The Gates of Hell
“Mr. Chairman, there’s a call from Cheong Wa Dae,” Kim Dae-seok said carefully. His voice carried a note of apology, for Yoo Jae-won had been deep in programming at his monitor. Kim Dae-seok hated interrupting him unless absolutely necessary, yet this was a direct line from the Blue House. Moreover, Yoo Jae-won himself had instructed that any call from Cheong Wa Dae be reported immediately.
“Cheong Wa Dae?” Yoo Jae-won stretched, rising from his chair and walking over. He had already received advance notice from Choi Kang-wook a few days earlier, so his expression remained calm. “Who exactly is calling? It can’t be the President himself.”
If it had been President Kim Young-sam on the line, Kim Dae-seok would never have looked so composed. Yoo Jae-won understood that at once.
“No, sir. It’s Kim In-ho, the Senior Presidential Secretary for Economic Affairs.”
“Kim In-ho?” The name felt faintly unfamiliar. Yoo Jae-won opened his Memory Palace, searched for the man, and quickly gathered the relevant information. After a moment he shook his head. “I don’t need to take this call.”
“Ah… is that so?” Kim Dae-seok flinched. Yoo Jae-won was not the sort to screen calls, let alone refuse one outright. The decision was highly unusual.
“Understood. I’ll make a note of it.” Kim Dae-seok bowed and withdrew from the study.
Alone again, Yoo Jae-won reopened the file on Kim In-ho inside his Memory Palace. The first article that surfaced was a scathing analysis titled “The Three Architects of the Economic Crisis.” As Senior Secretary for Economic Affairs, Kim In-ho’s duty had been to report the true state of the economy to the President in detail. Instead, he had concealed the nation’s foreign-reserve situation. If he had simply been ignorant, it would have been mere incompetence; the fact that he had known the truth and still withheld it made the offense far graver. He had deliberately deceived the President.
The reason he was calling Yoo Jae-won now was obvious: he knew the reserves were dangerously low and hoped to secure dollars. Yoo Jae-won had no intention of obliging. He was not a philanthropist, and with the dollar certain to surge, there was no reason to sell at a massive loss. Even if he did, the credit would go to Kim In-ho. Besides, Yoo Jae-won had been repeating the same warning for months: Korea’s economic fundamentals had not improved. Pouring dollars into the system would only provide temporary relief before the shortage returned.
He sent Kim Dae-seok a message via ID Talk: “Unless the call comes directly from the Ministry of Finance and Economy, the Prime Minister, or President Kim himself, do not forward it to me.”
After that firm instruction, Yoo Jae-won was left undisturbed—until early November, when the presidential campaign entered full swing. The previous day, Bloomberg had broken the news that Korea’s foreign reserves had fallen below two billion dollars. The report spread worldwide, and Korea was no exception. Even the insulated walls of Cheong Wa Dae could not keep the information from President Kim. The President now faced a crisis with no room left to maneuver. Yoo Jae-won had expected him to call personally, and he was not disappointed.
—Mr. Yoo, it’s been a while. I’m afraid I must make a rather embarrassing request.
President Kim’s voice sounded nothing like it had in their earlier conversations. The confident tone was gone; only fatigue remained.
“How may I help you?”
—What Korea needs most right now is dollars. Every bank is screaming for them. On top of that, companies have taken on far too much foreign debt in dollars and yen without understanding the risk.
“Would one hundred billion dollars in exchange suffice?”
—One hundred billion! That would be more than enough!
Through the crystal-clear connection of the Tiffany Phone, the President’s voice brightened noticeably. Even his breathing grew audibly lighter. Yet Yoo Jae-won had not finished.
“No. One hundred billion dollars will not be enough.”
—What do you mean?
“Even if I send you one hundred billion, you won’t last three months. ID Investment’s Korean reports have been raising these issues for the past two years. You still haven’t read them yourself, have you?”
Yoo Jae-won spoke with clinical detachment, laying out Korea’s structural problems point by point. Each sentence struck President Kim like a needle. At one point the President cleared his throat loudly, signaling his displeasure, but Yoo Jae-won continued without pause. He spoke as though conveying the anguish of the countless citizens who would soon suffer under the coming IMF regime.
—Listen here, Mr. Yoo! If you have no intention of helping, just say so!
President Kim finally raised his voice. An ordinary person might have flinched, but Yoo Jae-won remained unmoved. The presidency was at its strongest during the transition period before inauguration; after taking office, its power steadily eroded. With only a month and a few days left until the December 18 election, President Kim was little more than a toothless paper tiger. Even his own cabinet ministers were already maneuvering to protect their positions rather than obeying orders.
“On the contrary,” Yoo Jae-won said calmly. “If you will make two clear promises, I am prepared to act immediately.”
—Two promises?
“First, full liberalization of the exchange rate. Second, withdrawal of the pardons.”
The most urgent fire in Korea right now was the artificially suppressed exchange rate. Once it was allowed to float freely, the won would collapse. Prices of daily necessities would skyrocket overnight. Yet the shock would still be smaller than the forced adjustment that would come under the IMF. Moreover, because the global economy itself was not in crisis, the turmoil could be contained within two or three years. Delaying the inevitable only magnified the eventual damage.
The second condition concerned the pardons for the two former presidents imprisoned for their roles in the May 18 incident and for amassing astronomical slush funds. Yoo Jae-won had recently confirmed that President Kim himself had decided on those pardons. The timing was no coincidence: the election was only a month away. By granting clemency under the banner of national unity, President Kim hoped to recover support in the conservative stronghold of Daegu and North Gyeongsang Province—support that had eroded after he imprisoned the former presidents. Yoo Jae-won found the calculation unacceptable. Justice demanded that the two men remain in prison, and a fragmented ruling party would also benefit Jeon Myeong-heon’s campaign.
—…That is difficult.
After a long silence, President Kim finally spoke. He had weighed the political cost and reached the same conclusion Yoo Jae-won had anticipated: revoking the pardons would permanently alienate Daegu and North Gyeongsang, making any extension of his political influence nearly impossible.
“Then I have no choice either.”
—Is there truly no other way?
President Kim tried once more to persuade him, but Yoo Jae-won’s position did not change.
—Please reconsider, for the sake of the country.
“If that is your wish, I will review all current data again as soon as this call ends. Should you change your mind, please let me know at once.”
—…I understand your position, Mr. Yoo.
President Kim ended the call without bothering to hide his anger. His tone suggested he wanted to threaten consequences, yet he stopped short. The restraint was telling: recent polls showed Jeon Myeong-heon comfortably leading every other candidate. Threatening Yoo Jae-won now risked disaster if power changed hands.
Yoo Jae-won hung up with a bitter taste in his mouth. A few more days passed.
—KOSPI and KOSDAQ suffer record twin crashes!
—Won-dollar exchange rate breaks 1,000 won per dollar!
Ominous headlines poured out. Once the government’s interventions reached their limit, the exchange rate climbed relentlessly, hitting the daily fluctuation ceiling each day. Although the daily limit was only 2.25 percent, the won had risen steadily for months until it finally breached the 1,000-won barrier.
The real problem was President Kim—or rather, the civilian government’s erratic behavior. Deputy Prime Minister and Minister of Finance Kang Kyung-sik had told the President that if borrowing from allies such as the United States or Japan proved impossible, Korea would have to turn to the IMF. President Kim had effectively agreed. The very next day, IMF Managing Director Michel Camdessus arrived in Seoul in secret and began negotiations at the InterContinental Hotel in Samseong-dong, Gangnam. Normally, this would have led to an immediate public request for IMF assistance. Instead, the Ministry of Finance and Economy issued a statement denying any such talks. Even while using Camdessus’s own words to claim that Korea’s financial markets were not in crisis like those of Southeast Asia, the government concealed the fact of his secret visit. Then, without warning, it dismissed both Deputy Prime Minister Kang Kyung-sik and Senior Secretary Kim In-ho, replacing them with Lim Chang-yeol, formerly Minister of Trade, Industry and Energy, as the new Deputy Prime Minister and Minister of Finance and Economy.
Foreign capital’s reluctance to invest in Korea stemmed first from the North Korean issue and second from policy unpredictability. In the middle of a crisis that demanded swift decisions, the government had abruptly replaced its entire economic leadership. It was a desperate attempt to avoid the IMF at all costs.
Not long ago, President Kim had ranked first in all-time presidential popularity polls and seemed assured of extending his political influence. Now, within a few short months, the country’s situation had deteriorated beyond recognition. Yet he had no room left to retreat. On the morning of November 21, 1997, he held an emergency summit meeting with the leaders of the ruling and opposition parties. No concrete announcement followed. That same night at ten o’clock, Deputy Prime Minister Lim Chang-yeol publicly declared that Korea had formally requested IMF bailout funds.
The gates of hell had opened in Korea.