Economic consequences of governance damage

<Economic consequences of governance damage>


While watching the video of the Constitutional Court's impeachment trial on President Yoon Suk Yeol, Kwak Jong-geun, former commander of the Special Forces Command, constantly stops his mind from testifying. His actions in bringing members of the Special Forces into the National Assembly were certainly not sufficient. But what else could he have done? If not for what he did that night, how could he have prevented the coup.

Of course, it was lawmakers who quickly gathered at the National Assembly and voted to lift martial law that blocked President Yoon from taking part in a pro-Western political coup. Also, citizens gathered at the National Assembly that night to guard the National Assembly, chanting "impeachment and arrest" every weekend and safeguarding the square.

But it doesn't stop there.
Kwak Jong-geun also played an important role in making the coup fail.
First, he failed to take full control of the National Assembly and the election watchdog two days before the emergency martial law. He received prior instructions from Minister Kim Yong-hyun to prepare to immediately take control of the National Assembly and the election watchdog, but failed to actively implement them.
Second, they failed to comply with the order. When lawmakers were gathering in the plenary session of the National Assembly to lift martial law, President Yoon Suk Yeol instructed them to go in and pull out personnel even if they broke the door, but they did not comply.

Let's point it out one by one.

First, Tae-up.

Kwak Jong-geun was instructed by Defense Minister Kim Yong-hyun on emergency martial law over the phone on Sunday, Dec. 1. He thus informed and ordered specific plans to declare martial law, which had been implied from the past. Special measures will be taken within a few days (declared martial law), when the special forces were instructed to secure polls and flowers of the Democratic Party of Korea by the National Assembly's election watchdog. On Sunday, he received a phone call from Yoon Suk Yeol's president. He said, "I will see you after it goes well within a few days."
My mind went blank. It was not reasonable, but I couldn't refuse it. I couldn't deliver the order to subordinate unit. I prayed for no special announcement to my subordinate, Kim Hyun-tae, commander of the 707 Special Forces.
As the special forces did not order preliminary preparation, they did not bring helicopters to the special forces. As a result, the special forces' dispatch was delayed by more than an hour on Dec. 3, the day of martial law. The special forces landed at the National Assembly at around 11:40 p.m., an hour and 20 minutes after the martial law was declared, and sent troops into the country.
Kwak Jong-geun commanded while watching the screen at the command center, and Kim Hyun-tae, the special commander of 707, was sent to the scene by helicopter.
At 11:30 p.m., when the helicopter was on the move, President Yoon Suk Yeol called Kwak Jong-geun. It was the first time that President Yoon called the commander of the special forces directly on the phone. President Yoon Suk Yeol asked Kwak Jong-geun, who answered the phone in a nervous state, "Where are you?" Kwak Jong-geun replied, "I am in the command and control room and the helicopter is on the move."

Why did President Yoon Suk Yeol call at this point.
Let's look back on the 11:30 p.m. on that day. The appointment of martial law commander Park An-soo was 11:25 p.m. and the announcement of the first decree was 11:27 p.m. Perhaps he called to confirm the extent to which the special forces had entered, thinking, "Now that the decree was issued, political activities were banned and lawmakers can enter the National Assembly." It was speculated, but it would not be wrong.

If the helicopter had been prepared in advance, and the special forces had blocked the National Assembly at the same time as the announcement of the decree, how would the situation have progressed.
On the same day, martial law was declared at 10:30 p.m., and Chairman Woo Won-sik and Chairman Lee Jae-myung crossed the National Assembly wall at around 11 p.m. The special forces entered the National Assembly by helicopter with 50,000 rounds of live ammunition and cable ties. What would have happened if the special forces succeeded in blocking the National Assembly around 10:30 p.m.
The National Assembly's decision to lift martial law may have been canceled.
Just thinking about it is horrible.

Second, failure to comply with instructions.

Kwak Jong-geun received a second phone call from Yoon Suk Yeol's President at 12:30 p.m. on the same day. "It seems that the quorum has not been met. Bring down the personnel inside even if you break the door," he said. Kim Yong-hyun had already said in his previous phone calls, "Add additional 707 special forces" and "Stop the number of lawmakers from reaching 150."
A video conference with the commanders of the subordinate unit was left on, and the deputy was within a distance of hearing the phone. The president's voice could be heard by some of the troops.
Kwak Jong-geun, who was confused again, called Kim Hyun-tae, the general manager of the National Assembly. However, he failed to deliver what the president said.
"Can I enter by shooting a Taser or a horror bullet?"
Kim Hyun-tae immediately replied, 'No, you're in an accident.'
Kwak Jong-geun also concluded immediately. 'Yes, then don't do that.'
Nonetheless, special forces troops broke through the window of the National Assembly's main office at 12:39 p.m. But the appearance on the screen at the time was a puzzle. Special forces troops seemed too cautious. Perhaps the president's instructions were clear, but those of the commander, Kwak Jong-geun, were unclear.

National Assembly Speaker Woo Won-sik sat in the chairman's seat at 12:35. At that point or after, more than a half of the lawmakers, which are quorum of votes, appear to have gathered. However, the agenda was not drawn up, so the lawmakers kept waiting in the plenary session hall. Citizens also waited with anxiety. At that point, the window of the main office was broken. It wasn't until 1:02 a.m. that the passage of martial law was declared.
What would have happened if Kwak Jong-geun had delivered President Yoon's instructions as he had, thus allowing his troops to break down the door and enter the plenary hall? What if bloodshed occurred in the process? What if a majority of lawmakers were arrested for violating the decree and their crimes were unilaterally announced?
Martial law may have been justified after death.
Just thinking about it is horrible.

—
Let's think about it from Kwak Jong-geun's point of view for a moment.

If the coup in Yoon Suk Yeol had been successful, he might have been guaranteed a comfortable rest of his life as a high-ranking government official. Soldiers who sided with Chun Doo-hwan in the December 12 military revolt were boasting about their lives, serving as heavyweights, lawmakers, and ministers of the government, raising money for them. Roh Tae-woo was like that, Heo Sam-soo was like that, and Jeong Ho-yong was like that.
Now that the coup in Yoon Suk Yeol has failed, he has been arrested and charged with rebellion. His military career is over, and his pension will disappear. The rest of his life will be poor and miserable
U.S. Treasury yields have been soaring day after day. At the same time, the dollar has been strengthening and the exchange rate of other countries, including the won, has been weakening.

However, the interest rate on US corporate bonds does not rise as much as on government bonds. Even when interest rates on government bonds rise, the spread of speculative corporate bonds is steadily falling. This is very unusual given the status of government bonds that serve as the base rate for all bonds.

In the attached photo, U.S. Treasury yields and speculative corporate bond spreads move in the same direction until mid-2023. It's a move that fits conventional wisdom.

However, speculative-grade corporate bond spreads have been on the decline alone, even as U.S. government bonds fluctuate due to a large gap between the two after mid-2023.

Some warn that there is an excessive bubble in U.S. speculative corporate bonds and that the bubble will burst soon. This is a good warning to listen to.

However, if the gap between the two is due to the chronic malaise of the U.S. fiscal rather than the easy investment sentiment of the private corporate bond market, the story is different.

What great event happened in mid-2023 that broke the stable relationship between U.S. Treasury yields and corporate bond spreads?

On August 2, 2023, international credit rating agency Fitch downgraded the U.S. sovereign credit rating to AA+ from AAA. It was the first decline in 12 years. The market flipped.

Fitch pointed to "the erosion of national governance" as the main factor behind the credit rating decline at the time. The confrontation between Republican and Democratic parties has worsened day by day, raising concerns about the sustainability of the U.S. fiscal, with debt limit negotiations always reaching a dramatic conclusion only on the brink.

If much of the recent high rise in U.S. governance and fiscal crisis is due to the U.S. governance, we should not worry about the corporate bond rating bubble theory, but turn to the normalization of U.S. politics. Businesses are strong and healthy, but maybe the government is weak and fumbling?

High interest rates and high exchange rates are also causing tremendous difficulties for our economy. Persistent inflation is one of the reasons, but it is frustrating to see that US Treasury yields rarely fall due to the turbulence of US finances and governance failures.

Correct governance is so important to the economy.