Chapter 109: Travel Training (4)
“Miss, but why did CL lose so much? I mean, they took a $1 billion hit from that movie studio acquisition, but if that was all, I don’t think they would’ve collapsed this badly. The report says real estate was the main cause...”
Seo Ji-yeon, suddenly struck by a fundamental question, asked me. Despite having caught a cold, her academic drive was unshaken—she had no intention of stopping her studies.
“Mm, a bunch of misfortunes stacked on top of the investment failure... Low regulation is nice when you’re investing, but when the economy turns bad, it becomes a problem. Everyone could see the risk of collapse, but they still pushed in for some profit and got slammed.”
To put it simply, think of it like a ban on leverage.
In a bull market, no one understands why they shouldn’t use leverage because they can double their profit using borrowed money. But once the market drops and forced liquidation hits, they realize—
Ah, so that’s why everyone warns against leverage.
That’s why financial markets need basic regulations. If left unchecked, these finance-crazed suit-wearers will sell things they’re not even allowed to touch.
“...Then why did the downturn happen? It didn’t seem like it was just because prices had risen too much.”
“Because interest rates went up. When rates rise, the economy contracts. When they fall, it expands. That’s the basic idea. And while France wasn’t as bad as Britain, it had high unemployment and weak economic performance.”
“...?”
Seo Ji-yeon tilted her head, clearly not following.
“Why?”