``We're getting nearer, but are not quite there yet." So said in effect the top central bankers of Korea and the United States, separately but almost simultaneously, as to when their economies should take the so-called exit strategies by ending record-low interest rates.
One may not need the highest monetary policymakers to know it; the world is reaffirming the fragility of its nascent recovery, reeling under the ``triple punches" of U.S. banking regulations, China's monetary retrenchment and the Southern European debt crisis. Here in Korea, officials also appear jittery about worse-than-expected economic indicators, especially the job data.
As in most other economic decisions, it also will end up as a choice of the lesser of the two risks ― inflation plus an asset bubble or short-circuiting the recovery in this case ― based on the careful comparison of gains and losses in each case. Only, the Korean officials will need to listen to growing voices, especially among foreign analysts operating here, which call for a rate increase sooner than later, in view of the nation's somewhat rapid escape from crisis and initial signs of price spirals.
Suffice to say for now the final decision should be left to the Bank of Korea governor, whose role has often been executed by higher officials, such as the finance minister or even the President.
Our concern focuses more on how ― rather than when ― the economy should wean itself off the stimulus package and return to normalcy.
The biggest and most immediate problem will be how to defuse the ticking bomb of enormous debts owed by households and small businesses when the BOK decides to let interest rates rise. Although BOK Governor Lee Seong-tae stresses the differences between the Korean and U.S. systems and situations, he will need to at least refer to what his U.S. counterpart, Ben Bernanke, said about various buffering stages before pushing the final button of rate hikes.
In the medium term, the government ought not to ``waste the good crisis" as President Lee Myung-bak once said, by reinforcing the restructuring of ailing industries and corporations, shattering the almost self-hypnotic ``too-big-to-fail" myth. Coming to mind in this regard is the case of Kumho Group, which went to the brink due to reckless expansion and a family feud.
Most important in the long run, however, is seeking ways of how the nation's economy avoids falling into the same crisis again and coming up stronger from the ongoing experience, which also has much to do with the effective control of unemployment by providing more jobs.
This day will only come when Korea moves toward an economic system, in which the nation relies not on speculative demand but on real demand, and industrial production, not finance, stands at the center of economic activities. The production will then be linked to welfare, which will sharply improve income distribution to continuously create productive demand within the system.
As long as the government sticks to its old strategy and keeps regarding job creation as something resembling a charity provided by big businesses, a great number of workers will remain jobless and poor ― crisis or not.