🌍 French Protests and the Global Interest Rate War: “Why Has Life Become So Tough?”

Recently, massive protests have erupted across Europe, including France, bringing university students, teachers, farmers, and the middle class into the streets. This is not mere political discontent. It is an explosion of outcry from ordinary citizens saying, “Everything has gone up except my salary, and mortgage rates have skyrocketed—we can’t survive like this.”

Today, the global economy is facing a complex crisis combining the heavy burden of “high interest rates and high inflation” with a “government budget crunch.” We break down this complex phenomenon in simple terms from the perspective of everyday people.

1. Current Issues: Why Has Public Anger Exploded?

1) Rate Hikes Driven by the U.S.: Why Are Ordinary Citizens in Korea and Europe Suffering?

• Interest Rate Storm from the U.S.: The U.S. Federal Reserve (Fed) aggressively raised benchmark interest rates to curb inflation. As U.S. rates rise, global capital moves toward the U.S. to seek higher yields.
• Inevitable Rate Follow-ups: Other economies—such as Europe, South Korea, and Japan—have no choice but to raise interest rates reluctantly to prevent currency depreciation and capital flight.
• Collapse of Daily Livelihoods: As interest rates climb, interest payments on mortgages and home-rent loans double or triple. Combined with rising prices for fuel and groceries, everyday citizens have hit a breaking point where salaries alone can no longer cover basic living costs.

2) The Government’s Catch-22 Dilemma

Governments are not sitting idly by out of choice—they are trapped in a dilemma.

┌─────────────────────────────────────────────────────────────┐
│                 Government Dilemma (Catch-22)                │
├──────────────────────────────┬──────────────────────────────┤
│ 💸 Increase Spending         │ ❌ Spike in national debt    │
│    (Expand Welfare/Support)  │    → Bond yields surge       │
│                              │    → Fiscal crisis (Europe)  │
├──────────────────────────────┼──────────────────────────────┤
│ ✂️ Cut Spending              │ ❌ Backlash from citizens   │
│    (Austerity/Budget Cuts)   │    → Mass protests           │
│                              │    → Movements to overthrow  │
│                              │       administration         │
└──────────────────────────────┴──────────────────────────────┘

2. Regional Policy Comparison: “Every Economy Has Different Vulnerabilities”

Europe, the U.S., and Asia (South Korea and Japan) face distinct economic weaknesses, meaning their “shields” against interest rate shocks vary significantly.

💡 A Closer Look at Regional Solutions

🇪🇺 Europe (EU/ECB): “Prevent the Weakest Link from Breaking”

• The Problem: Fiscally stable countries like Germany can endure the pressure, but heavily indebted nations like France and Italy struggle with soaring bond yield costs.
• Solution 1 (Activating TPI as a Firefighter): When government bond yields of highly indebted countries (e.g., France) spike excessively due to market insecurity, the European Central Bank (ECB) activates the Transmission Protection Instrument (TPI) to directly purchase those bonds and forcibly lower yields.
• Solution 2 (Targeted Support): Broad cash handouts risk driving inflation higher. Therefore, governments employ Targeted Welfare, focusing energy subsidies specifically on low-income households in greatest need.

🇺🇸 United States: “Leveraging the Monetary Hegemony of the Wealthiest Nation”

• The Problem: Heavy government spending requires continuous treasury bond issuance, flooding the market and driving long-term interest rates higher.
• Solution 1 (Bond Buybacks & Short-Term Shift): The U.S. Treasury reduces the issuance of 10- and 30-year long-term bonds while increasing short-term issuances under one year. Additionally, it conducts Buybacks of existing long-term debt to stabilize long-term yield spikes.
• Solution 2 (Supply Chain & Productivity Measures): Supported by dollar dominance and domestic energy independence, the U.S. combines monetary tightening with supply-side solutions—boosting productivity through tech innovation like AI to tame inflation.

🇰🇷 🇯🇵 South Korea and Japan: “Managing the Ticking Time Bombs of Household Debt and Exchange Rates”

• 🇰🇷 South Korea (Soft Landing for Household Debt): Because a large share of household loans carries variable interest rates, rate hikes immediately increase the interest burden on citizens.
  • Solution: Authorities actively construct ‘micro-financial defense barriers’—encouraging shifts from variable to fixed-rate mortgages, deferring principal and interest repayments for vulnerable groups, and pressuring banks to lower interest margins.
• 🇯🇵 Japan (Tightrope Walk Between Weak Yen and Rate Hikes): As Japan exits its long-standing negative interest rate policy, it faces growing pains from currency depreciation and inflation.
  • Solution: Japan adopts a ‘gradual approach’—slowly reducing treasury bond purchases and raising short-term rates incrementally to avoid sudden spikes in government debt servicing costs.

3. What Lies Ahead? (Three Future Scenarios)

To prevent spreading protests and political instability, the global economy is likely to navigate toward solutions along three key axes:

1. Monetary Policy Pivot (Shift Toward Rate Cuts): As inflation stabilizes, major central banks—including the Fed and the ECB—will gradually begin lowering benchmark interest rates. Narrowing global interest rate differentials will help ease borrowing costs across Europe and Asia.
2. End of Broad Handouts and Shift to Targeted Welfare: The era of indiscriminate fiscal spending has ended. Moving forward, European and major governments will fully transition to Targeted Welfare, prioritizing energy and housing subsidies for low-income populations without triggering surges in bond yields.
3. Sustained Mortgage Relief Policies: To prevent a rise in ‘house poor’ households (property owners impoverished by high interest payments), governments will continue implementing policies to extend loan maturities, facilitate fixed-rate refinancing, and encourage banks to return a portion of excess interest income back to society.

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