Before you start the book, remember that invisible money and interest rates change our destiny!
As the book begins, incentives are the key to unlocking the economy.
Q&A: Six Things Every Interest Rate Beginner Should Know

First, you need to know the basics to read interest rates.
01 Interest rate is the fee for using money.
02 Is the unit of interest rate 'percent' or 'percentage point'?
03 Interest rate, interest rate, yield, and discount rate are all the same thing.
04 Why interest is higher when borrowing money than when depositing it
05 The difference between my money and other people's money
06 Which cost is higher, the cost of debt capital or the cost of equity capital?
07 Anatomy of the Components of Interest Rates
08 Market interest rates are like baby frogs
09 Welfare is my strength!
10 Correlation is long-term interest rate, load is short-term interest rate

Advanced Information from Experts: Liquidity Preference Theory & Future Value/Present Value

Second, what are the different types of interest rates?
01 One-day ultra-short-term interest rate, call rate
02 CD interest rate, which was the standard for housing mortgage loans in the past
03 Mortgage borrowers are crying thanks to CMA!
04 Base rate for newly reported housing mortgage loans, COFIX rate
05 Entrust your company's short-term funds to CP.
06 Another monster we raised, ABCP
07 Deposit and loan interest rates
08 Other various interest rates
09 'CDS Premium': If it's risky, you have to pay more!
10 Interest rates used in insurance
11 The profit structure of insurance companies is fundamentally different from that of banks.

Everything You Need to Know About Bonds from Experts

Third Yard: Reading the Economy with Essential Interest Rate Knowledge
01 When prices rise too much, interest rates must be raised.
02 Three '~rations' that represent the game
03 Is Korea experiencing deflation? Or not?
04 To raise the exchange rate, lower interest rates.
05 Is it better for the exchange rate to rise or fall?
06 The Butterfly Effect in Tokyo: Yen Carry Funds
07 Why do oil prices keep falling?
08 KIKO, the two faces of Janus
09 KIKO, there was one in the past too!
10 How do interest rates affect stock prices?
11 So, how do interest rates affect real estate?
12 LTV·DTI, you saved me.
13 Hey, friend! Should I buy a house or not?
14 Can the rental price be higher than the sale price?

Advanced Information Evaluation Theory of Experts

Fourth Yard: Interest Rates and Various Monetary Policies
01 The Strange Bank of Korea
02 How much money is there? Currency and liquidity indicators
03 The amount of currency that increases as time goes by
04 Let's learn about the Bank of Korea's monetary policy.
05 * Monetary Policy-1 Open Market Operations Policy
06 * Monetary Policy-2 Reserve Policy: The Multiplier Effect of Money Making Money
07 Monetary Policy-3.
Loan Policy (Rediscount Policy)
08 Where did the call rate go, and what about the policy rate?
09 The 'Liquidity Trap': No matter how much you throw money around, it won't circulate.
10 US Interest Rate Hike: The Light and Shadow of Rapid Quantitative Easing
11. Oh my goodness, negative interest rates actually exist!: Japan's going backwards

Fifth Yard Interest Rate and Own Asset Price Mechanism
01 Knowing the relationship between interest rates and asset prices makes money visible.
02 Rosy visions of the future drive up asset prices.
03 Real opportunities come after the bubble bursts.
04 The Light and Shadow of Leveraged Investment
05 Let's take a closer look at the depositor protection system!
06 Financial products for saving money in a low-interest-rate era: ELS, ELD, ELF
07 Interest Rate-Related Financial Products: Bonds and Bond Funds
08 The rich are sensitive to interest rates.
09 Learn, practice, wait, and when the opportunity comes, move.

As I conclude the book, will the world become like Japan?
References

Every economy begins and ends with interest rates.
Now is the time to pay attention to interest rates.

Since the beginning of capitalism, the world has always been designed and operated with growth in mind.
Still, most politicians and bureaucrats around the world are accustomed to making policies based on the premise of growth.
However, currently, economic growth rates, inflation, investment, and interest rates around the world are at historic lows.
The era of growth is over.
We cannot survive in the capitalist era the way we have done things so far.


The author says that to proactively cope with the coming era of low growth, low prices, low investment, and low interest rates, we must understand 'interest rates.'
Interest rates are a representative indicator of our current economic situation.
Prices, stocks, exchange rates, interest rate policies, and interest rates are in a push-and-pull relationship with each other.
It is very useful to know who moves interest rates and how they should be moved to help or hurt the economy.
Moreover, in an economic crisis like the current one, it is more important than anything else to know how interest rate trends affect the economy in order to respond wisely.
If you just sit there and passively follow the market flow, you will inevitably lose money without even realizing it.
This is why you need to pay attention to interest rates.


Laughing at interest rates, crying at interest rates

There are two types of people in our country.
That is, there are those who want house prices to rise and those who want house prices to fall.
People who bought a house with a mortgage loan can only sell it and pay off the debt if the house price goes up.
On the other hand, people who are worried about the ever-increasing rent every two years can only buy a house and live a stable life if the house prices go down.
This is an unavoidable livelihood issue.

The housing price issue, which has such a huge impact on us, is also directly or indirectly connected to ‘interest rates.’
We cry and laugh because of interest rates, and we cannot separate interest rates from our lives.
If you don't understand interest rates, you will be forever left behind in the harsh capitalist society of the 21st century.

Six things you absolutely must know if you're new to interest rates!

Q1.
Why do we need to know interest rates now?
▷ Starting in 2014, jeonse prices began to seriously squeeze the lives of ordinary people.
Why are jeonse prices skyrocketing? Ultimately, it's because persistently low interest rates leave landlords with nowhere to put the jeonse deposits they receive.
As a result, people started to change the jeonse to monthly rent or half-monthly rent, and eventually the jeonse supply decreased and prices rose.
Ultimately, the rise in rent is caused by interest rates.

The whole world is currently struggling with a recession.
And no one can guarantee the future direction or aftereffects.
The expected aftereffects include 'super inflation' due to the massive money injection and ultra-low interest rates, or, if not, falling into a liquidity trap and falling into the abyss of 'deflation' despite the money injection.
Inflation and deflation, even if they are in opposite directions, will bring us great trials and suffering rather than hope.
Therefore, to avoid being caught in this situation, you need to manage your cash flow well.
And at the core of it all is ‘interest rates.’
In other words, if you don't understand interest rates, it's difficult to predict and respond.
This is not just a story about governments or businesses.
This also applies to our common people who are sensitive to rent and tired of loan interest.
Therefore, in order to overcome any crisis that may come in the future, we must understand the characteristics and trends of interest rates.

Q2.
What are the characteristics of interest rates?
▷ Interest rates tend to move in the opposite direction to asset prices.
When interest rates are at their peak, asset prices are at their bottom, and when interest rates are at their bottom, asset prices are at their peak.
To put it more bluntly, are interest rates at their peak now? If so, you should buy a house. If not, you should wait.
Anyone who wants to invest like this must carefully monitor interest rate trends.
This is because interest rates can be used as a yardstick to determine the bottom and top of asset prices.
Moreover, interest rates tend to rise when a liquidity crisis occurs.
Therefore, people preparing to start a business should also carefully monitor interest rate trends.
When interest rates are high, money doesn't circulate well in the market, so it can be difficult to secure funds to start a business.

Q3.
What is the relationship between interest rates and exchange rates?
▷ Generally, when a country's interest rate rises, its exchange rate falls.
Exchange rate is the relative exchange value.
In other words, the exchange rate is 'how much Korean won is needed to exchange 1 US dollar?'
Therefore, when the value of our country's currency rises, the exchange rate falls, and vice versa.
This can be illustrated with a simple example.
Let's say the exchange rate rose from 1,000 won to 1 dollar to 1,500 won.
Previously, you could exchange 1,000 won for 1 dollar, but now you have to pay a whopping 1,500 won to exchange it for 1 dollar, which means that the value of our currency has fallen.

Rising won-dollar exchange rate = depreciation of the won
Falling won-dollar exchange rate = Won appreciation (appreciation)

The effect of interest rates on exchange rates is as follows.
If interest rates in Korea suddenly rise, many investors, both domestic and foreign, will come to invest in the Korean market.
But just as there is Roman law in Rome, there is a law in Korea that says you must invest in Korean Won.
Therefore, foreign investors will try to convert all their overseas funds (especially dollars) into Korean won in the foreign exchange market and invest them in Korea.
If that happens, the forces trying to exchange dollars for won will increase in the foreign exchange market.
What does it mean to exchange dollars for won? It means selling dollars and buying won.
The more buying power there is on any asset, the higher its price (value) will go.
Of course, the more selling pressure there is, the lower the price (value) goes.
In the above example, the value of the won increases as the buying pressure on the won increases, and the value of the dollar decreases as the selling pressure on the dollar increases.
However, as you can see from the organized table, the rise in the value of the won is directly related to the fall in the exchange rate.
Therefore, when interest rates in Korea rise, the won-dollar exchange rate falls.


Interest rates up ⇒ exchange rates down
Interest rate ↓ ⇒ Exchange rate ↑

Q4.
What is the relationship between interest rates and inflation?
▷ Prices are the prices of goods.
And the price of money is the interest rate.
Therefore, the general view is that raising interest rates when prices rise will stabilize prices.
When prices continue to rise, people start hoarding.
Because people are anxious about how much prices will rise tomorrow, they tend to buy things in advance.
As hoarding increases, prices rise further, a vicious cycle repeats itself.
It's so obvious, but you need money to buy things.
But no one carries all their money in their wallet.
Most people put their money in the bank just to earn interest.
So, if you want to do private investment, you have to go to the bank and get money.
But what if we raise interest rates, the price of money? People will no longer feel the need to hoard.
Because, as the price of goods rises (or even more), interest is added, so it is actually a loss to buy goods in advance this time.
Then, people will not have to go to the bank to withdraw money, and hoarding will naturally decrease, and prices will stabilize.
In theory, we can see that interest rates should be raised by the amount of inflation.

Prices rise ⇒ Interest rates rise ⇒ Price stability

Q5.
What is the correlation between interest rates and asset prices?
▷ Interest rates and asset prices tend to move in opposite directions.
In other words, when interest rates rise, asset prices fall.
What is an asset? It's something that generates money for itself.
These include interest-bearing deposit assets, real estate assets that generate rental income, and fund assets that generate investment returns.
So how are their prices determined? Let's look at an example.
If a deposit with an annual interest rate of 10% yields 1 million won in interest after one year, what would be the appropriate price to pay? Theoretically, it's 10 million won (after deducting taxes and other expenses).
Because if you put in 10 million won and receive 10% interest per year, that is 1 million won.
If you bought these deposit assets for 9 million won, you bought them cheaply compared to the fair price, and if you paid 11 million won, you bought them expensively.
Here's another example.
If the interest rate is 5% per annum, how much would you pay for a deposit with the same conditions, earning 1 million won in interest? It's 20 million won.
Because 5% annual interest on 20 million won is 1 million won.
We can discover an interesting fact here.
The lower the interest rate, the higher the price of deposit assets.
Of course, conversely, when interest rates rise, prices fall.
When future earnings are certain, we can see that asset prices move in the opposite direction to the rise and fall of interest rates.

There is another way to explain it.
When interest rates rise, people will be satisfied with the interest on their deposits.
During the foreign exchange crisis in the late 1990s, people received high interest rates of up to 30% per year.
I didn't feel the need to invest in stocks or real estate.
So people will start selling stocks and real estate, and asset prices will fall.
When interest rates are very low, people are less likely to be friendly with banks.
Even if you deposit money in a bank, you only get a pittance in interest.
So money leaves the banks and goes into the stock and real estate markets.
Asset prices are rising.
Therefore, by observing the trend of interest rates, you can gauge when to invest in assets or not.

Q6.
Who moves interest rates?
▷ 1) The financial market moves.
It was said that interest rate is the value of money.
Does money have a price? Of course it does.
The interest received on lending money is the price of money.
Therefore, when the borrower's risk of default is high or their credit rating is low, interest rates rise. This is precisely why interest rates in Korea were so high during the IMF bailout.
Also, interest rates rise when there is a liquidity crisis due to a lack of money in the market.
A representative example is the global financial crisis in late 2008, when, despite the government's drastic cuts to the policy interest rate, market interest rates did not fall but rather rose.


Credit rating ↓ + liquidity ↓ ⇒ interest rate ↑
Credit rating up + liquidity up ⇒ interest rate down

Of course, these credit ratings and liquidity are determined by numerous participants in the financial market.
In the financial market, the creditworthiness and liquidity of an individual, company, or country are assessed, and the interest rate, which is the price of money, is determined by the number of people willing to lend money or the number of people willing to borrow money.
Therefore, interest rates are always subject to change.
As credit ratings, liquidity, and the supply and demand for funds among various participants in the financial market change constantly, interest rates, like a living organism, are bound to change constantly.

2) The Bank of Korea is moving.
The Bank of Korea's top priority is price stability.
To stabilize prices, the Bank of Korea raises and lowers the policy interest rate.
As explained earlier, this is done by using the relationship between prices and interest rates.
In this way, not only the financial market but also the Bank of Korea moves interest rates.
Of course, it moves artificially as needed.
So, if the Bank of Korea were to raise the base rate from 1% to 2% tomorrow, would it actually rise that much? No.
So how does the Bank of Korea move interest rates?

The Bank of Korea first announces that it will raise the base interest rate to 2%, and then publicly sells the bonds (eligible securities) it holds to commercial banks.
Then, from the commercial bank's perspective, the money received from purchasing bonds is paid to the Bank of Korea.
When money is absorbed from the market to the Bank of Korea, money becomes scarce in the market and the price of money, which is the interest rate, rises.
As announced, the Bank of Korea adjusts interest rates by absorbing money in the market by selling bonds only enough to raise the base interest rate by 1% to 2%.
Of course, interest rates cannot be raised unconditionally just because prices are rising.
because.
This is because interest rate hikes could make it difficult for borrowers to borrow, leading to a decrease in consumption and a contraction in the economy.
In particular, considering that household debt in Korea reached a total of 1,200 trillion won at the end of 2015 and the outstanding balance of bank mortgage loans alone was 477 trillion won, interest rates cannot be raised indiscriminately just because prices are rising.
Therefore, it is common for the Bank of Korea, whose primary goal is price stability, and the Ministry of Strategy and Finance, which is responsible for overall economic recovery, to be at odds with each other.