America's No. 1 financial conglomerate

Chapter 276 South Korea: Suffering for the Sake of Saving Face

Upon landing in New York, Ernst immediately headed to Ernst Asset Management.

The car shuttled through the bustling streets of New York, with skyscrapers standing side by side outside the window, and the busy traffic showcasing the city's vitality and vibrancy.

About half an hour later, the car came to a smooth stop in front of the building where Ernst Asset Management Company was located. He quickly walked into the building and took the elevator directly to the top floor.

Pushing open the door to Jane Fraser's office, Ernst appeared surprised by her sudden appearance. "What brings our big boss to New York? Aren't you afraid those extreme fans will throw rotten eggs at you?"

Since pushing for player trades for the Knicks, the anger of New York fans has been like a volcanic eruption, relentless and unending.

The first to be affected was Knicks general manager Ernie Grunfeld. The fans who were unhappy with the trade vented their anger on his new car, giving the brand-new luxury car a free-style makeover with paints of various colors.

Red, green, blue—all sorts of paints were mixed together, resembling an abstract painting with an overturned paint bucket, so ugly it was unbearable to look at.

Next to suffer was Leopold Brooks, the general manager of Madison Gardens. It is said that the area in front of his apartment building became a dumping ground for rotten eggs, with fans secretly throwing rotten eggs there every day.

Over time, an indescribable stench permeated the apartment building's corridors, causing great distress to the neighbors. They filed various complaints, and some even called the police.

Brooks had to cooperate with the police investigation while also apologizing to his neighbors door-to-door, making him feel more pathetic than a rat crossing the street.

Later, news circulated from somewhere that Ernst was actually behind all of these player trades.

Since then, the Knicks' home games have become the focus of media attention, with their popularity skyrocketing. The number of nationally televised games is second only to the Chicago Bulls with Michael Jordan, and even the Los Angeles Lakers with Shaquille O'Neal have to be ranked lower in terms of televised games.

The reason it garnered so much attention was because there was so much fun at the event.

The director's camera could easily sweep across the audience and capture various banners targeting Ernst.

Ernst would better never set foot on New York soil again, or he'll be in for some special treatment from Knicks fans.

The Knicks don't welcome trash from California at all; they should just go back to California.

In short, the content was varied and bizarre, but without exception, every single one was filled with the anger and dissatisfaction of the fans.

Faced with Jane Frazier's teasing, Ernst remained calm, saying, "I think, given the Knicks' current performance, coming to New York at least guarantees my safety, right? After all, no matter how angry the fans are, they won't turn down a victory."

At this point, the NBA regular season had been going on for over a month, with nearly a quarter of the season completed.

No matter how much fans hated Ernst or how reluctant they were to part with veteran stars like Ewing, it is undeniable that the Knicks' rebuilding efforts have yielded positive results.

Although their current record of 11 wins and 9 losses only ranks seventh in the Eastern Conference, which is still some distance from last season, the talent shown by the young players on this team is obvious.

They were full of energy and played with great courage on the court, creating one youthful storm after another and playing a delightful basketball game that showed the audience the team's potential.

At least the media's evaluation of the Knicks is mostly positive, and many sports media outlets have published articles saying that this young Knicks team has a promising future.

Given two or three years to develop these young players, and with the Knicks holding a large number of draft picks, they could very well return to championship contention and become a younger, more competitive championship-caliber team.

It is precisely because the team's performance has improved that there have been far fewer banners targeting Ernst at Madison Square Garden recently.

As Ernst said, fans are forgetful; for a team, results are what truly matter.

As long as the team can win and bring them hope, the previous dissatisfaction and anger will gradually fade away.

"So, is there something important that brought you to New York this time?"

Ernst didn't waste any words. He sat down in the chair opposite her, ordered a cup of coffee from the departing secretary, and said, "Tell me about the situation in South Korea."

When South Korea was mentioned, Jane Fraser shook her head, her face showing undisguised contempt. "They only have themselves to blame. This country has almost lost everything for the sake of so-called face, and now it has fallen to this state entirely of its own making."

After a pause, Jane Fraser continued, "On December 3rd, South Korea finally compromised, agreeing to all the conditions proposed by the IMF and signing a bailout loan agreement for a whopping $55 billion. This completely tied their hands to the IMF."

Ernst had already seen the news about this. Although the signing of the aid loan agreement by South Korea did not have a significant impact on ordinary Americans, and many people were even unaware of it, in the capital circles, this event overshadowed the previously much-discussed IPO of YueDong Games.

Wall Street's financial tycoons have once again turned their attention to the Korean Peninsula, after all, no one wants to miss out on such a lucrative opportunity.

"So what are the specific details of this aid loan agreement? What conditions did the IMF propose?" Ernst nodded his thanks to the secretary who had just brought the coffee, and asked as he picked up his coffee cup.

The newspaper reports were not very detailed, and it was clear that both the West and South Korea were deliberately avoiding these provisions.

South Korea felt humiliated, while the United States knew that its behavior this time was extremely unsightly.

Jane Fraser took out a document, placed it on the desk, and pushed it in front of Ernst. "There are seven main clauses, each of which is like a sharp knife, directly stabbing into the economic lifeline of South Korea."

Ernst flipped through the documents, and what caught his eye were countless stories of Korean families being torn apart and people dying.

The first requirement is for South Korea to raise its domestic interest rates by at least 25%, which would undoubtedly increase the financing costs for South Korean companies significantly, and many small and medium-sized enterprises would likely go bankrupt due to broken cash flow.

The second requirement is that South Korea must allow foreigners to open banks and securities firms in South Korea by June of next year. This would essentially open the door to South Korea's financial market, allowing foreign capital to freely enter the South Korean financial industry.

The third measure is to raise the cap on foreign ownership in South Korean companies from 26% to 50% by the end of the year, and the cap on individual ownership from 7% to 50%. This means that foreign capital will have more say in South Korean companies and may even control some important companies.

The fourth provision allows foreign companies to acquire South Korean companies, including hostile takeovers, which gives foreign capital the opportunity to acquire high-quality South Korean companies.

The fifth item concerns opening up trade markets and abolishing the import license system and export subsidies. This will lead to more intense international competition for South Korean companies, and many companies that rely on export subsidies for survival may be unable to recover.

The sixth requirement is that large South Korean financial institutions must accept supervision from international organizations, which is tantamount to handing over control of South Korea's financial industry to others.

The last point is the exploitation of capital, a major cause of family ruin and death. The demand is to break the lifetime employment system in the South Korean labor market and allow companies to carry out large-scale layoffs, which will undoubtedly exacerbate employment pressure in South Korea and trigger a series of social problems.

However, Ernst did not seem to be reminiscing; instead, a smile gradually appeared on his face.

These terms were no less than a Boxer Protocol for South Korea, each one rife with predatory intent.

But for Ernst, for the Wall Street giants, and even for the whole of America, these terms sounded wonderful because they meant they could reap huge profits in the South Korean market.

Jane Fraser, looking at Ernst's expression, continued, "Sometimes I even wonder what the people of this country are working for, what they are living for."

"They don't even understand the most basic rules of the game, yet they dare to force their way onto the table and participate in the game. Is it just to get others to look up to them and satisfy their ridiculous vanity?"

For what?

The answer is actually quite obvious: it's all about saving face, about that fragile sense of self-esteem.

Why is South Korea so vulnerable and easily defeated in this round of financial crisis?

As Jane Fraser said, they didn't even understand the rules of the game before they rushed to the table, and in the end, they could only suffer the consequences.

South Korea has a near-obsessive attachment to the title of a developed country and has for many years wanted to join the OECD, which is known as the "rich country club".

Finally, last year, after years of continuous applications and efforts, South Korea achieved its goal and successfully joined the OECD.

It's important to understand that all current OECD member countries are developed nations. Becoming an OECD member not only signifies South Korea's recognition by these developed countries, but also fills the entire nation with a sense of joy and pride in joining the ranks of developed nations.

However, they overlooked an important issue: joining the OECD also meant that South Korea's financial market would become more entangled with Western capital.

Because OECD member countries have a credit guarantee when borrowing from other developed countries that are also OECD members, South Korean companies can easily borrow large amounts of US dollars from the international financial market.

In addition, the US dollar index was at a historical low last year, and dollar lending was not only large in volume but also very low in cost.

Against this backdrop, South Korean companies began to get arrogant, mistakenly believing that they had become so powerful that they were invincible, just as they had been in the domestic market, and could easily dominate the market.

As a result, South Korea's giant corporations began to borrow heavily in the international market, and then used the borrowed money to invest in factories all over the world, ambitiously preparing to fully expand into the global market.

However, they completely forgot that the reason their products were able to gain an advantage in the South Korean domestic market was largely due to government support and the imposition of high tariffs on foreign goods, which made it impossible for ordinary South Koreans to afford foreign goods and forced them to choose domestic products.

This is why the IMF required South Korea to open its trade markets in the aid agreement. Before that, South Korea's trade system was more like a closed greenhouse, only allowing its own products to go out and make money, but not allowing foreign products to come in and compete.

As expected, these companies, which were thriving in South Korea, suffered a crushing defeat in the international market.

Samsung ambitiously entered the automotive industry with US dollars borrowed from the international market, but what was the result? Their cars failed to gain traction in the international market, and even struggled to sell in the South Korean domestic market.

Daewoo Group fared no better. They expanded wildly with massive borrowing, even setting their sights on the former Soviet bloc, building factories from Eastern Europe all the way to Central Asia.

However, they overlooked the market environment, policy risks, and consumer demand in these regions, and ultimately all these investments went down the drain. Not only did they fail to generate returns, but they also burdened the companies with heavy debt.

Kia Motors has set its sights on the US market, hoping to replicate the success of Japanese automakers in the American market.

To achieve this goal, Kia invested heavily in marketing, but the end result was that it not only failed to become a Japanese automaker like Toyota and Honda that gained a foothold in the US market, but also encountered serious financial difficulties due to insufficient product competitiveness, almost going bankrupt.

The biggest mistake these South Korean companies made was that they borrowed short-term foreign debt, but invested in industries that required long-term development to see returns.

This model of short-term debt for long-term investment inherently carries enormous risks. If international financial markets fluctuate or the company's own cash flow encounters problems, it can easily fall into a debt crisis.

This is why Jane Fraser said they didn't understand the rules of the financial market and were practically idiots in the financial field.

In South Korea, they might be able to operate in this way because even if a company has debt problems and can't repay its debts, the government won't sit idly by. It will always find ways to provide new loans to help the company rob Peter to pay Paul and barely keep operating.

In the international financial market, they still want to use this method to lower interest rates and delay debt repayment, which is simply wishful thinking.

In the face of international capital, there is no room for sentimentality. Once you are unable to repay your debts on time, those capital giants will not hesitate to retaliate.

South Korea's financial system is relatively closed, lacking sufficient connection with international markets and experience. Most companies have not experienced much real international competition and lack the ability to cope with international market risks.

Under such circumstances, their insistence on integrating into the international financial market and participating in international capital games, ultimately leading to their being scammed and falling into their current predicament, was actually quite predictable.

Ernst put down his coffee cup and said calmly, "It's fine."

Jane Fraser looked at Ernst with some confusion upon hearing those two words; she didn't quite understand what Ernst meant by saying "it's fine."

Ernst didn't explain immediately, but instead changed the subject, asking, "So, how are the returns on our operations in the South Korean market so far?"