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Korea's top economic expert
Easy-to-understand economic stories from reporter Lee Jin-woo

“If you know the economy, you can see what you didn’t see before.
“You can see the flow of the world at a glance!”

It's full of useful economic knowledge that you can use for the rest of your life once you learn it!

What's the economic knowledge that separates the rich from the poor? The methods of accumulating money and the methods of growing it are completely different.
We need to understand why the world has become more about being called than saving, and understand the contradictory meaning of the statement that while saving is essential for becoming rich, saving alone cannot make you rich.
To do so, we need to understand the 21st century's finance-centric economy, which is completely different from the 19th century economy and therefore cannot be learned from high school economics textbooks that are written based on past theories.
The rich know quite a bit, but the poor may not know until they die.
This book took a long time to select the topics that best fit that question.
Let's take a look at an economic story that may be awkward and a bit unfamiliar, but is closer to the truth.

If you open the table of contents of a high school economics textbook, you will find the following contents.
Production and consumption, characteristics of a market economy, supply and demand and prices, the three elements of the national economy, the necessity and principles of trade, and South Korea in the world.
Perhaps that could be the case, since the educational goal of high school economics textbooks is to foster ‘responsible democratic citizens.’
But I also wonder if the goal of our lives as adults isn't just to be responsible democratic citizens.
Let's face our desires more honestly.
We want to make money, have a nice house and a nice car.
I want to be successful in stock investing, but I don't want to live a poor and difficult life.
I want to earn more money than others by working less hours, and I also want to avoid suddenly losing a lot of money and becoming poor one day.
In fact, it seems that only after things have become like this will we be able to fulfill our responsibilities as democratic citizens.
So what can we learn to do this?
--- pp.10-11, from "Prologue"

This is why banks are the 'money faucets'.
This is because as customers use banks and take out loans, their money continues to grow.
Now, when we hear the news that household bank loans increased by 5 trillion won last month, instead of thinking, "Household debt is increasing, so this is a big problem," we should think, "Oh, that means 5 trillion won more money has been released into the market."
We need to change our thinking to avoid the common misconception that "household debt continues to increase, so something big will happen soon, and people will be unable to buy houses due to the burden of debt, so house prices will fall."
If household debt continues to increase, it may become a burden in the long term, but in the short term, the increased amount of money released into the market will actually have a positive effect on housing prices.
--- p.23, from “PART 1 The Nature of Money: It Continues to Increase, and Must Increase”

The example of bond prices rising as market interest rates fall, as explained above, can be summarized as the fact that market interest rates and bond prices are inversely proportional.
Hearing this, you might wonder, 'Why are interest rates rising but bond prices falling?'
"Bonds are interest-bearing financial instruments, so doesn't rising interest rates mean the bonds are paying more? But why are bond prices falling? They should be rising instead." Many people think this way.
However, what we must not forget during this process is that the interest rate of a bond is already set when it is born, so no matter how much the market interest rate changes in the meantime, the interest rate written on the bond does not change.
When interest rates rise, it simply means that market interest rates are rising, not that the interest rate written on the bond is rising or falling.
Bonds are already set in stone at birth and remain unchanged until death.
--- p.105, from “PART 3 Exchange Rates, Interest Rates, and Bonds: The Fluctuating World of Money”

We say we deposited money in a bank, but from the bank's perspective, it is money that must be returned later, so in reality, the entire deposit is a liability.
If banks don't take on debt, the banking system won't function.
When someone borrows money from a bank, that money becomes that person's debt.
But if there were no such debt, no one would have any reason to deposit money, and the amount of money in circulation would always remain constant.
Because when someone borrows money from a bank, that amount of money is added to the market.
If you think about it, all the money that exists on Earth today was created based on someone's debt.
Currency, also known as cash, is a debt owed to the people by the central bank that issued the currency.
It's not like that now, but in the past, if you went to the bank with cash and asked to exchange it for gold, they would give it to you.
The essence of the currency called 10,000 won is a certificate that promises, "If you bring this certificate to the central bank at any time, I will give you gold or something similar worth 10,000 won." From the central bank's perspective, it is a debt that can be demanded for repayment at any time.
After the gold standard ends, we guarantee that you will be able to pay your taxes with this certificate at any time.
The value of this instrument is eternal as long as the system of mandatory tax payment is maintained,' the collateral for the debt has only changed slightly.
--- p.177, from "PART 5 Debt: The Engine of the Modern Economic System"

But as we do this, we are now running out of money.
Living expenses are running low, but you can't afford to not buy gasoline or go grocery shopping, so you're in a situation where you can't pay off your loan interest.
And this wasn't just happening in small towns.
As gasoline prices rose across the United States, similar events occurred simultaneously across the country.
And finally, what I was afraid of happened.
Across the United States, millions of people simultaneously defaulted on their subprime mortgage loans.
With this massive delinquency situation unfolding, the emergency lights have been turned on.
Problems began to arise with the derivatives sold while thinking, "Surely millions of people wouldn't be able to pay their interest at the same time?"
Because no one knew who had invested in these derivatives, people began to suspect each other, and because they were suspicious of each other, no one lent money.
In an instant, credit was paralyzed, and with the realization that even the most robust companies could go bankrupt in this situation, people became suspicious of banks and rushed to withdraw their cash.
This is the '2008 subprime mortgage crisis', an event that caused chaos around the world.
--- p.233, from “PART 6 Financial Crisis: What is a Crisis and What Should We Watch for?”

The reason we struggle and struggle when faced with the act of choice is because we are compelled to choose the better of the two.
But the 'essence' of the game of choice is not about picking the better one.
In an environment full of uncertainty, how can we always pick out the good?
Even if a better one is chosen in the end, it is just a result of luck.
The 'essence' of the game of choice we play is not making the best choice, but working afterwards to make the outcome of that choice the best outcome for me.
So, when we make a choice, what we should do is not pray that this choice will be the right one, but rather check to see if there are any considerations we may have missed when making the choice.
If there is no such thing, the way to play the game of choice well is to choose calmly and accept the results calmly.
--- p.313, from “PART 8 The Essence of Games and the Paradox of Choice: For a Wiser Life”

Just as the Creator cried out “Let there be light” when creating the world, the economic system of modern society began one day with a sudden cry, “Let there be debt.”
The reason why the economic development that humanity has been unable to achieve for thousands of years has been so dazzling in the last few hundred years is because it has become possible to borrow money from the market, or even if there is no money in the market, to borrow money from a bank when I need it.
Just as coffee is neither a medicine nor a poison, neither is debt.
The difference is that the world would run just fine without coffee, but not without debt.
The moment the debt disappears, the world ends.

--- p.323, from "Epilogue"