The global financial crisis, which began with the bankruptcy of Lehman Brothers, plunged the entire world into a recession. The country that emerged as the savior at that time was China.
China boasted an economic growth rate of nearly 10 percent every year, and before long, it had risen to become the world's largest in both economic and trade scale, serving as both the world's factory and the world's consumer market.
What would happen if China were to collapse? Could the entire world withstand the shock?
James said, caressing the amber on the head of his cane.
"The theory of a China crisis has been around for a long time."
I nodded.
"I think it's been more than 20 years."
When the economic growth rate was high, they said it would collapse due to demands for democratization, and when the economic growth rate fell, they said it would collapse due to a lack of jobs.
The story now is similar.
If you brought in one doomsayer, couldn't they give you 100 reasons why the Chinese economy will collapse?
"That friend Soros actually put it into action."
George Soros, the emperor of hedge funds.
About three years ago, he believed that the Chinese economy would collapse and went on a short-selling spree of the yuan. With a history of bringing down the Bank of England and causing the Asian financial crisis, he showed strong confidence at that time as well.
'A hard landing for the Chinese economy is inevitable. The currency values of Asian countries should fall by 40 percent from their current levels to be normal.'
Looking at the economic indicators, the debt of Chinese companies was serious even at that time.
From an outside perspective, if you let it collapse, the yuan will fall due to a decline in the growth rate and capital outflow. On the other hand, if the Chinese government injects public funds to prevent insolvency, it has to lower interest rates and print money. This is also a factor that causes the yuan to fall.
James continued, as if reminiscing.
"When George Soros took the lead, the hedge funds of Wall Street gathered. Kyle Bass, Stanley Druckenmiller, Jacques Schreiber, David Einhorn, David Tepper, and so on. Famous investors whose names you would know just by hearing them on Wall Street sold all their large assets such as stocks, bonds, commodities, and real estate to raise ammunition and charged in."
And they poured that ammunition into the Chinese foreign exchange market.
China's prime minister even came forward to directly criticize them.
'Short-selling speculators are trying to profit by creating a panic! The Chinese economy is not weak enough to be brought down by speculators.'
So what was the result?
"George Soros lost."
Chinese banks and companies did not collapse, and the yuan was also fine.
The hedge funds that had been pouring out short sales retreated before their losses grew larger, and George Soros also suffered a huge loss and threw in the towel.
Why did this result occur?
George Soros and the other hedge fund CEOs had knowledge and intuition that were incomparable to mine.
Were their thoughts wrong?
Looking at various indicators, George Soros's thoughts and arguments that the Chinese economy was in danger were common sense.
It's just that China was a country where that common sense didn't apply.
China is the most peculiar country in the world. Its population of 1.5 billion is one thing, and politically, it has chosen socialism, while economically, it has chosen capitalism.
Even this is only called capitalism; in reality, it is a state-led planned economy in the guise of capitalism. Most of the GDP is generated by state-owned enterprises.
It is the state-owned banks that lend money to these state-owned enterprises. Therefore, unlike in other countries, even if a company became insolvent, the bank did not immediately collect the money and could wait long enough.
Also, as Chairman Zhang Pinghua said, the Chinese economy is a vast ocean. You can overturn a pond, but it's difficult to overturn an ocean.
Henry, who had been lost in thought for a while, opened his mouth.
"Even if the Rothschilds' wealth has steadily increased over the past 250 years, their influence must have continuously shrunk. That's because the emerging markets have grown that much."
A sharp point.
Since the 20th century, the world's wealth has increased several dozen times. And more than half of this has been generated in emerging markets.
No matter how much influence the Rothschilds have in the political and business circles of the US and Europe, their influence in emerging markets will be limited.
Henry continued.
"Unlike in the past, the modern financial system is becoming more and more complex. It's not an easy task to continue to control it. If you play with fire, it can spread, and there's no law that says a famine can't lead to a great famine."
I thought of Grant Darrel Rothschild, whom I had met at the grand mansion in Buckinghamshire.
If the Rothschilds could do everything as they pleased, would they have needed to reach out to me?
Is the purpose of trying to cause a financial crisis to expand their influence to China? So that they can continue to maintain their position?
I recalled the case of South Korea.
South Korea, which received a bailout from the IMF due to the Asian financial crisis, was forced to fully open its financial market. The entry and exit of foreign capital in the stock, bond, and foreign exchange markets became free, and the limit on foreign capital's equity in financial capital was abolished.
As a result, almost all commercial banks fell into the hands of foreign capital. Lone Star's acquisition of Korea Exchange Bank is a prime example.
While Chinese capital has swallowed up companies around the world, foreign capital's investment in Chinese companies has been strictly limited.
Also, as is the case with all countries, investment regulations in the financial sector are even stronger.
James said.
"If the Chinese economy collapses, the US will also be hit hard. But if they can swallow up the Chinese financial market, the Rothschilds won't care who gets hurt."
Whether it's long or short, the more everyone moves in one direction, the more the initial investor's profit is maximized.
Therefore, IBs, PEFs, and hedge funds argue that the direction they have invested in is correct and want all investors to follow them.
George Soros failed. This is because many investors believed that China would not collapse and hoped that it would not collapse.
Grace showed strong confidence that she would never fail, but behind that, isn't there a desperation that she must not fail?
"Will the Rothschilds be able to succeed?"
James answered.
"The situation is very different now compared to three years ago. China's economic growth rate has fallen further, the asset bubble has worsened, and debt has increased even more. And unlike Soros, they have the power to raise the benchmark interest rate."
As Warren Buffett said, no one can create something out of nothing.
Fed Chairman McClay raised the benchmark interest rate not because he was ordered to by the Rothschilds, but because he believed it was the right thing to do.
I didn't mention that they had leverage on Ronald.
But both of them would have noticed that the president was in a situation where he couldn't do anything about the interest rate hike.
When interest rates rise, the value of the currency rises. A strong dollar means a weak yuan.
China could follow suit and raise interest rates, but in the current situation, an interest rate hike carries a high risk of accelerating a recession.
"All they have to do is give a signal that the Chinese economy will collapse. If they can give a clear signal, the world's capital will move as the Rothschilds wish without being ordered."
Money is the most powerful weapon that can move everyone. If they are certain, the major banks and hedge funds will all join the attack at once.
One might think that since it's China's problem, we can just watch the fire from across the river, but reality is not like that.
Strictly speaking, it's not a fire across the river, but a fire in the big house right next door. Of course, the flames will spread in all directions.
"It's not just China's problem. The moment China falls, the ASEAN and Central Asian countries will also fall in line."
I nodded heavily.
"That would include South Korea."
The country that has benefited the most from China's growth is South Korea. Even now, China is South Korea's largest trading partner and accounts for a third of its export volume.
The internet is full of comments wishing for China's collapse, but if China actually collapses, the country that will be hit the hardest is South Korea.
"South Korea is one thing, but there's another country that's in real danger."
"Which country?"
"Isn't there a country that depends on China for all its trade?"
Without having to think long, a country immediately came to mind.
I frowned and muttered.
"North Korea."
The collapse of the Chinese economy would be fatal to North Korea, which is just beginning its economic development. If the crisis deepens, North Korea will lock the door it had painstakingly opened and once again call for self-reliance. If it resorts to provocations again for the sake of regime stability, geopolitical risks could also heighten.
This, in turn, will come back as further damage to the Korean economy.
"But this is a really serious case. If we cooperate to prevent the crisis from growing before then, the result can be completely different."
I muttered to myself.
"A financial crisis will happen. We need to prepare accordingly."
At my words, Henry's expression hardened.
"Are you sure?"
"Yes."
Not because I believed Grace's words, but because I had seen the foresight.
The global financial crisis that occurred in 2008 was the biggest crisis since the birth of capitalism. But humanity overcame that crisis, and the world enjoyed a boom again.
So what will the next crisis be like?
What will there be after everything has collapsed?
***
I finished my schedule in the US and returned to South Korea with Henry.
I wanted to meet Ronald, but visiting the White House now wouldn't be much help. With many eyes watching, it would be better for us not to contact each other for a while.
Taek-gyu, who heard my story, blinked his eyes.
"They're going to cause a financial crisis to profit from it? Are they crazy?"
"You're telling me."
"Isn't 250 years of profiting enough for them?"
"It seems they want to profit for another 250."
Human desire is endless. Especially the more you have, the less you want to let go of what's in your hands.
I recalled my meeting with Grace. What she values most is her family. She would do anything for her family.
"If you've seen the foresight, is this something that's definitely going to happen?"
"Probably."
What will happen is bound to happen.
"Shouldn't you tell noona?"
"Henry probably already told her. They'll be setting up countermeasures at the headquarters level."
Taek-gyu said, as if fascinated.
"So 'fleece shearing' was a real thing?"
First, you lend capital to emerging markets to help their economies grow. Then, you raise interest rates and collect the loans, bankrupting them, and then scoop up the assets that have become cheap.
Then you help the economy recover and wait for the asset values to rise before repeating the same thing.
It's a term that refers to the predatory behavior of speculative capital, just like raising a sheep well and then shearing its fleece periodically.
If this is true, it won't be as simple as it sounds, and it will unfold in a much more complex and subtle way.
Because the sheep won't just stand still while its fleece is being sheared. What sheep would want to have the fleece it has worked so hard to grow taken away?
"So what should we do?"
"First, we need to prepare for the shock."
OTK Company's main businesses are cars and batteries. For a household, a car is the second largest asset after a house, and for a country, it is the item with the largest trade volume.
When a financial crisis comes, people will be reluctant to buy new cars. The transition to electric cars will be delayed, and battery sales will also decrease.
If the crisis grows larger, the investments we are currently making are also likely to be hampered. The factories we are building now, the Saemangeum development, the inter-Korean economic cooperation, everything will become a problem.
***
Gloomy forecasts and pessimism poured out.
The aftershocks of the benchmark interest rate hike continued. As emerging countries raised their interest rates one after another, concerns about a recession and an asset bubble collapse grew.
The market reacted sensitively to even small negative news, and even people with little interest in the economy could feel the serious atmosphere.
Although the real economy had not yet been directly hit, the financial market was rapidly sinking.
Stock prices, which had seemed to rebound with bargain hunting, collapsed again, and buying sentiment disappeared, freezing real estate transactions.
Companies facing their year-end closing were anxious about whether the exchange rate would rise further.
Even though Christmas was approaching, it didn't feel like Christmas at all. An unknown anxiety was etched on the faces of smiling people.
Before the year turned.
Another piece of bad news hit the financial market.
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