(Ju Jeong-wan's Perspective) The Dangerous Dream of Kim Seong-ju, Chairman of the National Pension Service

「 Inaugural address calls for resolving the youth housing crisis
The National Pension — the retirement funds of the entire nation —
should refrain from being mobilized for housing and foreign-exchange policy」

 

The inaugural address delivered by Chairman Kim on the 17th was considerably disconcerting — to the point of suggesting that he had been misguided from the very outset. In his inaugural address, he described it as his "long-held dream," stating that "the National Pension must step forward to resolve the serious housing problem." He further argued that "(the National Pension) should invest for young people who have postponed marriage and newlyweds seeking a home," and that it "should assume the role of a funding source for supplying housing at appropriate and reasonable prices."

Taken at face value, these remarks would not seem out of place as the inaugural address of the president of Korea Land and Housing Corporation (LH) rather than the chairman of the National Pension Service (NPS). It is indeed the government's proper responsibility to make policy efforts to alleviate the housing difficulties of younger cohorts. The question is where the enormous funding for this is to come from — a matter that should naturally be covered by the national fiscal budget. The proposition of mobilizing the retirement funds of the citizenry for this purpose is an extraordinarily dangerous idea. What may be someone's "long-held dream" could become a "terrible nightmare" for the majority of the population.

(omitted)

In the foreign-exchange market recently, suspicions have deepened that the government may mobilize the National Pension to defend against the depreciation of the won (i.e., a rising exchange rate). Deputy Prime Minister for Economic Affairs Koo Yun-cheol officially denied the proposition of mobilizing the National Pension for foreign-exchange market intervention; however, in practice, a path has been opened to expand the National Pension's "strategic currency hedging." Strategic currency hedging involves transacting in derivative financial instruments that sell dollars and purchase won in advance, in preparation for a scenario in which the won appreciates (i.e., the exchange rate falls) at some future point. This approach reduces the National Pension's risk of incurring foreign-exchange losses, but simultaneously diminishes the opportunity to realize foreign-exchange gains. This means that strategic currency hedging may, in certain circumstances, become a factor that undermines the National Pension's profitability.

The critical question here is who decides and implements strategic currency hedging, and for what purpose. If there is any underlying assumption that the National Pension's profitability may be sacrificed in pursuit of exchange-rate stability, this is an exceedingly dangerous proposition. One wishes to remind all concerned that the National Pension is not a discretionary fund to be freely deployed by any particular administration or political camp, but rather the precious retirement savings of the entire citizenry.

https://www.joongang.co.kr/article/25392880