September 15, 1997.
It was the Chuseok holiday, so Seok-won was staying home. With an ice-filled glass of whiskey in one hand, he stood in front of the large living room window, gazing at the night view while talking on the phone with Landon in New York.
[Did you see the headline about Korea in today's Bloomberg report?]
"You mean the one that said, Leave Seoul immediately?"
[So you did see it.]
"It claimed that non-performing loans have surged over the past three months, now accounting for 30% of Korea's GDP, and that commercial banks are in crisis."
[Not just Bloomberg, but also the International Herald Tribune and The Wall Street Journal have published similar articles, suggesting that Korea could soon face a much more severe currency crisis than the Southeast Asian countries.]
Seok-won furrowed his brows slightly as he replied.
"The government sent protest letters to American media outlets, claiming the reports were false. But seeing how those stories keep coming out, it seems the protests didn't work."
[Even if they stop writing about it now, the damage is already done.]
At Landon's words, Seok-won gave a bitter smile.
"True. Once you pour oil on a burning house, there's no undoing it. It's impossible to bring back the foreign capital that's now stampeding out of Korea."
Indeed, as foreign investors pulled out like a receding tide, both the stock market and currency exchange rates collapsed, pushing the government into an even tighter corner as it fought off speculative attacks.
When Korea opened its financial markets, the influx of foreign "hot money" helped drive stock prices up—but now, in the face of crisis, that money had turned into a deadly poison.
[On Wall Street, there are rumors that the Korean government may ask Japan for help to overcome the crisis.]
"Considering that Japan has the second-largest dollar reserves after the U.S., and is heavily intertwined with Korea economically and politically, it's entirely possible."
[If Japan steps in, Korea might be able to withstand the hedge fund attacks like Hong Kong did, don't you think?]
Seok-won rejected the idea without hesitation.
"Japan will never help Korea."
[What...?]
Landon, slightly flustered by Seok-won's firm tone, responded with a hint of pushback.
[I'm well aware of the historically strained relationship between Korea and Japan. But still, Japan wouldn't just sit back and watch, would they? They must know that if they ignore this crisis, the currency speculators might come after them next.]
"You're right—while it might be difficult for speculators to drive Japan into a full-blown currency crisis like they did with Korea and other Asian countries, they could still exploit Japan's weakened economy, stock market crashes, and stir up volatility in the yen."
Japan had invested the most in the Southeast Asian countries that were now ravaged by the currency crisis, making it impossible to avoid collateral damage.
As the economies of Thailand and Indonesia crumbled, Japanese companies that had been exporting to these countries saw their earnings plummet.
The financial sector, which had followed those companies into Southeast Asia with heavy investments, got entangled in the crisis and suffered enormous losses.
"In a way," Seok-won thought, "you could say that Japan, along with the rest of Asia, got fleeced again after the Plaza Accord."
Before he understood the full picture, Seok-won had even assumed that the sudden pullout of hot money and Japanese capital was a deliberate attempt to push Korea over the edge.
"Of course, the mass withdrawal of Japanese capital did negatively affect the won's exchange rate."
But the truth was that Japan hadn't intentionally pushed Korea into crisis. They were simply too preoccupied trying to handle their own problems to worry about anyone else.
In fact, just looking at how much the Nikkei Index had plunged since the beginning of the year made it clear how bad things were in Japan.
Perhaps, reeling from the bursting of the bubble, then being hit by the Kobe earthquake and the Asian financial crisis like back-to-back punches, Japan had fallen into what would later be called its "Lost 30 Years."
[But wouldn't Japan help Korea to prevent that from happening to themselves?]
Seok-won paused his thoughts and calmly explained why he didn't think so.
"When the financial crisis first broke out in Southeast Asia, Japan tried to step in directly to protect its investments. Landon, I'm sure you remember that."
[Of course.]
"But the U.S. didn't like Japan expanding its influence in the region and pressured Tokyo to stay out and let the IMF handle the aid."
Landon let out a low sigh.
[So you're saying the same would apply to Korea.]
"Exactly. And unlike back then, Japan now doesn't even have the capacity to get involved, even if they wanted to."
[With the Nikkei crashing and the Japanese prosecutors investigating corruption between the Ministry of Finance and banks, they really don't have the mental bandwidth for anything else.]
"That's what I'm saying."
Seok-won nodded as if to say exactly.
[Speaking of which, I'm sure you've heard that Yamaichi Securities tried to hide the massive losses they suffered from their CDS option contract with us, and during the prosecution's investigation, more accounting fraud was uncovered.]
"Of course. That's what caused the investigation into the entire financial sector to expand."
[Exactly. Because of that, Yamaichi Securities and other Japanese brokerage stocks plummeted, which in turn dragged down the Nikkei.]
Eldorado Fund, which had placed short bets on the Nikkei, was now reaping significant profits thanks to the sharp drop in Japan's stock market.
[And now that the KOSPI index has fallen below 500, the third and final option condition has been triggered.]
"So it has."
[There were already rumors that they might go bankrupt, and now another massive loss has been realized. At this rate, Yamaichi might really shut down.]
Seok-won frowned slightly and asked,
"If I recall correctly, out of the $4 billion CDS option contract with Yamaichi, half—$2 billion—was tied to the KOSPI, right?"
[That's correct.]
"Given their current state, are you confident we'll actually get paid?"
[That's why I instructed our Tokyo branch to immediately make a priority claim.]
Still frowning, Seok-won responded firmly.
"If they start dragging their feet or delay the payment, apply to the court right away to seize Yamaichi's real estate holdings."
[You really think Yamaichi might go bankrupt?]
Landon asked in surprise, and Seok-won replied in a subdued voice,
"Even if it's one of the top four securities firms in Japan, if the losses are too massive to handle, collapse is inevitable."
[True. Under normal circumstances, maybe not. But now that it's been revealed they engaged in accounting fraud worth hundreds of billions of yen… as you said, they might not survive.]
"That's why I want precautions taken in advance so we can still recover our funds, even if they default."
[Understood. I'll take care of it as you said.]
Seok-won gently swirled the ice in his glass before taking a sip of whiskey.
"Internal issues aside, the Japanese cabinet might be looking to make Korea the scapegoat—anything to keep the fallout from spreading to Japan."
[Did you say scapegoat?]
Landon asked in confusion.
"Yes. Why do you think the U.S. is blocking Japan from intervening and insisting that the IMF be the one to bail out Asian countries in crisis?"
[Isn't it because they want to use this crisis as an opportunity to modernize Asia's closed financial markets?]
At that, Seok-won shook his head with a cold expression.
"That's just a convenient excuse. The real goal is to force open financial markets and expand Wall Street's influence while strengthening the dollar's hegemony."
[Of course, that kind of agenda is definitely underlying all this.]
"But the U.S. wouldn't want things to spiral so far out of control that a large economy like Korea is pushed to the brink of default, Japan—the world's second-largest economy—is shaken, and the whole situation becomes unmanageable."
[Naturally. They want to extract profit, not wreck the global economy.]
Landon responded casually, but then a thought struck him, and he let out a short exclamation.
[So you're saying they're letting Korea slide into a foreign exchange crisis to create a sense of urgency—so that the U.S. is forced to step in and resolve the situation.]
"Exactly. To get the heavy-footed U.S. to move, and to feed the hedge funds who are already fuming after their losses in Hong Kong, they need a fitting scapegoat—and that's Korea."
[If that's the case, then Japan really has no reason to help Korea.]
Holding his phone to his ear, Seok-won gave a bitter smile.
"Japan might have already run the calculations and reached that conclusion."
[It makes you feel a bit sorry for the Korean officials heading to Japan to ask for help, completely unaware of this.]
"It's the price they pay for letting their guard down and failing to grasp how urgent the external situation is."
Although he felt sympathy on an emotional level, Seok-won's judgment remained cold and rational.
[If they can't get help from Japan—their last hope—they'll have no choice but to turn to the IMF.]
"To avoid the worst-case scenario of defaulting on their debts, that's the only option."
Landon murmured in agreement.
[If they're going to go to the IMF anyway, it would be better to surrender quickly and give up defending the exchange rate. But I don't know if the Korean government can make that kind of decision in time.]
Unless they could actually defend the exchange rate, every dollar spent trying to hold the line would just come back later as a burden on the people.
"I hope they do, but with the presidential election coming up, they probably won't be able to admit defeat until the national coffers are completely drained."
[Announcing they're going to the IMF would be like conceding defeat in the election and handing over power. So it makes sense.]
It was the worst possible timing for the hedge funds to attack.
A brief thought flashed through Seok-won's mind—what if it hadn't been during the election period? What if the Blue House and senior officials had made wiser decisions? But it was a useless thought now—too late to change anything.
"If the Korean government throws in the towel, we'll need to move funds immediately. So make sure we're ready to shift dollars at any time."
[How much are you thinking of using?]
"Even just picking up the good assets will require a considerable sum."
[So the stock-backed loan you arranged earlier was for this purpose.]
"That's right."
[Understood. I'll secure as much extra liquidity as possible to ensure nothing gets in the way.]
"Please do."
After ending the long phone call, Seok-won slipped his mobile phone into his pants pocket and stared out the window with a pensive look on his face.
The beautiful night view before him felt like the final glimmer before it all vanished—ephemeral and fading—and he couldn't help but taste bitterness on his lips.
With a somber expression in his eyes, Seok-won tipped his glass of whiskey and took a slow drink.