Risks

Jan. 11 (Asia Today) — Asia Today interviewed Sejong University business administration professor Kim Dae-jong on Tuesday about the 2026 economic outlook and strategies for coping with rising foreign exchange risks and fiscal pressures. Below are highlights in a question-and-answer format.

Q: Do you believe there is a real possibility of another foreign exchange crisis like the one in 1997?

A: “South Korea’s current foreign exchange defense capabilities are extremely vulnerable. The country’s foreign exchange reserves relative to GDP stand at around 22%. This is woefully inadequate compared to Taiwan, which holds reserves equivalent to 80% of its GDP. Meanwhile, the Korean won’s share of international payments is a mere 0.1%, making it a currency that no one will accept during a crisis. With an 84% probability of an upward trend in the exchange rate, the won is projected to surge to between 1,550 and 1,600 won per dollar by 2026. Without government preparedness, the likelihood of a foreign exchange crisis approaches 30%. We must significantly increase foreign exchange reserves to Taiwan’s level and establish safety nets through measures like Korea-Japan currency swaps. The interest losses from holding reserves are a cost we must bear given the potential losses from a crisis.”

Q: The government claims its finances are robust. What do the actual indicators show from your perspective?

A: “The government reassures us with a debt ratio of 52%, but this is merely an illusion. Broad national debt, including public enterprise debt and unfunded pension liabilities, has already surpassed 130% of GDP. The 2026 budget proposal shows an 8.1% increase to 728 trillion won ($560 billion), more than four times the inflation rate, pursuing loose expansionary fiscal policy. The IMF classifies countries with non-reserve currencies as risky when their debt ratio exceeds 60%. South Korea is expected to cross this threshold by 2029. Securing fiscal soundness is crucial for national survival.”

Q: What are the fundamental causes and solutions for the youth employment rate being only 45%?

A: “Companies are fleeing overseas to avoid high taxes and regulations. Korea’s corporate tax rate of 26% is higher than the global average of 21% and higher than places like Singapore and Ireland. The United States encourages innovation through negative regulation, but Korea is stifled by positive regulation. Allowing Uber alone could create more than 300,000 jobs, yet we are cutting off the buds of new industries. We need concrete action to create a business-friendly environment. Instead, the government raised the corporate tax rate by 1 percentage point.”

Q: In this situation, how can individuals protect their assets and become wealthy?

A: “I recommend a top-ranked stock strategy: invest 90% of your assets in the top U.S. market cap companies and 10% in the top Korean company. As dollar-denominated assets, they protect wealth when the exchange rate rises. Apartment subscription accounts should never be canceled and should be maintained. Statistically, the net asset threshold for the top 1% of wealthy Koreans is 3 billion won. By building expertise at work and consistently investing 25% of your salary into top-tier stocks, you can join that group.”

Interviewer: Kim Lee-seok, Editorial Advisor

Compiled by: Lee Jung-ho, Staff Reporter

— Reported by Asia Today; translated by UPI

© Asia Today. Unauthorized reproduction or redistribution prohibited.

SACRAMENTO — California and its state-funded programs are heading into a period of volatile fiscal uncertainty, driven largely by events in Washington and on Wall Street.

Gov. Gavin Newsom’s budget chief warned Friday that surging revenues tied to the artificial intelligence boom are being offset by rising costs and federal funding cuts. The result: a projected $3-billion state deficit for the next fiscal year despite no major new spending initiatives.

The Newsom administration on Friday released its proposed $348.9-billion budget for the fiscal year that begins July 1, formally launching negotiations with the Legislature over spending priorities and policy goals.

“This budget reflects both confidence and caution,” Newsom said in a statement. “California’s economy is strong, revenues are outperforming expectations, and our fiscal position is stable because of years of prudent fiscal management — but we remain disciplined and focused on sustaining progress, not overextending it.”

Newsom’s proposed budget did not include funding to backfill the massive cuts to Medicaid and other public assistance programs by President Trump and the Republican-led Congress, changes expected to lead to millions of low-income Californians losing healthcare coverage and other benefits.

“If the state doesn’t step up, communities across California will crumble,” California State Assn. of Counties CEO Graham Knaus said in a statement.

The governor is expected to revise the plan in May using updated revenue projections after the income tax filing deadline, with lawmakers required to approve a final budget by June 15.

Newsom did not attend the budget presentation Friday, which was out of the ordinary, instead opting to have California Director of Finance Joe Stephenshaw field questions about the governor’s spending plan.

“Without having significant increases of spending, there also are no significant reductions or cuts to programs in the budget,” Stephenshaw said, noting that the proposal is a work in progress.

California has an unusually volatile revenue system — one that relies heavily on personal income taxes from high-earning residents whose capital gains rise and fall sharply with the stock market.

Entering state budget negotiations, many expected to see significant belt tightening after the nonpartisan Legislative Analyst’s Office warned in November that California faces a nearly $18-billion budget shortfall. The governor’s office and Department of Finance does not always agree, or use, the LAO’s estimates.

On Friday, the Newsom administration said it is projecting a much smaller deficit — about $3 billion — after assuming higher revenues over the next three fiscal years than were forecast last year. The gap between the governor’s estimate and the LAO’s projection largely reflects differing assumptions about risk: The LAO factored in the possibility of a major stock-market downturn.

“We do not do that,” Stephenshaw said.

In Jafar Panahi’s acclaimed thriller “It Was Just an Accident,” it’s a distinct sound that alerts Vahid (Vahid Mobasseri), a mechanic, that the man who tortured him in prison might be dangerously close.

After hearing it, he embarks on a rage-fueled mission to kidnap and kill the interrogator. But Vahid is not certain he has the right man, so he enlists a group of other victims to help identify him. What ensues is a brilliantly taut ensemble piece.

The latest from the Iranian master earned the Palme d’Or at the Cannes Film Festival and is now a major contender this awards season, representing France at the Oscars in the international feature category. Iran would not submit the politically charged film.

“Because the auditory sense of prisoners is usually strongest above all the other senses, I thought that I would begin the film with a sound,” a stoic Panahi says via an interpreter in a hotel room in Santa Monica. “In prison, you keep trying to guess if this voice that you hear belongs to an older person, a younger person, what he looks like and what he does in life.”

A scene from “It Was Just an Accident.”

(Neon)

Panahi is no stranger to being deprived of his freedom. Arrested in 2022 for his outspokenness against the regime’s practices, he spent seven months in prison. It wasn’t until he went on a hunger strike that his right to legal representation was granted.

Without an attorney present, Panahi explains, interrogators blindfold detainees and stand behind them, either asking questions directly or writing them on a piece of paper and handing it to the detained, who lifts their blindfold just enough to read it. An interrogation nearly identical to that description plays out in last year’s Oscar-nominated film “The Seed of the Sacred Fig” by Mohammad Rasoulof, one of Panahi’s longtime collaborators.

“I had not actually seen Rasoulof’s film because when we make films clandestinely, we don’t talk about them, even with our close friends,” he explains. “I didn’t even know what his film was about. Only when I got to France to mix [‘It Was Just an Accident’], and Rasoulof’s film was out in theaters there, that’s when I saw it.”

Making films on the outskirts of legality under an authoritarian regime entails high-stakes discretion. The script for “It Was Just an Accident” never left Panahi’s sight when casting.

“To all of the actors, I gave the script in my own apartment,” he recalls. “I told them, ‘Read it here, don’t take it with you. Go and think about it for 24 hours, and then tell me whether you want to be a part of it.’” Everyone in the stellar cast, composed of dissident artists with varying degrees of experience in front of the camera, was aware of the risks it entailed.

Jafar Panahi.

(Kate Dockeray / For The Times)

Mobasseri had appeared in Panahi’s previous effort, “No Bears,” while Majid Panahi, who plays a groom swept up in the scheme by his vengeful bride, is the director’s nephew. Mariam Afshari, as a photographer who also joins the plot, had minimal acting experience, but had been involved in other productions in below-the-line roles. Panahi says he casts actors based on how their physical traits resemble the character he has in mind.

That was the case with the tall and lean Ebrahim Azizi, who appears as Eghbal, the man the group believes was their ruthless captor. For a scene near the end where Eghbal breaks down, thinking he’s about to be killed, Panahi placed his trust in Azizi — who only acts in underground films, not state-approved projects — to convey the tempestuous humanity of a presumed villain.

“I felt a huge burden on my shoulders when I left prison that made me feel I owed something to my fellow prisoners who were left behind,” Panahi says. “I said this to Ebrahim Azizi, ‘Now the entire burden of this film is on your shoulders with your acting, and you have to put that burden down with utmost commitment.’”

The first time Panahi shot that searing scene, he sensed it wasn’t coming together. After all, his only experience with real-life interrogators was from the receiving end of their questioning. “I went to one of my friends, Mehdi Mahmoudian, who has spent one-fourth of his life in prison,” he says. “I told him, ‘Because you know these personality types very well, come and tell this actor what to do.’ He guided [Azizi] and we took two or three more takes and it was done.”

Amid the hard-hitting moral drama of “It Was Just an Accident,” moments that warrant a chuckle for their realistic absurdity might surprise some viewers. However, a touch of sardonic levity has always been part of Panahi’s storytelling.

“Humor just flows through life. You cannot stop it,” he says.

To make his point, Panahi recalls a morbid memory from when he was around 10 years old. One of his friends had lost his father. Disturbed, the boy threatened to take his own life. Panahi and his other friends followed him to try to stop him if he did in fact attempt to hurt himself.

Determined, the boy announced he would stand in the middle of the road and throw himself in front of a large vehicle. “We were lucky because we were in a very isolated part of town and there were no real big cars passing by,” he says. “Two hours later we were all sitting in a movie theater. Humor is always there. It’s not really in my hands.”

State regulators ordered Southern California Edison to identify fire risks on its unused transmission lines like the century-old equipment suspected of igniting the devastating Eaton wildfire.

Edison also must tell regulators how its 355 miles of out-of-service transmission lines located in areas of high fire risk will be used in the future, according to a document issued by the Office of Energy Infrastructure Safety on Dec. 23.

State regulations require utilities to remove abandoned lines so they don’t become a public hazard. Edison executives said they did not remove the Eaton Canyon line because they believed it would be used in the future. It last carried power in 1971.

The Office of Energy Infrastructure Safety said Edison must determine which unused transmission lines are most at risk of igniting fires and create a plan to decrease that risk. In some cases that might mean removing the equipment entirely.

While the OEIS report focuses on Edison, the agency said it also will require the state’s other electric companies to take similar actions with their idle transmission lines.

Scott Johnson, an Edison spokesman, said Monday that the company already had been reviewing idle lines and planned to respond to the regulators’ requests. He said Edison often keeps idle lines in place “to support long-term system needs, such as future electrification, backup capacity or regional growth.”

“If idle lines are identified to have no future use, they are removed,” he said.

Johnson said that since 2018, Edison has removed idle lines that no longer had a purpose seven times and provided a list of those projects.

The investigation into the cause of the Eaton wildfire by state and local fire officials has not yet been released. Edison has said the leading theory is that the dormant transmission line in Eaton Canyon briefly reenergized on the night of Jan. 7, sparking the fire.

Unused lines can become energized from electrified lines running parallel to them through a process called induction.

The Eaton wildfire killed at least 19 people and destroyed more than 9,000 homes and structures in Altadena.

After the fires, Edison said it had added more grounding equipment to its old transmission lines no longer in service. The added devices give any unexpected electricity on the line more places to disperse into the ground, making them less likely to spark a fire.

The OEIS issued its latest directives after Edison executives informed the agency they had no plans to remove any out-of-service lines between now and 2028, the report said.

State regulators and the utilities have long known that old transmission lines can ignite wildfires.

The Times reported how Edison and other utilities defeated a state regulatory plan, introduced in 2001, which would’ve forced the companies to remove abandoned lines unless they could prove they would use them again.

In its report the OEIS noted it would require Edison and other electric companies to provide details of how often each idle line was inspected and how long it took to fix problems found in those inspections.

Edison has said it inspected the unused line in Eaton Canyon annually before the fire — just as often as it inspects live lines. The company declined to provide The Times with documentation of those inspections.

In the OEIS report, energy safety regulators said they expect to to approve Edison’s wildfire mitigation plan for the next three years despite the problems they found with the approach.

For example, the report noted that Edison is behind in replacing or reinforcing aging and deteriorating transmission and distribution poles. The regulators said the backlog “includes many work orders on [Edison’s] riskiest circuits.” A circuit is a line or other infrastructure that provides a pathway for electricity.

Officials said the company must work on reducing that backlog. They also criticized Edison executives for not incorporating any lessons they learned from the Jan. 7 wildfires into the company’s fire prevention plans.

Johnson, Edison’s spokesperson, said the company already improved the backlog of pole replacements. He said the company also planned to tell regulators more about the lessons it learned after the Eaton fire.

Under state law, the OEIS must approve a utility’s wildfire mitigation plan before it can issue the company a safety certificate that protects the company from liability if its equipment ignites a catastrophic fire.

The OEIS issued Edison’s last safety certificate less than a month before the Eaton fire — despite the company having had thousands of open work orders, including some on the transmission lines above Altadena, at the time.

Edison is offering to pay for damages suffered by Eaton fire victims and a handful already accepted its offers. The utility says that because it held a safety certificate at the time of the fire it expects to be reimbursed for most or all of the payments by a $21-billion state wildfire fund.

If that fund doesn’t cover the damages, a law passed this year enables Edison to raise its electric rates to make up the difference.

Gov. Gavin Newsom and state lawmakers passed laws to create the state fund and safety certificate program to protect utilities from bankruptcy if their equipment starts costly wildfires. Critics say the laws have gone too far, potentially leaving utilities financially unharmed from fires caused by their negligence.

Edison is fighting hundreds of lawsuits filed by victims of the Eaton fire. The company says it acted prudently in maintaining the safety of its system before the fire.

Pedro Pizarro, chief executive of Edison International, the utility’s parent company, told The Times this month that he believed the company had been “a reasonable operator” of its system before the fire.

“Accidents can happen,” Pizarro said. “Perfection is not something you can achieve, but prudency is a standard to which we’re held.”