On July 17, during the national holiday, Seoul Mayor Oh Se-hoon posted a message on his Facebook that went beyond simple criticism of the government, strongly evaluating the economic policies of the Lee Jae-myung administration.
His key message can be summarized in one sentence: "The government is creating a society where those who work diligently and save are at a disadvantage."
Mayor Oh diagnosed that the capital market, real estate, and debt relief policies are interconnected rather than separate issues.
"A Capital Market Turned into a Gambling Den"
The first issue Mayor Oh pointed out was the extreme volatility in the domestic stock market. He noted that this year, the KOSPI market has experienced numerous instances of trading halts and circuit breakers, stating, "The market is being shaken dramatically without any external shocks like a global financial crisis or a pandemic."
A trading halt is a mechanism that temporarily suspends program trading when futures prices fluctuate sharply, while a circuit breaker is a system that temporarily halts all trading when stock prices rise or fall beyond a certain threshold. Originally intended as a safety measure to stabilize the market, frequent activations can signal increasing market volatility.
Mayor Oh attributed this volatility to the expansion of high-risk single-stock leverage ETFs. Leverage ETFs are designed to track the returns of underlying assets at multiple times. While they can yield high returns in a rising market, they can also amplify losses in a declining market. In particular, leverage products targeting individual stocks have been criticized for their high volatility, posing significant risks to inexperienced individual investors.
Although the government recently announced measures to strengthen entry requirements for individual investors, Mayor Oh described this as "a remedy after the fact, coming only after losses have occurred."
"Is the Person Who Paid Off Their Debt at a Disadvantage?"
The second issue Mayor Oh raised was the long-term debt adjustment policy for overdue debts. The government is promoting a policy to reduce or adjust debts of vulnerable groups that have not been repaid for an extended period under certain conditions, arguing that it serves as a social safety net to help them recover.
In contrast, Mayor Oh argued that if society receives the signal that overdue debts can ultimately be forgiven, it could increase the relative deprivation felt by those who have diligently repaid their debts.
This raises the so-called moral hazard debate. Moral hazard is an economic concept suggesting that policy support can weaken responsible behavior. Conversely, the government argues that some level of debt adjustment is unavoidable to support economic recovery and vulnerable groups.
"Money Leaving the KOSPI Ultimately Goes to Real Estate"
In his message, Mayor Oh also connected the financial market and the real estate market as part of a single flow.
He asserted, "When the gambling den collapses, liquidity will ultimately move to real estate in Seoul and the surrounding metropolitan area."
In reality, investment funds in asset markets tend to move toward markets with higher expected returns. However, actual fund movements are influenced by various factors, including interest rates, lending regulations, supply conditions, and economic outlook, making it difficult to explain with a single cause.
Mayor Oh expressed concern that instability in the capital market could ultimately stimulate real estate prices again, placing the burden on the younger generation.
Why Emphasize Youth?
In this message, Mayor Oh repeatedly used the term 'youth.' In the past, accumulating savings to purchase a home was a common way to build assets, but recent high housing prices have led to the perception that financial investment has become the primary means for young people to accumulate wealth.
Mayor Oh diagnosed that if the financial market is exposed to excessive risks in this situation, it could jeopardize the last opportunity for young people to build their assets.
This message raises a policy philosophical question beyond mere economic criticism: "Will we create a society where diligent labor and saving are rewarded, or will we become a society where speculation and debt relief provide greater incentives?"
* This article has been translated by AI.
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