an _invasion of the United States_.
|
| Wonder if Legoland Korea will end up as one of those
| factoids.
| datavirtue wrote:
| Seems to have very little to do with theme parks.
|
| Goofy American: Why don't they just print more money?
| jaywalk wrote:
| According to the article, they did end up printing more money.
| halpmeh wrote:
| Wow, this was so interesting. I always feel two steps behind when
| I read news like this? Does anyone who works in the finance
| sector have tips for staying up with the news? Like how do you
| find out that a random local government in South Korea has
| defaulted on its debt, how do you understand the significance of
| the event (as I'm sure many defaults happen every day), and how
| do you track the effects of these events?
| xwdv wrote:
| Stocktwits
| throwaway743 wrote:
| Oh man... going to any one thread there... you can smell the
| marlboro reds and desperation through your screen
| djbusby wrote:
| Bloomberg Terminal has a firehose of news, especially news
| about money things.
| prox wrote:
| But that's pretty pricey right?
| djbusby wrote:
| No, not when the cost helps you make/save money.
|
| Like, would you pay $2500/mo to help you make $25000/mo?
|
| "Pricey" is subjective; and is only one number. You need
| another number to get the Ratio. Then we can see if Price >
| Gains; making $THING is expensive.
| prox wrote:
| Yeah, badly worded, sorry. A significant investment for
| some is probably more apt.
| PhasmaFelis wrote:
| > No, not when the cost helps you make/save money.
|
| I'm sure, but you recommended it to someone who just
| wanted to be more informed about financial news. For that
| person, it _is_ extremely pricey.
| ravenstine wrote:
| That can be said of many things. In the context of
| average joe HNer, that's pretty frickin' expensive.
| suresk wrote:
| Context is important - for a random person wanting to
| keep up better on financial stuff, $2500/month is
| extremely pricey.
| bobthepanda wrote:
| And they charge good money for it too.
| lvl102 wrote:
| Twitter beats BBG nowadays. And it's FREE!
|
| Elon, you listening bro?
| suresk wrote:
| I guess, why do you want to stay up to date on all sorts of
| stuff like this? It is more than any single human could
| reasonably process, even if they did it 24x7. Even people
| working in finance are going to be focused on fairly small
| areas defined by geography, industry, product type, etc..
| halpmeh wrote:
| I would like to stay up-to-date on this stuff because I find
| it interesting. I don't want to consume every single piece of
| financial news possible, but I'd like to get better at
| identifying important trends happening in the market before
| they hit the mainstream news.
| anm89 wrote:
| For in depth china news I recommend:
| https://www.youtube.com/@ChinaUpdate
| bombcar wrote:
| The reality is that it's almost always not 'that' significant -
| if it is, you eventually hear about it.
|
| Your best bet is to find things like HN or commentators you
| like; remember, most of this is _entertainment_ for _you_
| unless you 're actively involved.
| FredPret wrote:
| The human economy is a complex animal. There is no simple way
| to understand it all
| toomuchtodo wrote:
| Attempting to can be an enjoyable experience though.
| tqi wrote:
| > But the fallout is not limited to local government bonds; it
| impacts the whole of South Korea's bond market, worth more than
| $2 trillion. Corporate bonds are considered less safe than local
| government bonds. If few buyers are brave enough to buy local
| government bonds under these conditions, even fewer buyers can
| muster enough courage to buy corporate bonds.
|
| Can someone explain this part? While the knock-on effect on other
| municipal bonds makes sense, I would have expected this to make
| corporate bonds more attractive since the demand would have
| shifted?
| legitster wrote:
| If you are buying government bonds, it means you are really
| risk averse. Cash is probably a better option to you.
| snikeris wrote:
| Not necessarily. Some people buy 30 year treasuries
| specifically because they are more volatile than shorter
| duration bonds.
| rsj_hn wrote:
| I upvoted this story because it was interesting and fun to read,
| but there are a few problems with the article.
|
| 1. The author makes it seem like South Korea's credit problems
| are due to LegoLand announcement, rather than the global crisis
| of high inflation forcing governments to raise interest rates,
| causing projects to go bust all over. It's not clear how much of
| this was caused by Legoland and how much Legoland is just an
| example of bond market troubles after an unprecedented period of
| low rates that created unrealistic investor expectations of risk,
| and the subsequent repricing when rates start to go up. E.g.
| municipal debt should never be priced the same as federal
| government debt, because the Federal government is a currency
| issuer with a central bank, whereas the municipal government is a
| currency user, and there is nothing wrong with a project backed
| by a local government from declaring bankruptcy -- investors
| should not price that at zero risk.
|
| 2. The author (who is a lawyer, not an economist) believes that a
| reduction of new housing causes real estate values to fall,
| rather than increase.
|
| 3. The belief that high interest rates are designed to reduce
| "liquidity" and that therefore emergency liquidity measures
| somehow contradict a policy of rate hikes.
|
| Here I will rant a bit. Use of "liquidity" in financial
| journalism is usually a red flag as most reporters don't
| understand it. They think it means "money". They view the market
| as a big bag in which the government dumps money when it lowers
| rates, or removes money from the bag when rates go up.
|
| You see similar reporting on the stock market, which they also
| view as a big bag in which investors pour money in or remove
| money out -- forgetting that in a stock exchange, for every buyer
| there is a seller.
|
| Bottom line, money going into or out of a bag is generally the
| only mental model available in financial journalism. There are
| exceptions, but you see it everywhere and it drives me crazy.
| This is why the author believes it's a contradiction and irony
| that the South Korean government would announce emergency lending
| facilities even as it raises rates.
|
| But what liquidity refers to is how quickly/efficiently can you
| convert something into cash. For example, a liquidity crisis in
| the bond market means that you can't use the bond as collateral
| for cash loans. Bonds becoming discounted more is not a reduction
| in liquidity, it just means the bonds are worth less because
| interest rates are higher. But as long as you can use them for
| collateral according to their expected value, then the bond
| market remains "liquid" regardless of the interest rate.
|
| When liquidity is threatened, the central bank steps in and says
| "We will accept these bonds as collateral for cash loans". Note
| that the central bank is still applying the policy discount rate,
| which may be high. In this article, several large banks banded
| together to make this announcement as well - that they would
| accept bonds as collateral for loans. Such a step has nothing to
| do with rate hikes, and does not undermine the rate hike program,
| it only undermines the bag-of-liquidity metaphor.
|
| No government raises interest rates to reduce liquidity or lowers
| rates to increase liquidity, rate hikes are done to manage
| inflation and/or foreign exchange rates, whereas the tools to
| manage liquidity are discount windows, swap lines, and emergency
| lending facilities. They are separate tools with separate
| macroeconomic targets.
| somedude895 wrote:
| > It's not clear how much of this was caused by Legoland and
| how much Legoland is just an example of bond market troubles
|
| This is actually a good point that I wasn't considering.
| Reading the article again I can't find the author making any
| substantial link between the Legoland incident and the broader
| effects. Seems likelier to be correlation than causation.
| summerlight wrote:
| > It's not clear how much of this was caused by Legoland and
| how much Legoland is just an example of bond market troubles
|
| It is pretty clear. Almost every single report on the bond
| market attributes this incident as a direct cause of the
| turmoil. Sentiments drive the market and this is a signal
| strong enough to spread FUD among the market. If you cannot
| trust government-issued bonds, then what else you can trust?
|
| Of course, this is not the sole reason. Your question is more
| of a counterfactual reasoning, like "would it happen if the
| market is in a better situation". It might be better, but you
| are not supposed to throw embers when oil's leaking.
| MichaelZuo wrote:
| Thought this was an Onion article at first... still difficult to
| believe that the South Koreans would let their economy get so
| close to the edge like that.
|
| EDIT: Especially since "To prevent the credit market from seizing
| up completely, the South Korean government stepped in by
| providing a liquidity facility of more than 50 trillion won
| (about $35 billion). The Bank of Korea also injected 42.5
| trillion won (about $31 billion) to stabilize the short-term bond
| market, and South Korea's five largest banks also pledged to
| provide up to 95 trillion won (about $67 billion) in liquidity."
|
| Wouldn't it have been easier to retract the policy of the local
| government, sack the local leaders, etc., to rollback the loss of
| trust?
|
| Especially since S.K. is a unitary country and not federated so
| local governments have no sovereignty.
| downrightmike wrote:
| They should, the bad bankers getting punished helped Iceland
| bounce back quickly. But the SK Chaebols are really the
| problem. They have a house of cards built on centralized
| ownership through leveraged buyouts and collusion. If they
| don't take the Chaebols down and punish them too, the bankers
| will just keep going on doing what they. The government keeps
| pardoning the Chaebol leaders who run into the same problems
| regardless of their leader, father and son both have the same
| issues because it is systematic.
| wellareyousure wrote:
| somedude895 wrote:
| > Wouldn't it have been easier to retract the policy of the
| local government, sack the local leaders, etc., to rollback the
| loss of trust?
|
| That's what I thought too. Central government coming in to make
| it clear that local governments have to honor their word
| without exception.
| bobthepanda wrote:
| That rolls back the lack of trust in that specific project but
| does not prevent contagion ("who's next? Who else was doing
| this?")
|
| Moves like this are supposed to be reassuring to the broader
| market. Punishment is something done after an error but does
| not guarantee that someone else also didn't do this, and
| punishment doesn't go back in time and undo actions.
|
| If you are not decisive enough the markets can quickly spiral
| into contagion, however rational that may be. (See: the
| prolonged cascading during the Euro crisis)
| MichaelZuo wrote:
| It probably wouldn't restore things back 100% to where they
| were before. But it probably would have restored a large
| amount of trust.
| bobthepanda wrote:
| Nothing magically restores total trust, but the important
| thing is that the ball needs to keep rolling, even if a bit
| slower.
| NotYourLawyer wrote:
| I dunno, I think that'd be a pretty good signal to the market
| that these kind of shenanigans aren't gonna fly and won't
| keep happening.
| bobthepanda wrote:
| The important thing to signal is not that, but that's
| necessary to do later.
|
| The important thing to signal is that investments are safe,
| even if other investments might fall prey to the same
| issue. Doing just the former means that everyone is
| suspicious of everything they currently hold, and will be
| too spooked to invest even in new perfectly good ones until
| they get clarity on everything, causing the market to seize
| up.
|
| Justice and auditing takes time, but the need to refinance
| bonds is pretty much constant.
| summerlight wrote:
| No, it's actually pretty dry compared to the real thing
| happened in the bond market. What it means is that no bond
| could be fully trusted in South Korea in the long term.
| Whenever political power shifted, some crazy politician can
| decide to default it and there's no system to stop them from
| doing such stuff. If you cannot trust government-issued bonds,
| you don't have the economical foundation at all.
|
| > Wouldn't it have been easier to retract the policy of the
| local government, sack the local leaders, etc., to rollback the
| loss of trust?
|
| That would help the situation, but the only solution here would
| be the systematic guarantee to punish such politicians but we
| don't have any hope for a foreseeable future since the governor
| is from the ruling party and was a prosecutor. South Korean
| prosecutors are the worst for this job, they're corrupted to
| the root _and_ is a highly political entity but without being
| elected. I don 't see any possibility of prosecuting the
| governor for abuse of power.
| MichaelZuo wrote:
| Thanks for responding, I edited my comment afterwards as I
| did some digging and it does seem to have seriously damaged
| mutual trust in SK. Not exaggerated at all by FP, my first
| impression was incorrect.
| bobthepanda wrote:
| An important thing to keep in mind is that despite South
| Korea's wealth, the sharp rise in its economy and
| relatively recent regime change means that its institutions
| are not battle-tested. This causes its markets to behave
| more similarly to developing markets, because the
| institutional trust is not there.
|
| It also does not help that historically it was one of the
| worse managed Asian Tiger economies. During the 1998 crisis
| it was the only East Asian economy to need an IMF bailout,
| and it has a very well publicized revolving door of pardons
| for chaebol CEOs convicted of things like bribery and
| fraud.
| yongjik wrote:
| > the only solution here would be the systematic guarantee to
| punish such politicians ...
|
| Yeah I don't think it would work, even in principle. Being an
| idiot is not a crime, and you can't prosecute politicians for
| being grossly incompetent, unless they break the law.
| Besides, as you already pointed out, any such system would be
| abused by politicians and their supporters to "get back at"
| their opponents. I'm pretty sure many who voted for Yoon
| specifically did it to watch his predecessor Moon going to
| prison. (I guess they will have to keep waiting - you can
| like or hate Moon, but nobody made a convincing case of
| corruption.)
| avianlyric wrote:
| > Yeah I don't think it would work, even in principle.
| Being an idiot is not a crime, and you can't prosecute
| politicians for being grossly incompetent, unless they
| break the law.
|
| Depends what you're doing. Here in the UK, it is a crime to
| be an idiot if you're a member of senior management in bank
| (there 10 or so "prescribed roles" that can only be held by
| a single individual at a time that are considered senior
| management).
|
| Laws exists because wilful ignorance and deliberate idiocy
| was a large component of why no banker went to jail after
| 2008.
| r00fus wrote:
| > Being an idiot is not a crime
|
| Criminal negligence is a thing [0]. It's just not applied
| to politicians yet (probably because they write the laws).
|
| [0] https://en.wikipedia.org/wiki/Criminal_negligence
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