From the time that I was still a little girl until I got into middle school, whenever my teacher told us to write about our hopes and dreams, I always said that I wanted to be a loyal stay-at-home housewife/mom. To be specific, I wanted to marry a man who owned a ramen factory.The thing is, my parents never allowed me to eat ramen at home. So, of course I wanted to eat it more. And naturally, I thought that if I got married to a man who owned a ramen factory, that would be the day that I would be able to do anything that I wished. At the time, marriage and ramen were the two biggest symbols of freedom in my life.
Looking back, I think I was really cute even if I say so myself.
But the important thing is that just because my parents forbade me from eating ramen didn't mean that my appetite for ramen was somehow gone. Nor did it mean that it would disappear from the supermarket. So, of course I ate ramen whenever I got the chance. While I was younger, my perenially unemployed uncle used to live with us. He was always armed with a guitar in one hand and a song in the other. And whenever he got hungry, he used to send me on errands to buy him a packet of ramen. Whenever he sent me on such errands, I always bought the kind that I wanted and he always scolded me for getting the type that he thought didn't taste all that great.
As far as he was concerned Sam-yang Ramen was the best.When ramen was first sold in Korea in 1963, it used to cost ₩10 a pack (as of this writing US$1.00 is worth ₩1033). Later on, in the latter half of the 1970s, the price rose to ₩50 a pack. Then in the 1980s, ₩90 a pack. In the early 1990s, ₩220 a pack. In the late 1990s, ₩450. Now in the 2000s, it costs up to ₩750 a pack.
The price of ramen does go up really quickly, doesn't it?
However, it wasn't just the price of ramen that skyrocketed. The same applied to the price of just about everything else. I do believe that this is what it known as inflation.
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| The red line represents the Consumer Price Index whereas the green line represents the price of Sam-yang ramen from 1963 to the present day. |
Looking back, when I was in high school, I learned about inflation and deflation. Inflation, of course, refers to the general increase in the price of goods and the loss of a currency's value. Deflation, on the other hand, refers to the general fall in the price of goods and the improvement of a currency's value. Though I learned about both, I don't think I have ever experienced deflation.
One day, I was struck with a question. Why doesn't the price of ramen ever fall? I'm not talking about ramen being sold for lower prices during promotional sales. I am talking about a general fall in the price of ramen via deflationary pressures. If there is inflation, wouldn't it be just as natural as for there to be deflation as well? As long as there was a limited amount of money, then supply and demand would cause prices to rise and fall. Just like the way I learned about the price system in school.
Of course, the fact that prices only go up can only mean that the amount of money that circulates in the economy is not limited. Coupled with the fact that people don't really have a choice about which money they can get to use just goes to show why a lot of banks never seem to go bankrupt.
Let's say, for example, that we plan to go out to sea on a boat. No matter how much we pray for calm seas, there is no guarantee that it will always be smooth sailing. Sometimes there will be choppy seas and sometimes, there will be waves that we just cannot manage to stay above. If we ever find ourselves on a boat in the middle of the sea during a storm, wishing away the storm won't save us. All we can do is try to survive the storm the best way we can.
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When there is an increase in the amount of money, the price of goods rises. When the price of goods rise, that means that the value of money has fallen. For example, if a bag of cookies that used to cost ₩500 now costs ₩5,000, what that means is that in the past, whereas one could buy 20 bags of cookies for ₩10,000 in the past, now, people can buy only 2 bags of cookies for the same amount of money. That is why there has to be a limited amount of money. Every Central Bank in the world does works hard to make sure that there is an appropriate amount of money in their countries - no more, no less.
Source: Bank of Korea's Economic Education - Economics Lessons for Children |
The Bank of Korea likes to say that an “appropriate” amount of money ought to exist in the world and it claims that it works hard to achieve this balance. But how much is an “appropriate” amount of money? Should there be enough for economic growth?
If so, I have a few questions about that.
- Is it possible for far-off third parties to figure out which human action is economically beneficial and which is not?
- Is it possible for the Bank of Korea to know for sure our current economic climate?
- Even if it could, can it then somehow accurately analyze that data in timely fashion?
- Then can it actually accurately predict the economic landscape of the future?
- It is possible for the Bank of Korea to actually know how much is just the right amount of money that needs to be printed? Furthermore, is it possible for the Bank of Korea to know just how long that appropriate amount of money ought to be circulated?
It doesn't take a genius to realize that it is all a pointless exercise in futility.
Some time ago, Adidas had a rather catchy slogan – Impossible is Nothing. And the Bank of Korea seems to have decided to pursue a monetary policy based on that slogan's call for tenacious determination. As laudable as such a sentiment may be in sports, pursuing that kind of monetary policy is analogous to a snake oil peddler asking his potential clientele to trust him just this one time because he swears upon his life that his “medicine” is actually an elixir.
God knows what would happen if we took that “medicine.” It is likely that we would get even sicker than we were before we took that “medicine.”
Only learned people seem to be able to mess around with interest rates; and they seem to do with it with the gentle flick of their hands. And it is no different from praying for calm seas.
These central bankers have created a mess with their monopolization of the printing and distribution of money. In order to fix the mess they made, they have pursued expansionist monetary policies. And all the while they proclaim to all who are willing to listen that they are doing all they can to stem this flood. I wonder if any of these people ever lose sleep at night.
If they are, indeed, that exhausted from all their efforts that have stemmed from their good intentions to save the people, then, perhaps, for their sake, if for no one else's, they all ought to resign en masse.
If they are religious, considering the Pope's visit to Korea, perhaps they could also consider going to church for some much needed confession. They could just tell the priest that they did it because even they have bills to pay and need to put food on the table. I'm sure that they'd be forgiven. It wasn't like as though they were plotting to overthrow the State.
(To be continued in Part 2)
Planning Director of Freedom Factory
Yoojin Lee
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