Is there anyone who doesn’t like giving money in their pockets? It is truly compassionate money. It is a story of the 4th disaster subsidy that the party government will give out to people suffering from Corona 19. First of all, the policy of giving out from the victims is official, and a super supplement of around 15 to 20 trillion won is imminent next month.
Usually fiscal sounders oppose the funding. It is the logic that there is no money to distribute even though the country’s barns have been ruined by the Corona 19 hit. The government’s emergency fund is only 2 trillion won left in the budget for the actual vaccine purchase. Eventually, finances must be filled with deficit government bonds. It means to share the cash with the future generations in debt.
Although overlooked by the politics, there is another path of shock that subsidies throw on the national economy. Treasury bond rates. Treasury bond interest rates are soaring day after day as large-scale government bond issuances are expected to raise subsidies. The 10-year interest rate rose by 0.5 percentage points in the past half year, and the 3-year interest rate rose by 0.2 percentage points. There is no sign of a fall in interest rates due to the fact that the Korea-US interest rate is aligned.
A rise in government bond yields means a rise in loan rates. It is a link of’disaster support fund → issuance of government bonds → falling bond prices (increased interest rates) → increased bank procurement costs → rising loan interest rates → hitting the lives of the common people’.
Interest rates are skyrocketing as the authorities have locked up loans. The interest rate for household loans has already risen by 0.07 percentage points in one month to 2.79% (based on the amount of new treatment in December last year). The interest rate on credit loans (3.5%), which is frequently used by the common people, jumped by 0.49 percentage points. If the people who received 100 million won in credit loans due to corona 19 suffered from a hardship in credit loans received 3 million won in disaster support, would this really help if they had to pay more than 3.5 million won in interest a year due to an increase in interest rates?
The common people are well aware of the fear of indiscriminate loan interest. Benevolent disaster subsidies and cruel loan interest rates are linked through the capital market through a single string. This is the point where politicians who are trying to contemplate by distributing cash are trying to close their eyes. There is no free lunch in the national economy. We deserve to be on the lookout for political arbitrage traders who easily put their hands in the pockets of the people and only buy their own popularity.
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