Lee Jae-myung's Debt Expansion: Selective Targeting of Expensive Housing, Trump's "Housing Asset Increase": A Dilemma
President Lee Jae-myung's targeted attacks on high-priced housing prices amidst the debt-increasing pressure of Trump's hardline conservatives, who prioritize "housing prices as assets," pose a dilemma within the hardline conservatives' strategy of increasing debt.
Under the US conservative system, housing prices rose sharply, and the Trump administration led the way. In Korea, housing prices rose first in high-priced housing due to the increased supply of cash to support the stock market. The selective targeting of "multiple homeowners" was framed as "supplying the homeless" and "the suffering of young people without homes."
In the US, stabilizing housing prices was a key component of policies to expand ownership, but the rapid rise in housing prices following the pandemic is a stark contrast.
Japan's 1980s real estate bubble burst was triggered by a large trade surplus, a boom in US building purchases, and a rapidly rising stock market. This was followed by a sharp adjustment in the yen exchange rate following the Plaza Accord in 1984.
The Lee Jae-myung administration is a typical imitation of the recent US housing policy of "surges in prices," where "supply expansion growth driven by a surge in stock prices leads to a slowdown in housing construction, interest rates are lower than in the US, and the exchange rate surges due to the undervalued Korean won."
President Lee, in his debt-expansion supply-side strategy, targets high-priced housing. In the process of personally determining the criteria for selecting those who are exempt from price increases, he omits policies that require a cross-examination process within the realm of political parties and the government, opting instead for a unilateral offensive using direct, personal social media.
The Lee Jae-myung administration announces inflation figures excluding "ownership costs," a key component of the US Consumer Price Index (CPI). Since owner-occupancy costs account for approximately one-third of the CPI, the actual inflation in Korea appears to be exceeding 3%, not the low 2% reported.
Edward J. Pinto, co-director of the American Enterprise Institute's (AII) Housing Center, told the New York Times, "If economic growth is strong and housing construction remains at a constant level, low interest rates will only drive up housing prices."
The United States' housing crisis began with the Great Depression, triggered by the stock market crash. In the 1970s, with its prolonged period of low interest rates, inflation surged, rapidly transforming owner-occupied homes into "growth stocks" signifying wealth accumulation. This shift shifted the focus from "price appreciation" to "supply and demand."
As homeowners began to view their homes as tools for rapid wealth accumulation, debt expansion and the stock market became closely intertwined. South Korea, under a bureaucratic dictatorship, replaced "personal loans," which had been shunned by the "development finance dictatorship" that tied bank loans to corporations, with "housing rental deposits."
Bank of Korea statistics show that the outstanding currency balance surged 9.1% last year to 210.6956 trillion won, up from 193.1519 trillion won the previous year. This surge was driven by soaring stock prices and high-priced housing prices.
The annual growth rate was 4.4% in 2022 and 3.6% in 2023, but soared to 9.1% last year as the Lee Jae-myung administration injected cash into the market to stimulate consumer spending. This boosted the real estate and stock markets. Since early this year, President Lee has engaged in a daily psychological warfare on social media, forcing real estate funds into stock market investments, portraying "high-priced housing" as "the enemy of multiple homes."
Under the Moon Jae-in administration, which was characterized by the pandemic and the expansion of the policy-driven economy, the Bank of Korea's currency issuance rate soared to 17.4% in 2020 and 13.6% in 2021. It then plummeted to 4.4% in 2022 and 3.6% in 2023, before rebounding sharply to 9.1% last year under Lee Jae-myung's administration, fueled by debt expansion and stock market expansion.
The New York Times, which analyzed the escalating housing prices under Trump's hard-line conservatives, stated on the 4th, "The desire to protect the investments of existing homeowners while making it easier for first-time homebuyers to acquire ownership is a dilemma that has puzzled policymakers for decades. In a country where homeownership is a national aspiration and a major source of personal wealth, there's no way to lower costs for buyers without also squeezing their wallets."
President Trump, who pledged to address housing affordability, a key concern for voters during his second term, said at a Cabinet meeting last week, "I don't want to lower housing prices," but rather "raise the value of homes for homeowners."
In a speech to the billionaires' gathering at Davos last December, President Trump said, "Every time we make homes more affordable for someone, we actually lower the value of those homes." He added, "I don't want to hurt the value of homeowners. They walk down the street in their city for the first time in their lives and are very proud that their homes are worth $500,000, $600,000, $700,000."
Housing is a unique economic good.
The New York Times stated, "Housing is a basic necessity—shelter—on the one hand, and a financial asset on the other. This divide has become a double-edged sword in economic policy."
Economists across the ideological spectrum have diagnosed that the United States is experiencing a severe housing shortage, driving up home prices and rents. They typically advocate a solution: focusing on policies to increase housing supply, which would "align supply with demand and curb price increases."
The New York Times noted, "If the president were talking about housing supply and demand in almost any other context, this approach would seem uncontroversial. But Trump frequently argues that expanded oil drilling will calm energy prices. But when it comes to housing, the basic math isn't so simple."
During his second term, the Trump administration has proposed several measures aimed at making housing development more feasible, or indeed more affordable, with two key ideas.
For example, in November, he floated the idea of a 50-year mortgage, which would lower monthly mortgage costs but would add hundreds of thousands of dollars to the cost of a typical home.
Trump's advisers have been discussing allowing homebuyers to use retirement accounts for down payments, and at a Cabinet meeting, Trump finally pointed to his repeated "mortgage rate cuts" as the "primary solution to increasing homeownership," which has actually become a policy of debt expansion.
The New York Times stated, "What these ideas have in common is that they are 'demand-side' policies aimed at making mortgages cheaper or easier to obtain," and that "economists estimate a housing shortage of 4 to 7 million people." The Trump campaign has been characterized as a conservative policy.
Judge Glock, a senior fellow at the Manhattan Institute, a conservative think tank, told the Times, "Most of Trump's proposals so far are consistent with the federal government's 100-year history of accumulating more debt for the people."
The New York Times analyzed the tumultuous history of housing and the federal government in the United States, starting as the most robust private asset in the nation's history, government intervention during the Great Depression, its transformation into a "growth stock" during the 1970s' rising inflation, and the shift from the prolonged ultra-low interest rates caused by the COVID-19 pandemic's expansion of the money supply to the rapid rise in high-priced housing.
While property ownership remains a core value of social stability in the United States today, the federal government played little role in helping people purchase homes until the Great Depression.
Homebuyers typically obtained mortgages through cooperatives called building and loan associations, which required large down payments and repayment terms over a decade or so.
As banks began to collapse following the Great Recession, the federal government took a series of measures, including the establishment of the Federal Housing Administration, to stabilize the housing market and prevent homeowners from falling into foreclosure.
This lowered down payments and, over time, introduced products like the 30-year fixed-rate mortgage, broadening the pool of buyers.
In the decades that followed, the federal government's role in housing continued to expand, fueled by veterans loans, a program born from the military preference program immediately following World War II, and by support from financial institutions like Freddie Mac.
The federal government's housing policy, coupled with financial policies, aimed to increase homeownership by forcing lenders to extend credit to more buyers than the purely private market could accommodate.
Dartmouth economist William A. Fishel told the New York Times, "Stabilizing home prices was a key component of expanding homeownership, but the rapid price increases that began to change in the 1970s, when inflation surged and owner-occupied homes became 'growth stocks.'"
As homeowners began to view their homes as tools for rapid wealth accumulation, growth restrictions, such as environmental laws and zoning policies that discouraged new development, proliferated across the country, driving up home values. This effectively brought federal and local housing policies into conflict.
While the federal government attempted to subsidize mortgage rates to stimulate housing demand, local governments attempted to limit the supply by making it more difficult to build homes. Local governments' "prioritizing" of existing housing led to predictable outcomes, accelerating the pace of housing price growth.
Dr. Fishel coined the term "humboter" to describe a new wave of voters focused on real estate values, a tactic many now simply refer to as NIMBY ("stay out of my backyard").
This shift contributed to a housing shortage that had been building for decades, most acutely in high-priced markets like California, where newcomers were flocking.
The New York Times noted, "It was the aftermath of the Great Depression, the stock market crash, that turned the housing shortage into a national crisis. In the years following the financial meltdown, lenders pulled out and local homebuilders closed."
US homebuilding plummeted by more than 70% from 2005 to 2009, and nearly two decades later, it still hasn't reached its pre-Depression pace.
During the pandemic, interest rates plummeted, boosting demand and further driving up housing prices.
Economists' concerns have focused on interest rate cuts, arguing that if interest rates decline without a healthy increase in housing supply, home prices will rise, negating the benefits of low mortgage rates.
Edward J. Pinto, co-director of the Housing Center at the American Enterprise Institute (AII), stated, "If economic growth is strong and home construction remains at a steady pace, low interest rates will only drive up home prices."
Housing politics is nearly impossible to map along traditional Democratic and Republican divides.
The New York Times stated, "A better way to think about the housing tension is to pit incumbents against newcomers, stability against change."
Dr. David Schleicher, a Yale Law School professor and writer on land use and property, pointed to California, where "home voters" from both parties oppose growth and change.
"Progressives have pushed for expanded environmental protections, while conservatives have resisted property tax increases," he told the Times. "There are right and left, but ultimately, it's the same conservative."
The new singularity is the shift toward bipartisan NIMBYism ("Yes in My Backyard").
The New York Times stated, "In other words, the consensus is that the nation must build more housing, faster." "In recent years, cities and states have passed measures to increase housing supply, such as allowing backyard units and easing restrictions on multifamily construction, but their stated goal is to make housing more affordable."
Like the "home-voter" revolution a half-century ago, this movement has spread from conservative states like Montana to progressive ones like California.
There are currently several measures in Congress aimed at increasing housing supply that enjoy bipartisan support.
In the American system of municipalities, state and local leaders, who once considered it politically destructive to confront local homeowners, now routinely run for office with anti-NIMBY policies and a commitment to lowering housing prices.
Excessively high real estate values create their own instability.
Parents who feel their retirement accounts are sufficiently funded by their homes may be upset when their grandchildren cannot afford to live nearby due to high housing prices.
High-rent areas are struggling to find workers, while neighborhoods struggling with homelessness are seeing continued price increases for luxury condominiums.
"Until recently, the problem wasn't serious enough for voters to find solutions," California political consultant Jason Elliott told the New York Times. "But now the social costs are too obvious to ignore."
He served as a senior adviser to Gov. Gavin Newsom from 2019 to 2024.
At a Cabinet meeting on the 3rd, President Lee approved the "Semiconductor Special Act," which provides ultra-low-interest financing to conglomerates. He stated, "Stock prices are beneficial to corporate activities. Furthermore, no one is harmed by rising stock prices." However, the Korean stock market plummeted starting on the 5th, triggered by the decline in US technology stocks, with foreign investors, who had previously enjoyed substantial profits, selling.
In his New Year's press conference, President Lee stated, "There is no need for undue concern, as we are in the process of normalizing."
Regarding the sharp decline in stock prices, President Lee stated, "Some people like it," adding, "I don't know why." He avoided mentioning foreign investors profiting significantly from the plunge, confirming foreigners as the absolute ruling class in Korea.
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