I upvoted this story because it was interesting and fun to read, but there are a few problems with the article.

1. The author makes it seem like South Korea's credit problems are due to LegoLand announcement, rather than the global crisis of high inflation forcing governments to raise interest rates, causing projects to go bust all over. It's not clear how much of this was caused by Legoland and how much Legoland is just an example of bond market troubles after an unprecedented period of low rates that created unrealistic investor expectations of risk, and the subsequent repricing when rates start to go up. E.g. municipal debt should never be priced the same as federal government debt, because the Federal government is a currency issuer with a central bank, whereas the municipal government is a currency user, and there is nothing wrong with a project backed by a local government from declaring bankruptcy -- investors should not price that at zero risk.

2. The author (who is a lawyer, not an economist) believes that a reduction of new housing causes real estate values to fall, rather than increase.

3. The belief that high interest rates are designed to reduce "liquidity" and that therefore emergency liquidity measures somehow contradict a policy of rate hikes.

Here I will rant a bit. Use of "liquidity" in financial journalism is usually a red flag as most reporters don't understand it. They think it means "money". They view the market as a big bag in which the government dumps money when it lowers rates, or removes money from the bag when rates go up.

You see similar reporting on the stock market, which they also view as a big bag in which investors pour money in or remove money out -- forgetting that in a stock exchange, for every buyer there is a seller.

Bottom line, money going into or out of a bag is generally the only mental model available in financial journalism. There are exceptions, but you see it everywhere and it drives me crazy. This is why the author believes it's a contradiction and irony that the South Korean government would announce emergency lending facilities even as it raises rates.

But what liquidity refers to is how quickly/efficiently can you convert something into cash. For example, a liquidity crisis in the bond market means that you can't use the bond as collateral for cash loans. Bonds becoming discounted more is not a reduction in liquidity, it just means the bonds are worth less because interest rates are higher. But as long as you can use them for collateral according to their expected value, then the bond market remains "liquid" regardless of the interest rate.

When liquidity is threatened, the central bank steps in and says "We will accept these bonds as collateral for cash loans". Note that the central bank is still applying the policy discount rate, which may be high. In this article, several large banks banded together to make this announcement as well - that they would accept bonds as collateral for loans. Such a step has nothing to do with rate hikes, and does not undermine the rate hike program, it only undermines the bag-of-liquidity metaphor.

No government raises interest rates to reduce liquidity or lowers rates to increase liquidity, rate hikes are done to manage inflation and/or foreign exchange rates, whereas the tools to manage liquidity are discount windows, swap lines, and emergency lending facilities. They are separate tools with separate macroeconomic targets.