Golden Spoon Investment Portfolio - Chapter 330

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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330. I’m truly… convinced it will happen exactly as I’ve said.

“Did I say not to sell dollars?”

Park Tae-hong looked at me with a puzzled expression, and I nodded in response.

“No, sir. I’m not saying to spend them. If you have surplus funds right now, this is the time to convert as much as possible into dollars.”

Park Jin-hyung, seated across from us, furrowed his brow and interjected into the conversation.

“The exchange rate was around 826 won per dollar until last year, and now it’s climbed to 897 won—it’s become incredibly expensive. You’re saying we should convert even more at this price?”
“Yes. With only a 71-won increase, now is the last opportunity to accumulate dollars while it’s still cheap.”
“897 won is cheap?”

Park Jin-hyung deepened the furrow on his brow, clearly unconvinced.
Park Tae-hong, with a cigarette between his lips, urged me forward with his eyes for an explanation.

“You’re aware that a currency crisis is spreading among Southeast Asian nations, starting with Thailand.”
“Are you saying Korea will face the same currency crisis as those countries, just as you mentioned before?”

Park Tae-hong asked with a grave expression.

“Yes. The timing may differ, but Korea cannot escape an attack by currency speculators.”

I spoke without hesitation, my voice firm with conviction.
As I drove home the certainty that a currency crisis would inevitably strike, both men couldn’t hide their bewilderment.
Their instinctive reaction was disbelief, but given Seok-won’s remarkable insights thus far, they couldn’t simply dismiss his words.

“The situation is certainly difficult with the defaults of Hanwha Group and Samoh Group, but a currency crisis? That seems like a stretch.”

Park Tae-hong’s expression mirrored his eldest son’s sentiment.
Though Seok-won had warned of a currency crisis before, he had assumed it was merely to instill vigilance.

“Why do you think Korea is a safe haven when Southeast Asian nations are falling like dominoes? That’s what I don’t understand.”
“That’s because, unlike Thailand or the Philippines, Korea is a nation that has achieved successful economic growth—so much so that it’s called one of Asia’s Four Dragons. That’s why we confidently joined the OECD not long ago.”

Seok-won shook his head and spoke.

“Joining the OECD doesn’t automatically make a country developed.”
“….”
“It’s more accurate to say we’ve simply stepped across the threshold into the developed world, leaving behind the status of a developing nation that had enjoyed various privileges in exports and other sectors.”

Seok-won shrugged his shoulders and adopted a cynical demeanor.

“In fact, those export privileges we enjoyed have now vanished, especially during this economic downturn. OECD membership should be viewed not as good news, but as a headwind.”

Seok-won continued his explanation while observing the two men listening intently.

“When the prolonged boom of the three lows—low interest rates, low oil prices, and low exchange rates—ended, exports declined, economic growth slowed, and current account deficits ballooned. The excessive investments made during the boom years came back as a boomerang. This is precisely what drove Thailand into its foreign exchange crisis.”

Seok-won glanced at Park Tae-hong with a slight raise of his eyebrows, watching as the chairman held a cigarette between his fingers while crossing his arms.

“Doesn’t that sound like a familiar story?”

Park Tae-hong exhaled a low murmur in response.

“It’s similar to Korea’s situation.”
“While Hanwha Group had problems from excessive debt-fueled management even before, you know well that it collapsed because the steel mill built in Dangjin failed to operate properly—they ignored the downturn in the steel industry and borrowed heavily to construct it.”
“….”
“Is Hanwha Group the only one suffering from such overinvestment? I don’t believe so.”

In an era when recklessly expanding business through borrowed capital was considered standard practice, it was actually harder to find companies that didn’t engage in debt-fueled management.

‘If even the least indebted among the top ten conglomerates has a debt ratio exceeding 300 percent, that says everything about the situation.’

Not just the top ten conglomerates, but virtually every major company had construction, electronics, and trading subsidiaries, touching every profitable venture. This revealed just how severe the overinvestment and duplicate investments had become.
This phenomenon had even spawned a term—octopus-like management.

“When the economy booms and liquidity overflows, there’s no problem. But if credit suddenly dries up like now, that excessive debt becomes poison, tightening the noose around the group’s neck.”

Park Tae-hong exhaled white cigarette smoke and nodded.

“You’re right. Everyone at the Federation of Korean Industries meetings these days does nothing but complain about their debt problems.”
“Companies that secured funding through domestic banks are in relatively better shape, but those tempted by low interest rates and took foreign currency loans now face higher interest rates and exchange losses on top of everything else. Their situation is far more dire.”

Park Jin-hyung seemed to nod in agreement, as if he’d heard similar concerns from various sources.

“With the exchange rate fluctuation, the principal and interest jumped over 8% right before our eyes. I’d be bewildered too.”
“As I mentioned earlier, it’s only risen 8%.”

Seok-won glanced at Park Jin-hyung and corrected him.

“If the government and the Bank of Korea hadn’t intervened, the exchange rate would have surged far more dramatically. The fact that our foreign exchange reserves have plummeted to barely 20 billion dollars is proof of that.”

Park Tae-hong spoke with an expression of disbelief.

“Your concerns are certainly valid, but the government has accelerated the opening of the capital markets to attract foreign investment, and they’re saying the trade deficit will narrow this month. Wouldn’t that improve conditions somewhat?”

Seok-won responded firmly.

“No. It will actually make things worse.”
“?”
“If the foreign capital flowing in now were legitimate money, then what you’re saying could improve the situation. But unfortunately, most of it is hot money chasing short-term gains, and that’s the problem.”

Seok-won spoke with added emphasis, elaborating further.

“If there are any signs that domestic conditions are deteriorating, these investors will be the first to pull their money out of Korea to avoid exchange losses. When that happens, they’ll drain our already depleted foreign exchange reserves significantly, becoming the trigger that deepens the crisis.”

Imagining foreign capital flooding out of Korea all at once like a receding tide, Park Tae-hong involuntarily let out a low whistle.
Park Jin-hyung also realized the gravity of the situation and his expression hardened.
Seok-won spoke to the two men in a somewhat subdued voice.

“Before coming here, I heard that commercial banks, including the Industrial Bank, are urgently recalling the foreign currency funds they lent to finance companies.”

Park Tae-hong furrowed his brow and leaned forward, asking.

“The banks are calling in dollars?”
“Yes. With interest rates rising due to the defaults of Hanwha Group and Samoh Group, foreign currency borrowing costs have become expensive, and the exchange rate surge has added to the burden. Though late, the banks are finally implementing risk management.”
“Hmm.”
“Finance companies short on dollars are struggling day by day, forced to secure overnight foreign currency call funds from banks to settle their foreign currency payments.”

Park Jin-hyung then asked in surprise.

“Not just anywhere—a Finance Company barely surviving on overnight short-term funding. Is that really true?”
“Yes. Even that’s not enough, so I heard they’re urgently liquidating their assets to cover the rapidly mounting dollar interest expenses. They’ve suffered massive exchange losses from the rising won-to-dollar rate, and they’re taking double losses in the process of disposing of their holdings.”

Park Tae-hong tapped his cigarette into a crystal ashtray, the filter nearly burned down, and muttered to himself.

“They’re propping up the top stone by removing the bottom one.”

Seok-won turned his upper body slightly toward Park Tae-hong, his gaze serious and intent.

“In this state, they won’t be able to hold out for long.”
“That’s true.”

Park Tae-hong nodded in agreement.

“With the situation like this, there’s no way the currency speculators wreaking havoc across Thailand and Southeast Asia will leave Korea untouched. It’s only a matter of when, not if—they’ll definitely bare their greedy fangs.”
“Is that why you’re telling me to hold onto dollars?”
“Yes. When that time comes, dollars will become more precious than anything else.”

Park Tae-hong fell silent for a long moment, weighing the matter carefully, before finally reaching a decision and speaking again.

“You’re right. Holding onto dollars seems better than saving a few pennies in interest right now.”
“You’ve made a wise decision.”

Seok-won’s expression softened with quiet relief at the answer he’d hoped for.
Then, as a thought suddenly occurred to him, Park Tae-hong posed an unexpected question.

“How high do you think the exchange rate will go?”

Park Jin-hyung, his eldest son, also turned his gaze toward Seok-won with evident curiosity.
Seok-won paused briefly before answering.

“It could potentially reach as high as 2,000 won per dollar.”
“…!”

Park Tae-hong’s eyes widened in shock at the unexpected answer, and he pressed further.

“Did you say 2,000 won?”
“Yes.”

Unlike Seok-won, who nodded calmly, the two men gasped and dropped their jaws in shock.
When the won-to-dollar rate at 897 per dollar was already causing an uproar, hearing that the exchange rate would more than double from current levels was understandable.

“Two thousand won? For the exchange rate to spike that high, the nation would need to be on the brink of default—isn’t that estimate too extreme?”

Park Jin-hyung spoke as though such a thing were impossible, but Seok-won’s expression had turned grave, all traces of humor vanishing as he replied seriously.

“If our foreign exchange reserves are completely depleted and we’re flooded with demands to repay foreign debt but have no dollars left to pay, the only option would be to declare a moratorium. That would be no different from defaulting, wouldn’t it?”

A moratorium referred to the temporary suspension of all debt repayments when a nation found itself unable to pay interest or principal on its foreign debt.
When such a shocking word came from Seok-won’s lips, Park Jin-hyung’s entire body went rigid.
Park Tae-hong also widened his eyes and asked.

“You really believe it could go that far?”

Seok-won observed the two men’s startled reactions and spoke calmly.

“Based on last year’s figures, our country’s total foreign debt stands at 104.5 billion dollars. More than half of that is short-term debt that must be repaid within a year.”

Park Tae-hong swallowed hard without realizing it, and Seok-won glanced at him sideways.

“Our foreign exchange reserves are barely over 20 billion dollars. If debt rollovers aren’t possible and we’re demanded to repay everything, then in the worst case, as I mentioned before, we could face a paradoxical default despite having a trade surplus.”

Park Tae-hong realized that what Seok-won had been consistently saying all this time pointed to exactly this, and his expression filled with alarm.

“You’re truly convinced this will happen.”

Seok-won met Park Tae-hong’s gaze directly without flinching, his voice tinged with bitterness.

“We’ve already passed the point of no return. Stopping here will be difficult. All we can do now is minimize the damage and strive to survive the storm that’s about to break.”

At Seok-won’s unusually grave demeanor, Park Tae-hong furrowed his brow, his expression growing contemplative.
Park Jin-hyung’s eyes had also turned serious and somber, for Seok-won’s words had been that shocking.
Moreover, unlike before, Thailand and other Southeast Asian nations were now actually facing a foreign exchange crisis and enduring severe hardship, so what had once been a warning now felt like an imminent reality bearing down upon them.

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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