Lee Jae-myung, the candidate from the Democratic Party of Korea, clashed with Lee Jun-seok, the candidate from the Reform Party, during a debate when he again mentioned so-called “hotel economics.”
During the second TV debate of the 21st presidential election on the 23rd, Lee Jae-myung was attacked by Lee Jun-seok, who likened him to Chávez during a discussion on pension and healthcare reform in response to a super-aged society. Lee quickly hit back by citing hotel economics. Hugo Chávez was the authoritarian leader of Venezuela.
Lee Jae-myung asked Lee Jun-seok, “Don’t you know Bob McTier?” to which Lee Jun-seok replied, “I do not know.” When Lee Jae-myung then asked, “Don’t you know Lucas Chai?” Lee Jun-seok responded, “Isn’t it the original of hotel economics?”
Robert McTier is a former president of the Federal Reserve Bank of Dallas, while Lucas Chai is a financial journalist. In a booklet released by the Bank of Korea at the end of last year titled “Bank of Korea and Payment Systems,” a column written by former President McTier was also quoted.
Lee Jae-myung then asked, “Do you know the table showing how to use the 50,000 won issued by the Bank of Korea?” to which Lee Jun-seok retorted, “That doesn’t involve hotel cancellations, does it? You went through a lot of trouble to figure it out, but it’s a completely different story.”
In response, Lee Jae-myung mentioned, “If you search for ‘the $100 story’ regarding Bob McTier or Mikhail Schmidt Salomon, or Lucas Chai on the internet, you will find a lot. The same story comes up there.”
Lee Jae-myung stated, “If someone tries to check in at a hotel but ends up turning around with $100 or 100 euros, eventually the money comes back, and that is the same customer. However, even in such cases, it is an example used to illustrate that the economy can circulate without necessarily having funds coming from outside due to the circulation effect of money.” He added, “When these individuals historically cite examples, no one ever mentioned no-show economics.”
The controversy over “hotel economics” began on the 16th during a campaign rally in Gunsan when Lee Jae-myung referred back to his statements made eight years ago.
At that time, Lee Jae-myung explained, “If a traveler pays a deposit of 100,000 won to a hotel, the hotel owner pays off a debt at a furniture store with that money, the furniture store owner buys chicken at a chicken shop, the chicken shop owner purchases supplies at a stationery store, and the stationery store owner pays off a debt to the hotel. Even if the traveler cancels the reservation afterward, the economy revives as the money circulates.”
In response, Lee Jun-seok criticized during the first TV debate of the presidential candidates on the 18th, saying, “It’s a bizarre economics theory that says the economy is revived as long as money circulates even if a hotel reservation is canceled,” questioning, “Is it a perpetual engine based on a marginal propensity to consume of 1?”
Lee Jae-myung responded, “It does not circulate as 1. That was just a once extreme example,” and explained, “The point was that circulation is important in the economy.”