The Miracle on the Han River ended with the Asian Financial Crisis in 1997. As the twin spectre of capital flight and currency speculation descended on South Korea, the Won lost half its value. The govt had to go hat-in-hand to the IMF for a $58 billion emergency bailout.

The US Treasury-influenced IMF made Korea eat austerity like it was a spendthrift 3rd world basket case despite the fact the crisis was caused by a private-sector led liquidity freeze. Korea was in fact in excellent fiscal shape.

In national solidarity, women donated gold jewelry to pay down the debt. 200 tonnes of wedding bands, heirloom jewelries etc were collected to be melted down. But it was nothing compared to what Korea suddenly owed.

Korea’s social contract broke. There was no longer the expectation of lifetime employment and stability. Suicide spiked. The generation of “IMF Kids” who came of age after the crisis lost their faith in their national destiny. The hellish, hypercompetitive Korea of Parasite and Squid Game was all downstream from that moment.

Hong Kong was expected to be next. With an astronomically overvalued stock and property markets, a delicate peg to the US dollar and no way to control its own financial destiny by printing money, it look like prime pickings for the vulture of international finance.

At the time of the crisis Scott Bessent was heading Macro Strategy at George Soros’ Quantum Fund. It’s widely inferred that Bassent placed “double bets”, shorting the HK Dollar as well as the Heng Seng Index. It’s like throwing two babies into the air and making the Hong Kong Monetary Authority choose between which one to save.

The hunter got hunted. HKMA shocked the world, not just by increasing interest rates to 300% to torch the shorts, but also buying $15 billion worth of blue chip stocks directly to shore up the Heng Seng. Nominally it acted independently as a part of 1C2S. In reality, none of it could have happened without a quiet nod from Zhu Rongji, who also made sure the Yuan held rock steady in support.

Soros’ Quantum Fund suffered heavy losses in 1998, widely believed to be tied to HK-related trades.

What was clear: the peg held, Hong Kong aura-ed up and Beijing can breath a quiet sigh of relief that they didn’t have Hong Kong fall into financial disaster so soon after the handover.

It’s kinda ironic that the US criticizes China for being so mercantilist and not opening up their capital markets and spending more.

It’s kind of like complaining that your friends don’t like going out drinking with you anymore when the last time they did, you mugged them. The more US sings the praises of financial liberalization, the harder Asian countries hoards US dollars.

Well, Bessent is now US Treasury secretary and here in London today as a part of the high-stakes US China trade talks. I don’t know what’s going on exactly, but this I know for sure:

He remembers them…and they remember him.

Vir