011 : War and Opportunity
Read at noblemtl
Jongno Bank Street.
I left Euljiro and went to Jongno’s bank street. David said it would take some time for him to find me, and until then he had to go to work.
Singapore merchant Razak had to open a letter of credit first so that he could feel safe.
“Seriously, there was no Korea Exchange Bank at that time?”
After wandering around looking for KEB for a long time, we came to the conclusion that KEB had not yet appeared.
It was embarrassing.
I could understand why Sambok was subjected to such humiliation at Chohong Bank even with the export contract in hand.
Before there was a bank dedicated to import and export business, I thought I would have to go to the Bank of Korea.
A letter of credit (L/C) is a document by which a bank guarantees the safety of transactions between an exporter and an importer in international trade.
A letter of credit is compared to a contract with a real estate agent, but a more appropriate metaphor is the safe transaction system used in online transactions.
For example, if you are dealing in an expensive luxury bag, you will want to avoid fraud as a seller or buyer.
At this time, we use a brokerage trading site.
In other words, the relay transaction site receives the transaction price of the bag in advance and transfers the transaction price to the seller only when the buyer receives the bag and confirms that there is no problem.
There is a fee, but there is no safer way to avoid fraud on both sides.
In particular, international trade is very vulnerable to fraud due to the physical distance, so it is an international standard for banks to receive the goods and pay for the goods after checking all the customs documents.
The letter of credit was named in the sense that banks grasp import and export details so that they can trust each other.
‘It’s absurd to have to go to the Bank of Korea to open a letter of credit.’
As I passed through the formidable main gate, there was a sign in the corner that read ‘The Bank of Korea, Foreign Exchange Department’.
I wondered if it was right that the government was implementing export promotion measures to place the foreign exchange business in the very corner.
Contrary to the government’s urgency, it seems that the financial sector in the 1960s did not even properly establish export procedures.
“hello.”
“Welcome, how can I help you?”
“I came out of mainstream unemployment. I would like to set up a letter of credit notification account for exports to Singapore.”
“Please fill out the letter of credit application form. A commercial letter of credit agreement, export sales contract, corporate registration, and personal seal are also required. The application form is across the street.”
The female clerk at the window asked for the relevant documents in a firm tone. There is no such thing as kindness.
In the old days, seniors who said that if you want to work at a bank, you had to give at least some candy to a bank employee to get things done, it seems like they weren’t joking.
“Here it is.”
I filled out the application form and handed it over to the window.
Fortunately, Sambok was able to fill out the application documents because he had completed the corporate registration.
“Wait.”
After waiting, I started typing hard.
Transferring application documents by typing again was a form of work that symbolized the inefficiency of the 1960s.
The boring time passed.
***
“Guest, it’s done.”
“Ah, yes. thank you.”
Finally, a letter of credit was opened.
It took well over 2 hours.
This was before the culture of “hurriedly” was applied to the financial sector.
‘With this, somehow get an IDA loan, get domestic capital from the Korea Development Bank based on the loan, make a product, get export approval, ship it, get a shipping confirmation and bring it to the bank, only then will I get 400,000 dollars in my hands. the poor. It’s complicated.’
Putting on the first button was the most difficult.
In the 21st century, you would have been around investment companies, but in the 1960s, opportunities were plentiful, but there was no money on the market.
The 1960s were a romantic era.
That means there are more opportunities to win than money.
“Should I go back? When will David visit me at the factory?”
If I present this letter of credit to him who came to visit me, I will be able to borrow several hundred thousand dollars from the IDA loan.
I left the bank hoping so.
I was waiting for the bus at the bus stop, and a black official car pulled up in front of me.
“Found it! Mr Wu! I am, David.”
“David. What do you think?”
“Get on. hurry.”
“A ride?”
“I have a place to go. You won’t regret it.”
What are your regrets? I’ve been waiting for you
“good.”
I got in the car and shook hands.
“I’m glad I found you. I thought it would have gone to the Jongno bank street, but my guess was correct.”
Like a nobleman who predicts the economy, he predicted that I would become a banker. You’re smart.
“Where are you going?”
“I will go to the 8th U.S. Army Corps of Engineers in Yongsan.”
“Why are you there… Ah! There is a computer there.”
“… you know a lot.”
American engineers and economists have been using computers since then.
It is at the level of a scientific calculator by 21st century standards, but it was quite usable in terms of calculating hundreds of times faster than humans.
“What do you need me for?”
“To answer questions about the Vietnam War and inflation in the United States.”
Also, you saw the phrase I wrote on the back of my business card.
As soon as David sees the phrase, this is it! would have wanted
An economist like David gets attention when he warns of the dangers of national policy, and when the warning becomes a reality, he gains great fame.
‘Well, what percentage was US inflation during the Vietnam War? It must have been around 6%, right?’
It wasn’t particularly difficult to guess.
It was a painful memory, but it was a problem that reminded me of my previous life when I was running a small and medium-sized construction company.
Inflation was always repeated, and the cycle was always about 10 years. There were some differences, but whenever an economic crisis was mentioned, the rate of inflation was around 6%.
I remember that the IMF period in the 1990s was so toxic that prices skyrocketed by more than 8%.
***
Yongsan 8th U.S. Army Corps of Engineers.
In the midst of trying to recall the memory, I arrived at Yongsan before I knew it.
“stop! Please stop.”
“This is David, World Bank Secretary. I’m here to use the computer.”
“Have you obtained permission to use it?”
“Here is the certificate.”
“Who is next to you? You look Korean.”
“He is my assistant. I vouch for your identity.”
“Pass!”
“thank you. Good job.”
It passed the inspection of the 8th Army Corps of Engineers very easily.
The checkpoint sentry and David seemed to know each other face to face.
The place where the car stopped was a very nice building.
It was a modern building resembling a small dome stadium.
“Amazing.”
“Isn’t it surprising? I admire it every time I come.”
“You have a keyboard and a monitor.”
I was even more surprised to find the keyboard and monitor.
I heard that computers in the 1960s were a method of entering data by punching holes in paper.
“Ha ha, of course. This is a brand new computer that costs a whopping $150,000. I can’t find it even if I have money, so you can say it’s more expensive than that.”
It was ridiculous that a scientific calculator cost $150,000.
“So you have an inflation model here.”
“That’s right. How long do you think the Vietnam War lasted?”
David hooked up and asked a question.
It was a very obvious question to me, but one that David hadn’t even considered a few hours ago.
Because, at that time, the US government as well as other countries thought that the Vietnam War would end soon if US troops entered the war. Because it was a fight between the world’s most powerful military power and the small Southeast Asian Communist Party.
However, behind the Viet Cong, there was a huge communist camp called the Chinese Communist Party and the Soviet Union.
“Even if I can’t, I will go for more than eight years. In the Korean War, both the free camp and the communist camp learned enough about confrontation.”
“A confrontation?”
“Absolutely. Vietnam has hellish tropical jungles. It would be difficult to advance the front one kilometer in a month.”
The failure of the United States is that it overlooked the jungles of Southeast Asia and the Viet Cong’s guerrilla tactics.
Honestly, time was on the side of the Viet Cong.
As the war dragged on, originally the poor Viet Cong had nothing to lose, but the prosperous United States had too much to lose.
Not only the loss of life of young soldiers, but also the amount of money spent on wars in other countries was enormous.
“The tropical jungle is a variable!!! okay. It makes sense. That’s why you said inflation is happening in the US.”
The United States did not lose militarily in the Vietnam War, but withdrew its footing due to the depreciation of the dollar due to the procurement of war expenses and rapid inflation.
The US had no choice but to abolish the gold standard in the aftermath of inflation, and the economies of Europe and the Middle East faltered, eventually triggering an oil shock. The Vietnam War caused all sorts of butterfly effects around the world.
“Of course. No matter how wealthy America is, a prolonged war is dangerous. Do you not know the history of handing over world hegemony to the United States even though Britain won World War II?”
David couldn’t help but nod.
Rather than talking about inflation risk only in words, it is more reliable if you bring in historical facts.
“… that makes a lot of sense. If so, how much inflation do you think the United States will suffer if the Vietnam War is prolonged?”
David treated me like a great scholar.
It was a question that no ordinary person could ever answer.
but i know the answer
“I do not know. As a rule of thumb, the US external deficit would be over $5 billion a year.”
“Five billion dollars a year! Does that make sense?”
“Why do you think it is impossible? If the United States were to launch an all-out war in the Vietnam War, it wouldn’t have been more, if not less.”
When the Vietnam War was intensifying, the U.S. spent nearly 20 billion dollars a year on war expenses.
“All-out war!”
“Confrontation eventually leads to all-out war. Unless North Vietnam, or the communist bloc, gives up on expansion.”
“!!!!!”
There is no way the communist camp will stop expanding in this era.
Isn’t it the era of ideological battles in full swing?
The U.S. military entered Vietnam with a complacent idea and then fell into a quagmire in an instant.
“That… yes. That’s right. It is a very possible scenario.”
It’s not a possible scenario, it becomes a fact.
‘Moreover, it was a great opportunity for us.’
Korea earned 5 billion dollars in foreign capital as a result of the Vietnam War.
I heard that the reason why Korean construction companies began to advance overseas from the late 1960s was that large-scale civil engineering works continued in a row while the US military was expanding its operational scope to Southeast Asia.
“If the war lasts eight years or more, and the average annual war cost is at least $5 billion… Inflation…”
David started entering data.
It was an attempt to calculate inflation in the United States using a mathematical model.
“If you do a rough math, the value of the US dollar will collapse by more than 20% and inflation will be close to 6% per year. It’s unfortunate, but…”
I deliberately shook my head.
If I had been born in the United States, I would have gotten a job at a fund company, put all-in on a short position, and been rejected at once.
“Ugh! My God, how can I do that mentally…”
David looked back and forth between the computer monitor and me in amazement.
He jumped up from his seat and gulped down a glass of cold water. He seemed more excited than upset.
“Mr. Wu, what would you do? Is there any way? I want to know your opinion.”
“Is there anything special? We need to import cheap quality goods from Korea. Then prices will stabilize and there will be a soft landing to some extent. That’s the only way to hedge risk in my view.”
“Do you have to import Korean products?”
“sure. If you import cheap and high-quality products, even Japanese and German products will go down in price. The US should strategically make Korea a production base for the domestic market.”
“…a wonderful insight.”
It’s not a surprising insight, it’s because the original history was like that.
Even though the United States went through a hard time in Vietnam, the mainland society in the United States was somehow stable because cheap daily goods poured in from Korea.
In the early 2000s, as Chinese products swept the world, prices around the world were extremely stable.
Cheap products are irritating to consumers, but they make sense from an economic point of view.
Inexpensive products reduce prices by themselves, but incumbent companies also join the price competition, leading to lower prices.
“Of course, there are prerequisites. In order for Korea to make a proper product, the United States needs to invest some money. Funding for the construction of the petrochemical complex must be the top priority.”
“That’s what the IDA Vice Minister said.”
“Ah, does that make sense?”
I grinned.
After a long conversation, the story of the vice minister finally came out.
Honestly, if this is consulting, wouldn’t it be okay to get a loan?
