The essence of the crisis in Korea

The essence of the crisis in Korea

1. Korea accounts for 13.5% of investment in the construction industry, but the proportion of added value is only 4.5% of GDP. In other words, the rate of return on capital investment is low.
2. According to the CEO of the construction company, the construction cost is 11 million won for small-scale construction per pyeong. Well, that’s possible, but is it that expensive to pour concrete and raise reinforcing bars? It’s because labor costs have risen. Well, I guess so. Apartments along the Han River cost more than 100 million won per pyeong, so 10 million won for construction is not a big deal? These days, it’s close to 300 million won per pyeong…
3. If capital is invested in something that has no added value, such as real estate, it is natural that national development will not be possible.
4. Real estate can make stable profits, so for those who do not have special knowledge, abilities, or business items, making money solely from real estate is the only way to become rich.
5. You borrow money based on real estate credit, you use that money to buy a property, and when the price of that property goes up, you use additional credit to buy the property… It doesn’t take any special dexterity. You can make wealth with endless inflation and loans. With additional income here, the proceeds go up exponentially.
6. But what added value does real estate create? Apart from the convenience of moving around, apartments are not particularly thought of. It is a national loss if the Economic and Social Development Commission money is invested in these areas.
7. Even that economic unit money is not real. It is a valuation made by inflation for decades, so if inflation sentiment disappears and prices fall, only debt remains.
8. This could lead to a banking crisis because if the debt-to-equity ratio is hundreds of percent, it becomes only a monetary unit debt. The state has no choice but to fall victim to accomplices and lower interest rates and use real estate stimulus measures.
9. Eventually, it enters the real estate inflation cycle again. If this inflationary cycle continues, the proportion of assets in the construction sector is excessively inflated compared to the income of individual citizens.
10. It is a kind of bomb-spinning game, and through various governments, including Park Chung-hee, Chun Doo-hwan, Roh Tae-woo, Kim Young-sam, Kim Dae Jung, Roh Moo Hyun, Lee Myung Bak, Park Geun Hye, Moon Jae In, and Yoon Suk Yeol, and Lee Jae-myung, dangerous bubbles have been created in the form of infinite cycling whenever the construction investment economic stimulus >> GDP growth >> real estate inflation >> asset bubble >> risk >> recession >> economic stimulus regime is created.
11. Depending on the statistics, Korea’s national net assets will be around 2.3 in 2023, excluding debt from the entire financial and real estate land facilities. This is around 2.3, with financial assets around 0.1, and financial assets accounting for 4.5% of the total net assets.
12. Building real estate, land, and equipment assets actually depend on evaluation. As mentioned earlier, no one can be sure if this is the price because it has been accumulated by inflation.
13. There are tens of billions of dollars in apartments along the Han River in Gangnam, and if you put your hand on your chest and ask, “Is that the price right?” Then, can you always say, “If you sell it like gold like a stock?” I don’t think so.
14. The U.S. is said to account for 66% of the country’s $167 trillion net assets. We’re 4.5%…
15. Although the U.S. government debt is $37 trillion, the amount of financial assets is $110 trillion, so if the debt is added, there are $147 trillion worth of financial assets. In Korean money, the size of financial assets is KRW 21 trillion. We said it was about 0.1 trillion. Korea’s financial assets are about 1/200 of that of the United States.
16. Korea’s national net assets are also $16 trillion as of 2023 in dollars. It is 1/10th the size of the United States, but its financial assets are only 1/200.
17. This difference is due to the fact that about 95% of assets in Korea are concentrated in real estate facility assets.
18. Even if I have a good idea these days, I don’t develop it. Actually, my classmates are all about to retire, and I’m old enough to organize something.
19. To tell you the truth, it’s not just because of age, but because of development costs. Artificial intelligence meta-golf businesses are worth 1-2 trillion dollars in value-added, and developing them will cost an estimated $100-200 million in testing costs. The scale of test investment alone is 150-300 billion won.
20. We need to invest in this to create a business that is 1.5 to 3 times the investment cost, but there are many people around us who want to invest. I wonder if they will invest about 100 to 200 million won. I’m getting dizzy.
21. It takes 100 billion units of money to commercialize ideas related to MPCS and HBM, and it is said to develop them into billions of dollars.
22. Artificial intelligence semiconductors have a basic Waku… The investment unit is worth 100 billion won. They want us to invest hundreds of millions of dollars in this and make it Nvidia-class.
23. Due to the lack of basic financial assets, it is unreasonable to meet the development cost at 1/200 US cost. In fact, investors themselves do not have the money to invest.
24. They say they have a lot of money to invest in Korea. No, I think the money to invest is almost dried up. There are 20 billion apartments along the Han River, and 15 of them are enough to start artificial intelligence meta-golf. It can go business around 1-3, but no one wants to do that. Real estate owners say… Why would I do that?
25. Developer bounces too. Please make the same level at 1/200 capital cost. I make a request. Why would I do that at this age?
26. These days, I don’t code and make products myself. I’m over the age of complaining about engineers to develop it cheaply. If you do that, young people will be criticized for asking for passion pay.
27. Debt and capital concentrated in the real estate sector should be returned to financial assets. It is not trillions of won, but at least tens of won units must be circulated around so that ideas and technologies can be valued and worked properly.
28. I want to develop it, but I’m not able to use that money to develop it, and I’m not confident in persuading engineers to develop it. I’m sorry for future generations that I can’t create added value with good ideas.