IMF Colonized Korea–Part II Evidence

[Photo caption/credit: South Korean Flag courtesy Google Images]

I published Part I of this article (IMF Colonized Korea—Part 1 (the “Agreement”)) two weeks ago. 

Here’s Part II–the “Evidence” supporting my contention that the IMF colonized South Korea in A.D. 1997.  This total article is a long, hard read.  It’s not for everyone.  But if you want to catch a glimpse of how the world’s central banks and economy really work, this article is worth your time.

In A.D. 1997, like several of the other “Asian Tigers,” South Korea suddenly slid close to financial collapse.  To avert national bankruptcy, the IMF offered to provide South Korea with a $55 billion loan “package”—$15.5 billion from the IMF, plus another $40 billion from other creditors that was arranged by the IMF.  That loan was premised on Korea’s acceptance of various new rules and some shocking political and economic concessions.

South Korea’s economic survival was guaranteed—if South Korea agreed to surrender much of its economic and politi­cal sovereignty to the IMF.  Eventually, faced national bank­ruptcy, Korea’s government accepted the agreement, the “loan” was received, the Korean economy sustained, and sovereignty surrendered.

Although the proposed 46-page IMF agreement was marked “STRICTLY CONFIDENTIAL” and “NOT FOR PUBLIC USE,” the Korean newspaper Chosun published a photocopy of the document on the Internet (http://www.chosun.com/ feature/imfscan/report1.htm).  If that report is still available, I can’t find it and it is no longer available at the original 1998 link.  However, a description of that report can be found on the IMF website at:  https://www.imf.org/external/np/sec/pr/1997/pr9755.htm.

 

•  In A.D. 1998, when I first read the agreement between the IMF and South Korea, I received my first lesson on how “real world” economics works. There were no graphs or mathematical models. The IMF “agreement” was not an exercise in intellect, theory or persuasion—it was pure extortion. Like Don Corleone in the movie The God­father, the IMF made South Korea an offer it couldn’t refuse.

Many may view the Korea’s plight with indif­ference.  But, it’s apparent that the IMF and/or other central banking entities like the ECB still employ virtually identical strategies in order to extract similar political and economic concessions from any na­tion—including Greece and the US—that it seduces into massive debt.

The following excerpts are from the pages noted of the IMF/Korea agreement:

  • Page 3. “Background. . . . since the beginning of 1997, ‘an unprecedented number of highly leveraged conglomerates have moved into bankruptcy,’ due in part to ‘a weakening in profitability associated with the cycli­cal downturn.’  These bankruptcies ‘severely weakened the financial system . . . cut the value of the banks’ equity and further reduced their net worth. . . . The weak state of the banking sector has led to successive downgrades of Korean financial institutions by international credit rating agencies and a sharp tightening in the availability of external finance.”

First, South Korea was not threatened with financial ruin because its government had borrowed too much “cheap currency” from the IMF.  Korea was threatened with ruin because too many of its conglomerate corporations had borrowed more than they could repay.

Who made the excess loans to South Korea’s conglomerates?  Were these loans based on the bankers’ benign intent to help South Korea?  Or were the loans made with malignant intent to colonize South Korea?

Second, I suspect the IMF’s “background” explanation contains a funda­mental lie. The IMF implies that the troublesome conglomerates were:

1) “highly leveraged“.  They’d had access to more credit than their actual economic capacities warranted.  Was their access to excessive credit merely a mistake made by the banking system or was excess credit an irresistible bait used to entice the “conglomerates” into a web of debt?  Was the excess credit provided by Korean or foreign banks?

2) afflicted by a “cycli­cal downturn” (a recession) in the economy.  The “cyclical downturn” was the “lone gunman” responsible for South Korea’s financial problems); at a time when,

3) there was also a “sharp downturn” in access to credit from foreign banks (who were probably the source of the earlier, excessive credit); which,

4) precipitated the conglomerates’ insolvencies; which,

5) threatened the Korean banking system (which had also made major loans to the conglomerates which would be repudiated if the conglomerates filed for bankruptcy); which,

6)  forced the South Korean government to choose to either “do something”—or let their economy collapse and risk the wrath of the South Korean people.  The only “something” available for “doing” was to surrender much of South Korean sovereignty and economic control to the IMF—and allow South Korea to become a de facto IMF colony.

That hypothetical chain of events sounds reasonable, but who ultimately provided the excess credit to the unworthy conglomerates?

The “usual suspects” would be the interna­tional (not Korean) banking community.  That international banking community would almost certainly have strong ties to the IMF.

Q:  Why did the Korean conglomerates fail to anticipate the economy’s “cyclical downturn”?  If the downturn were unexpected, the conglomerates might have been caught off guard.  But, if a downturn was “cyclical,” it follows that the downturn should’ve been expected as part of a predictable business cycle that all major conglomerates and banks should have routinely anticipated and guarded against.

A:  The Koreans and most of Asia were beguiled by the label “Asian Tigers”.  They were so intoxicated by their previous business success, they didn’t think they could be stopped by the business cycle.  Therefore, they borrowed every dime they could find and failed to prudently re­strict their use of credit.

Result?  When the cyclical/predictable downturn hit, the conglomer­ates became insolvent and discovered they had more in common with kittens than tigers.  The entire Korean banking system trembled.  This caused the international bankers to “sharply tighten” Korea’s access to private, foreign credit and almost precipitated a national collapse.  The threat of that collapse caused Ko­rean officials to “request” the benefit of IMF loans and protection.

This chain of events sounds a lot like standard sales techniques used by drug dealers. First, they give young girls free drugs to get them ad­dicted.  Then, they cut off the free supply.  Finally, they virtually force the girls into prostitution to support their addiction.

Foreign banks similarly loaned South Korea more credit (drugs) than it could handle, and then “sharply tightened” the supply of credit to force the South Korean government to “request” a job as an IMF whore.  If that metaphor weren’t roughly correct, why would the IMF impose financial and political restrictions that virtually destroyed Korea’s claims of sovereignty?

  • Page 4. “The [Korean] authorities’ policy response [to the conglomerates’ bankruptcy] was piecemeal and failed to calm markets…. [and] did little to restore market confidence.” [emph. add.]

That text included the first of fourteen references to the IMF document’s dominant theme: The need to maintain public confidence in the market and financial system.

Why is confidence so vital? Because all modern banking is:

1)  Based on debt.  Debt is only a promise to pay, but those promises are, irrationally, treated as assets;

2)  Overly indebted.  Thanks to fractional reserve banking, there are at least nine debt-based dollars in circulation for every “paper” dollar that’s deposited into bank vaults; and,

3)  There are NO real, asset-based dollars (gold, silver, or substance) to back up any of it.

The whole, global, fiat-monetary “system” depends on “confidence” because it’s all based on the average man’s irrational belief that the “dollars” in his wal­let and bank account are real (backed by assets).  That belief is not merely false, it’s a lie.  No amount of talking or reasoning is likely to convince most people that their dollars, the debt-based monetary system, and the government that supports it aren’t “real”.

Nevertheless, in the event of a serious financial collapse, circumstances could quickly prove his “dollars” are illusory when he tried to extract his dollars from a bank and discovered that those dollars were not only missing, but had never really existed.  Therefore, a financial collapse could be so re­vealing that it should be avoided at all costs.

  • Page 5

To “save” Korea, IMF objectives included:

  “… building the conditions for an early return of confidence …”

Note that the IMF was not merely building confidence, it was building “con­ditions” that would instill public confidence.  These “conditions” were structural changes in the Korean political and economic sys­tem.  Those changes sounds nice enough, but “structural changes” in the “conditions” of an economy or political system can be fairly described as “revolutionary“.

In A.D. 1997, the government of South Korea agreed to accept an IMF-imposed revolution.

(In A.D. 2015, Greece accepted another financial and economic revolution when it agreed to the ECB’s bailout plan.)

“. . . a strong macroeconomic framework designed to con­tinue the orderly adjustment in the external current account;”

I.e., if South Korea and/or its conglomerates couldn’t pay all of their debts when due, these debts would be mercifully “adjusted” to allow more time to repay.  But, the “external” debts would be repaid and would not be expunged in bankruptcy.  South Korea thereby guaranteed to repay the international bankers who improp­erly loaned Korea excessive credit in the first place.

“A comprehensive strategy to restructure and recapitalize the financial sector.”

Sounded nice, but it meant the Korean banking system would submit to a reorganization including new (foreign) control. How else could the nearly bankrupt Korean banks “recapitalize” except by bor­rowing more foreign “money”?  Once the Korean banks borrowed excessive foreign currency, they became servants to (and controlled by) foreign lenders.

  • Page 6

Korea’s “day-to-day conduct of monetary policy . . . will be implemented in close consultation with the [IMF] staff.”

“Close consultation” meant the IMF would essentially control Korean monetary policy.  (I’ll bet the recent Greek agreement with the EU and ECB also requires Greece to submit to “close consultation” with the EU and/or ECB.)

 “… [I]ncreases in mineral oil taxes and excises yielding about, ‘A percent of GDP [must] come into effect.  Additional measures would focus on reducing current expenditures [government benefits], rais­ing current revenues [taxes] by broadening the tax bases [taxing more people and products] rather than increasing tax rates . . . .”

As a “contingency measure,” the Korean government could raise “indirect tax rates and excise tax … by up to 30 percent.”

Translation: South Korea would simultaneously increase the average Korean’s taxes and reduce his governmental benefits. This squeeze would force common Koreans to pay for the excess, incompetence or criminal conspiracies of Korea’s conglomerates, government, and bankers. The conglomerates, government officials, and Korean bankers may have volunteered to become the IMF’s call girls, but the common people were involuntarily drafted into the ranks of IMF streetwalkers.

Taxes rose.  More of the South Korean “mice” were drafted to power the “hamster wheels” and all those wheels had to spin faster to generate more interest and profits for the IMF.

  • Page 8 Financial Sector Restructuring—the heart of the IMF’s “loan package”.

Remember the famous Baron Rothschild quote, “Give me con­trol of the nation’s money and I care not who controls the govern­ment”?

Well, by “restructuring” Korea’s “financial sector,” the IMF assumed de facto control over Korea’s monetary system. The IMF restructuring strat­egy comprised three broad elements:

1. A “clear and firm exit policy” which sought “to ensure the rapid resolution of troubled financial institutions in a manner that mini­mizes systemic distress and avoids moral hazard. . . . [M]erchant banks that are unable to submit appropriate restructuring plans within 30 days will have their licenses revoked. . . . [T]his policy will include mergers and acquisitions by domestic or foreign institutions. The supervisory authorities [IMF] will review such mergers and acquisi­tions to ensure that the new groupings are economically viable. This process will entail losses to [Korean] shareholders.”

Q:  Who determines what’s “appropriate”?

A:  The IMF

Any bank that didn’t toe the IMF line within 30 days would be closed.  Financially troubled institutions and banks could be acquired by foreigners. No proposed merger between one or more Korean institutions or banks would be allowed without the IMF’s approval.  Korean stockholders were guaranteed to lose money.

 

2.To provide “strong market and supervisory discipline,” the Korean authorities “will request urgent passage of a bill to set up an agency that will consolidate the supervisory functions presently dis­tributed among various agencies. The legislation will give the agency operational independence and adequate resources—in line with [the IMF’s] Core Principles for Effective Banking Supervision—thereby free­ing it from outside [non-IMF] interference.”

Who would operate this new, independent, supervisory agency?

Directly or indirectly, the answer would be the IMF.  The IMF thereby took control of South Korea’s merchant banking system.

3.Because circumstances were said to be “urgent,” there was no time to waste on debate or consideration. Korea was forced to quickly pass laws to create a central, independent bank supervisory agency that is free from “out­side” interference of the Korean people or government and subject only to the IMF. I.e., Korea surrendered control of their entire monetary system to a new central agency that sounded very similar to America’s “operationally independent” Federal Reserve System.

  • Page 9 “[T]o promote competition and efficiency in the financial sec­tor, the authorities will allow foreigners to establish bank subsidiaries and brokerage houses . . . .”

Thanks to the IMF, South Korea’s previous policy prohibiting foreign banks was abandoned. After the agreement, foreign banks could feed off the Ko­rean people.

South Korea was thereby colonized

  • Page 10 Capital Account Liberalization. “The govern­ment has announced that the ceiling on aggregate foreigner’s ownership of listed Korean shares would be increased from 26 percent to . . . 55 percent . . . . The ceiling on individual foreign ownership will be increased from 7 percent to 50 per­cent…. [and] eliminate restrictions on foreign borrowing by corporations.”

Written by Alfred Adask
Report Adask’s Law

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