40 Years of Wealth Rules Overturned

This figure was the sum of a 35% bank interest rate and government incentives, even surpassing Warren Buffett's 60-year average return of 19.9%. However, this high-interest era ended as the average domestic deposit interest rate significantly dropped to 2.9% in 2020.

In 2005, the market price of an Eunma Apartment (31 pyeong) was 700 million won, equivalent to approximately $680,000 at an exchange rate of 1,024 won.

By September 2026, the actual transaction price had risen to 3.13 billion won, a 4.5-fold increase in won terms. However, at an exchange rate of 1,330 won, the dollar equivalent was $2.34 million, making the increase only 3.4 times in dollar terms.

When converted to gold prices over the same period, the value that was 48kg in 2005 decreased to 18kg in 2026, demonstrating that the rise in real estate prices is an illusion caused by the real decline in currency value.

In 2005, the price of gold was 15,000 won per gram, which has now significantly increased to 177,000 won.

Consequently, the weight of gold that could be purchased with 1 million won drastically decreased from 68.4g in 2005 to 20.8g in 2019, and currently to 5.6g. This clearly shows a significant decline in the purchasing power of currency when measured against gold.

The first was the decline in currency value due to quantitative easing, which began in 2008.

The second was when interest rates, having crossed a critical threshold, began to rebound, signaling a counterattack by money. 2026 appears to be the year when serious interest rate hikes and the counterattack by money will commence, marking a transition to an era where debt risks escalate.

The U.S. attempted to stimulate the economy by cutting benchmark interest rates during each recession, which led to a prolonged low-interest rate environment for 40 years.

An economic structure emerged where those who borrowed money for investment received subsidies, rather than depositors earning interest. After the 2008 financial crisis, quantitative easing led to a surge in money supply, further widening the wealth gap.

The newly released money flowed primarily to investors, not depositors, driving up asset prices and exacerbating asset inequality.

The Fed's assets, which were $900 billion in August 2007, surged to $4.5 trillion by the end of 2014, and further expanded to $9 trillion by April 2022, after the COVID-19 pandemic.

During this period, the Nasdaq index rose 12-fold in dollar terms and 16-fold in Korean won equivalent. Gold prices rose 10-fold in Korean won equivalent, and the S&P 500 index rose 8-fold. The Fed's quantitative easing directly propelled the asset market.

Over the past 20 years, while the Nasdaq rose 12-fold and gold 7.5-fold, the KOSPI only saw a 5-fold increase.

Apartments in Gangnam-gu showed only a 2.7-fold increase based on actual transaction prices from the Ministry of Land, Infrastructure and Transport, reflecting their already high prices since 2006. The short average stock holding period of Korean investors, only 5 days, is also cited as a factor hindering wealth accumulation.

However, the central bank's monetary policy is not directly distributed to individuals but supplied to the market through banks, primarily flowing into asset markets and increasing the wealth of asset owners. Due to concerns about inflation, there is a structural limitation where new currency from the central bank is not directly distributed to individuals.

When the central bank purchases bonds and supplies cash to banks, banks use these funds for lending.

In this process, the wealthy borrow money at lower interest rates, while ordinary citizens are placed in a discriminatory lending environment, borrowing at higher interest rates. This exacerbates interest rate differences based on creditworthiness, contributing to widening wealth inequality.

During the 2000 dot-com bubble, the Nasdaq index fell 78% from 5,100 to 1,100. However, ordinary citizens faced difficulties in obtaining loans or were subjected to high interest rates (15-16%) during the crisis.

In contrast, the wealthy borrowed money at low interest rates (3%) and reinvested it in the stock market, which rose by an average of 11% annually, monopolizing the profits. This is also the background behind the increase in the share of wealth held by the top 1% of U.S. assets, from 22% in 1990 to 31%.

During the 2008 global financial crisis, asset prices rose rapidly due to the central bank's liquidity provision.

However, the lives of ordinary citizens only recovered to pre-crisis levels in 2014, six years after the declaration of crisis overcome. Over the past 40 years, the share of savers has been transferred to investors, and ordinary citizens who recently ventured into investment are now facing high interest rates.

U.S. interest expenses are projected to reach $880 billion in 2024, surpassing defense spending of $870 billion, and a 'snowball effect' is expected, with interest expenses reaching $2.1 trillion by 2036.

Interest rates are continuously rising due to structural pressures from declining savings due to baby boomer retirements and increasing government debt, which raises demand for money.

Due to the mass retirement of the baby boomer generation, the number of tax-paying individuals is rapidly decreasing.

Simultaneously, spending on welfare benefits for those aged 65 and older is surging, leading to a rapid increase in the U.S. fiscal deficit year after year, a situation that is difficult to resolve structurally.

While the U.S. primarily features 5-10 year long-term corporate bonds and 30-year fixed mortgage loans,

Korea has a higher proportion of 1-3 year short-term corporate bonds and variable-rate loans. Therefore, prolonged high interest rates could quickly lead to a contraction in household consumption and a broader economic impact.

We tend to believe that 1 million won will still be 1 million won a year later, but asset prices change significantly during that time.

In a situation where asset price illusions occur due to the depreciation of money, rising interest rates drastically increase the interest burden for borrowers. Therefore, it is important to evaluate the real value, not just the nominal value, when investing.

Turkey's stock prices rose 18.9-fold over the past 13 years, but the value of the lira against the dollar plummeted to 1/24th during the same period.

When reflecting the currency depreciation, Turkey's stock prices actually fell by 22% in dollar terms, demonstrating that nominal stock price increases do not signify real wealth growth.

It is necessary to construct a portfolio by distinguishing between 'anchor' assets that stabilize the ship in turbulent waters and 'sail' assets that propel it forward quickly.

Investing in productive assets and monopolizable sectors, and securing the financial stamina to withstand by reading the direction of money movement, are key strategies for survival and reversal in a volatile market.