We have played this game before

Cho Hyun-sukThe author is the economy news editor of the JoongAng Ilbo.The protagonist Seong Gi-hun, played by Lee Jung-jae in the Netflix drama "Squid Game" (2021), barely survives a deadly contest worth 45.6 billion won ($30.3 million) in the first season. Instead of fleeing with the prize money, however, he chooses to reenter the game. Because he has played before, he believes this time will be different.After the first brutal round leaves participants in panic, Seong shouts to the terrified contestants, “I’ve played this game before.”International oil prices are rising again amid the ongoing conflict in the Middle East, including the closure of the Strait of Hormuz to select nations. The price of international crude oil is displayed on a screen at the dealing room of Hana Bank in central Seoul on March 13. [YONHAP]The result unfolds exactly as viewers might expect. Even for Seong, experience does not change the outcome. With the exception of a single survivor, nearly everyone meets a grim fate. The bloody survival thriller and the often dense field of economic and financial crisis research share an unexpected connection here.That connection is captured in the book "This Time Is Different" (2009) by Harvard University professor Kenneth Rogoff and economist Carmen Reinhart. The authors examine centuries of financial crises and identify recurring patterns that appear again and again. They describe these patterns as the “this time is different” syndrome.The sequence of crisis typically unfolds in a familiar way. Debt accumulates first. Excessive borrowing creates the illusion that economic growth is stronger than it truly is. Housing prices and stock markets rise, while financial institutions appear stable and profitable. Eventually an unexpected shock or external trigger shatters market confidence and the economy plunges into crisis.At this point the “this time is different” syndrome emerges. Policymakers and investors convince themselves that they have learned from past mistakes and become more sophisticated. They believe that new financial tools, better regulation or superior knowledge will prevent the same collapse from happening again.Yet Rogoff and Reinhart reach the opposite conclusion. Their extensive historical data show that crises arrive repeatedly and rarely turn out to be different. Like Seong Gi-hun returning to the deadly game, economies often repeat familiar mistakes.This year bears unsettling similarities to 2008. At that time geopolitical tensions in the Middle East intensified as concerns over Iran’s nuclear program resurfaced and the Iraq war added to regional instability. Supply anxiety combined with surging demand from emerging economies pushed commodity prices, including oil, sharply upward.By 2008 international oil prices had soared above $100 per barrel. In Korea, the newly inaugurated administration of President Lee Myung-bak entered office with the ambitious “747 pledge,” which promised 7 percent annual economic growth, $40,000 in per capita income and the world’s seventh largest economy. But the government soon confronted a different reality — high oil prices, a weak currency and rising interest rates.From its first year in office the government rolled out emergency measures. Fuel taxes were cut in March. In June authorities including the Fair Trade Commission and the National Tax Service launched wide-ranging investigations into hoarding and collusion affecting oil, telecommunications fees and processed food prices.Some policies were unprecedented. The government drafted a supplementary budget under the banner of “overcoming high oil prices and stabilizing livelihoods.” It used tax revenue collected beyond expectations the previous year to provide oil price rebates of up to 240,000 won per person. In many ways the policy resembled an early version of the disaster relief payments seen in later years.The same year also saw the launch of Opinet, the Korea National Oil Corporation’s fuel price information system, which publicly disclosed gasoline prices at gas stations nationwide beginning in April.Despite these efforts rising oil prices proved impossible to contain. In July 2008 global crude prices reached a record $147 per barrel. Less than two months later, however, prices collapsed sharply. The trigger was the bankruptcy of Lehman Brothers, a major U.S. investment bank, in September.The economic slowdown tied to high oil prices exposed the fragile debt structure behind the housing and financial markets. The subprime mortgage crisis burst the bubble, setting off the global financial crisis that would reshape the world economy. In the end the crisis was overwhelmed by an even larger one.Recent warnings suggest echoes of that period. On March 13, Bank of America chief investment strategist Michael Hartnett cautioned that movements in asset markets this year resemble the pattern seen in 2007 and 2008.Vehicles line up at the Mannam Square gas station in Seocho District, Seoul, on March 8 as fuel prices at domestic gas stations rise rapidly following the outbreak of war between the United States and Iran. [KIM JONG-HO]He pointed to several parallels: rising oil prices driven by Middle East tensions, instability in private corporate lending and the risk that central banks could misjudge policy amid stagflation — a combination of inflation and economic stagnation.Of course differences also exist between 2008 and today, particularly for Korea. Household debt has surged from 724 trillion won to 1,979 trillion won, nearly tripling. Government debt has climbed from 309 trillion won to 1,302 trillion won, more than quadrupling.Changes in the stock market are especially striking. Margin trading — known in Korea as “debt investment” — stood at just 3.5 trillion won in March 2008. This month it has approached 32 trillion won across the Kospi and Kosdaq markets, nearly ten times higher.The Lee Jae Myung administration has been announcing a series of measures to address rising oil prices. Many resemble steps taken during the Lee Myung-bak government. Yet it has also revived the oil price notification system, a policy abandoned nearly three decades ago that effectively functions as a price cap.Most of the measures rely on fiscal spending or temporary relief. Rogoff and Reinhart warn that economies heavily dependent on debt inevitably face greater vulnerability during crises.For now many observers can only hope that this time, unlike in the past, the outcome will truly be different.This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.