Financial Crisis in South Korea

Financial Crisis of 2007-2008 originated in the United States spread to the financial systems of many other countries, including CIS countries, by means of the domino effect. Bankruptcy of one of the largest Americans Bank, Lehman Brothers Holdings PLC, in someway was a launcher of this global crisis the scope of that can be compared with the Great Depression of the 30s of the last century. No one could have even believed that a crisis in the local market of subprime mortgage loans in the USA would have such enormous affect on the financial systems over the world and crash banking sectors of many countries one by one.

Article one titled “A Kim in his counting house; North Korea’s awful economy” explains North Korea’s collapsing economy. North Korea suppresses most economic data. The information is created by using near statistics of its trade with other countries. We can use those countries records and a jazz for population growth and inflation to get a close estimate of that country’s economy. In 1950s through the 1970s its economy outgrew the capitalist’s country of South Korea. All their resources were placed towards production. Although today North Koreas per capita GDP is only one 40th of South Korea’s at a whopping $600 year. Korea spent almost 3,000,000,000 each year in the military. There are 1.2 million people in the Army out of 25 million people in the whole entire country. They have huge conventional arsenal, rocket launchers and nuclear tests. Most countries who invest highly in the military grow economically. North Korea however their economy has gone up only a little. North Korea’s exports in 2015 were no higher than that at their peak in late 1970s, while per capita imports were 2/5 lower. The underperformance is remarkable either for a country that is neither a failing country nor at a state of war. So where North Korea go wrong? The collapse of the Soviet Union hit North Korea hard in 1990s on addition bad weather and agricultural reduction collapsed in the 1990s that led to famine in which hundreds of thousands of people died. Also North Korea’s nuclear bombing test has

The roots of the crash trace back to U.S. regulatory and governmental activity. Thirty years prior, at the birth of financialization and Ronald Reagan’s Administration, certain policies started to favor banks’ activities, particularly with respect to the practical dissolution of antitrust laws during the time and a general

There is one distinction between the North Korean and South Korean economies that separate them and their ability to last as a substantial economic policy. At the end of the Korean War there was need for both independent countries to establish themselves in the market. The North Koreans decided to practice Juche, which essentially means that they planned on keeping their market and economy localized and not participating in the world trade scene. The South Koreans, on the other hand, did participate in the world market. Both countries knew that in order to establish and survive they would need to have cheap labor and cheap resources. But, once again, South Korea had a helping hand because of their decision to participate in the world market.

The situation led to the surging inflation cases in the country, lack of capital finances to support new business startups, recession/depression, and unemployment since most companies laid off their employees after closing down their businesses. Consequently, the situation spread all over the word with most governments forced to intervene and bailout some of their financial institutions to manage the crisis. In the American context, what worsened the situation was high expectation of the mortgage lenders who expected huge profits from their clients after full recovery of the loans.

The 2007 - 2009 financial crisis was the worst financial and economic crisis since the 1929 stock market collapse leading to the Great Depression, hence it has been dubbed the Great recession. This disruption in the economy due to the lost confidence in the financial institutions undermined the stability of the financial system and led to the loss of jobs and trillions of dollars in wealth and savings for entities within the economy. The gravity of the U.S crisis influenced the global financial system leading to a worldwide crisis.

As this was happening, the big financial institutions stopped buying sub-prime mortgages and sub-prime lenders were getting stuck with bad loans. By 2007, some well-known big lenders had declared bankruptcy. Subsequently, the failure of many financial institutions were affecting the global growth, Australia was not an exception.

First, most banks and insurance companies had insufficient capital holdings to back the financial commitments that they were making. The whole financial system was built on unstable foundations. Banks had allowed their balance-sheets to expand but set aside too little capital to absorb losses.

This has to be taken in the context of the considerable global recession that has been in play since 2008, the results from which North Korea was largely shielded due to its insularity. In general terms, the North Korean economy is still far poorer than most other Asian nations.

The transformation of South Korea from one of the poorest countries to one of the richest and most industrialized countries in only three decades is remarkable. Some authors argue that this was the product of a unique set of historical circumstances that led to landless children moving to the cities to provide cheap labor and the consequent American presence. Military rule was replaced by civilian government since 1987 and it has developed to have Asia’s highest income. It is the world’s 7th largest exporter driven by high-tech multinationals such as Samsung, Hyundai and LG.The rule of law, government transparency and education has led to the rapid growth of the national economy. The leadership and proper economic policy implementation has always been behind the rise of South Korea. Although it has almost no natural resources and always suffers from overpopulation, the country adapted an export-oriented economic strategy to fuel its economy. The 1997 Asia financial crisis affected the economy and the country had to rely on funding from the IMF to restructure and modernize (Kleiner, 2001). In addition to that, policies by then President Kim Dae Jung spurred the growth of the ICT industry.

erosion of the quality of the capital, throughout this period. The market lost confidence in the banking

In recent years, international trade has encountered a lethargy which can be contributed to “the absence of further trade deals [and] more big countries opening up [their borders]” This has led to economic dismay like South Korea. In South Korea, “Exports account for roughly half of South Korea’s GDP” and in 2014 “The country’s exports shrank by the largest annual amount in six years.” Even though South Korea may be facing economic struggles currently, due to the slow international trade, they have made significant progress compared to when they were under the colonial rule of Japan who restricted their import and export barriers. The heavy reliance South Korea has on trade as a source of economic stability has led to economic instability. In order to have a more thorough understanding of the decline of international trade on a State, this paper will focus on how the slow international trade has been affecting South Korea’s economy. The South Korean economy has suffered as a result of being a heavily export base; therefore, the decrease in trade among the international community has had negative effects on the South Korean economy.

Due to the consequences of the recent financial crisis, the company has observed a significant decline in the investment activities of its clients all over the world. These consequences brought negative impacts to its financial performance.

The resulting strengthening of manipulation and corruption that took place has evolved into South Korea’s chief technique of upholding business success and effectiveness in the global community. The chaebols have become a core stake in the South Korean economy, but they have dissuaded economic growth. Not many small businesses and companies are able to survive against the business conglomerates. There are a select few businesses that can outweigh the financial and political advantages of the chaebol. Consequently, the economic inequalities have developed substantially. Not much of the economy is left after the chaebol have used their power and authority to consume more than their share. This disparity is most visible in times of financial catastrophe. In 1998, following the South Korean IMF crisis, the Gross Domestic Product of South Korea dropped by 7 percent. While the top 5 percent of South Koreans only saw their income decrease by 2 percent, the bottom 30 percent of Koreans saw their income drop by almost a

As a result of the fixed real exchange rate, it prevented Korean exported goods becoming more expensive relative to competing goods in the world market. The devaluations of Korean won ultimately stimulated exports further.