South Koreans became hooked on plastic so dizzyingly fast that by 2003 they owned on average four credit cards each and their collective debts amounted to about $100 billion.
The cards had an additional allure as a status symbol, because previously in South Korea only the elite had them. “When I used credit cards, I somehow felt that others regarded me highly and that gave me confidence ”” and I forgot that I needed to pay it all back later,” said Kang Hee-yun, an office worker in her mid-40s, who eventually had to resort to “card kiting,” the trick of using one card to repay the debt on another.
The bill soon came due for many South Koreans. In 2003, a 34-year-old housewife harassed by creditors leapt to her death from her high-rise apartment after pushing out her three children. Families unraveled as their breadwinners lost their savings. A sudden surge in crime and prostitution led South Koreans to bemoan their “bankrupted society.” Finally, after millions had defaulted on payments, the government stepped in to help bail out LG Card, then the country’s largest issuer.
“The excess was similar to what’s happening with the American housing market today,” recalled Song Ji-hoon, a Rolex-wearing lawyer in his mid-30s who worked on behalf of one of the credit card companies. “Koreans wanted fancy cars, bigger TVs ”” although there was no real money to buy them ”” much the way those Americans thought that they could own houses with nothing but loans. Of course, in both instances, banks got greedy extending credits and mortgages to people who couldn’t pay back.”
This is a very fine piece from today’s New York Times op-ed (I am blessed today since I am with Dad–I have a paper copy on the day of publication). Here is your pre-reading quiz. In 1998, the household savings rate in South Korea was 25 percent. What was it in 2007? Guess before you click-KSH.