How Gold Came to South Korea’s Rescue

Nineteen years ago, South Korea came precipitously close to bankruptcy.
The Asian financial crisis had spread like a virus. Thailand, Malaysia, Singapore and other Southeast Asian countries were all affected, inciting fears of a global economic meltdown if the crisis couldn’t be contained.
Before 1997, South Korea had been held up as a textbook example of economic reversal and resilience.
Once a poor colony, the country underwent an unbelievably rapid transformation in the second half of the 20th century, propelled by smart policy reforms and heavy investment in education. Many called it the ‘Miracle on the Han River.’ By the end of the century, Korea had grown to become the world’s 11th largest economy. Residents had the incomes to enjoy comfortable, ‘Western’ lifestyles.
But in the summer of ’97, the bug arrived in Seoul. Businesses began to fail. Left with nonperforming loans, banks collapsed, while others discontinued fresh lending. The won was in freefall. Liquidity dried up. Foreign investors yanked nearly $18 billion out of the country. Hundreds of thousands lost their jobs.
Korea’s only recourse was to seek help from the International Monetary Fund (IMF), and in December, the lender approved a gargantuan $58 billion bailout package, the largest in history. The deal required Korea to liberalize trade and its capital accounts, reform its labor market, restructure corporate governance and more.
A new crisis emerged, then, which native Koreans still refer to as the ‘IMF Crisis.’
The government wasted no time in raising the funds to pay back the loan, and on January 5, 1998, a national campaign was launched that today stands as one of the most moving shows of patriotism and self-sacrifice the world has ever known.

This post was published at GoldSeek on 28 September 2016.