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Thread: North Korea Revalues Its Currency

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    North Korea Revalues Its Currency

    December 2, 2009
    North Korea Revalues Its Currency
    By CHOE SANG-HUN
    http://www.nytimes.com/2009/12/02/bu...gewanted=print
    SEOUL, South Korea — North Korea has taken confiscatory steps to curb unofficial economic activity and suppress inflation, issuing a revalued currency and sharply limiting the amount of old money people can exchange for new bills, South Korean news reports said Tuesday.

    The measures appeared to be a crude form of shock therapy intended to severely punish people involved in black market trading, which had begun to take root in North Korea in recent years as the country’s central planning system broke down.

    If carried out as described by South Korean and Chinese news agencies, the adjustment would wipe two zeroes off the value of North Korea’s currency, the won, and allow people to exchange only about 100,000 to 150,000 old won for the new notes. That would effectively decimate private stores of cash wealth in local currency. At the official exchange rate, 100,000 won is the equivalent of $690, and at the black market rate it is worth only $35.

    Unconfirmed reports on South Korean news Web sites said that the revaluation and exchange limits briefly set off street protests in North Korea’s capital, Pyongyang, forcing the authorities to revise slightly upward the amount of currency people could exchange.

    The value of the dollar and the Chinese currency skyrocketed as people rushed to underground money-exchangers, said the Yonhap news agency of South Korea, citing anonymous North Korean traders in China.

    Rail stations were crammed with “uncontrollable crowds” of people rushing home to swap their money, said Daily NK, a Seoul-based Web site that specializes in gathering North Korean news, citing informants in Haesan, a North Korean town near China, and other cities.

    “It’s all chaos in markets and railway stations,” Daily NK quoted a North Korean as saying.

    But Good Neighbors, a Seoul-based Buddhist relief agency that collects information on North Korea through people inside the country, said that Pyongyang and other major cities had returned to “utter quietness” by late Tuesday as the North’s secret police, the national security agency and the military increased patrols, and most shop owners closed their stores.

    North Koreans were shocked by the currency reform, Good Neighbors said. Many had stored cash to help tide them over during the lean winter and spring months, but now they have suddenly seen much of their savings wiped out, the group said.

    There was no official announcement of the measure in North Korea’s official media, and the accounts of protests in the North, which would be rare in the tightly policed country, could not be independently confirmed.

    “As people rushed to swap money, commercial activities have virtually come to a standstill,” Good Neighbors said in a statement. “The purpose of the reform is to kill private market activities that stoked anti-socialism.”

    South Korea has received intelligence about the reported currency move but has been unable to confirm it, said Chun Hae-sung, a government spokesman.

    Choi Soo-young, an expert on the North Korean economy at the government-financed Korea Institute for National Unification in Seoul, said: “The primary aim is to control inflation. But the North also wants to stop the market from prospering too fast.”

    Since a famine that killed many North Koreans and shook the rationing system in the mid-1990s, the North’s centrally planned economy, with state-run stores that sell goods at government-set prices, has coexisted with an unofficial economy where people sell homegrown food or goods smuggled in from China.

    For a time, those nascent signs of private-sector activity were cited as evidence that the North Korean leader, Kim Jong-il, might be inclined to follow the example of China, the North’s neighbor and most important backer, which began to move away from its dysfunctional central planning system in the late 1970s. At that time, Beijing first allowed entrepreneurs to supplement the country’s state-run production and distribution systems.

    But after years of tolerating unofficial markets, North Korea declared in 2005 that it was reinforcing the ration system. Since then, it has restricted the kinds of goods that can be sold in the markets, how often they should open and the age of people who can sell there.

    Earlier this year, Vitit Muntarbhorn, the United Nations’ special representative on the human rights situation in North Korea, said that the government had singled out women in a crackdown on marketing activities.

    He said that by suppressing the private markets, the government was demonstrating its intention to keep North Koreans dependent on the state.

    Women have been especially active in the private markets, and there have been reports in the South Korean news media about young North Korean women protesting against the government’s renewal of antimarket measures while food shortages have persisted.

    In June, the authorities shut down the largest unofficial market for food and goods outside Pyongyang, dispersing traders to smaller markets in other districts, according to South Korean news reports at the time.

    One reason is that the mix of state and private activity has fueled inflation, partly by drawing goods that would otherwise be sold at low, state-subsidized prices into more lucrative private markets.

    “With the government stores unable to provide enough supplies, unofficial markets have fueled inflation,” said Dong Yong-sueng, an economist at the private Samsung Economic Research Institute who monitors the North Korean economy.

    Food prices have risen so sharply in recent years that workers can buy only two kilograms of rice, about four and a half pounds, with their monthly wages, according to Open Radio for North Korea, a Seoul radio station and Web site that specializes in collecting news from informants in the North.

    The North Korean officials also saw the increasingly vibrant markets as a conduit of capitalist ideas and outside influence on the tightly controlled populace.

    By wiping out much of the wealth that traders have accumulated, the currency measure could anger many people who lose money. But from the government’s perspective it could have the effect of reducing a growing income gap among citizens, Mr. Choi said.

    The measure will have an immediate but short-lived impact in fighting inflation, Mr. Choi and Mr. Dong said. But it could also worsen the North’s already acute shortages by discouraging the markets, which have emerged as an important source of food for North Koreans.

    “As long as the North’s official economy cannot generate enough goods, and unless it can invite foreign investors by improving external relations, inflation will recur,” Mr. Dong said. “The vicious circle will continue.”
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    * DECEMBER 2, 2009
    North Korea Reissues Won, a Blow to Unofficial Economy - WSJ.com
    North Korea Reissues Won, a Blow to Unofficial Economy



    * smaller Text larger

    By EVAN RAMSTAD

    SEOUL -- North Korea redenominated its currency for the first time in 50 years and limited how much old money could be traded for new, likely wiping out millions of residents' savings and much of the cash used in market activities frowned upon by its authoritarian government.

    The action triggered chaos in the isolated country on Monday and Tuesday, according to news outlets in South Korea that specialize in obtaining information from the North. Millions of people rushed to banks and offices of the ruling Workers Party to get information, make exchanges or trade existing North Korean won for euros and U.S. dollars.
    [Korea] Bloomberg News

    100 won bank notes

    North Korea has issued new currency four previous times since it was founded in 1948, most recently in 1992, usually at times of financial distress. But it has also used new currency issues as a political weapon, by limiting how much can be converted or distributing new notes unevenly, says Marcus Noland, a senior research fellow at the Peterson Institute for International Economics in Washington.

    "It's basically a way of rewarding your friends and punishing your enemies," Mr. Noland says.

    The government announced the move Monday, using a closed-circuit broadcast system that can't be monitored outside the country. It said the old currency could be traded for new at a rate of 100 to 1 -- with a 1,000 won bill, for example, becoming a 10-won note -- marking the North Korean won's first redenomination since 1959. It said it would make exchanges from Tuesday to Saturday.

    The action appears to be the latest and most sweeping step by the North Korean regime to rein in an unofficial economy that has grown in recent years and is perceived to threaten the grip of dictator Kim Jong Il's government.

    North Korea's unofficial economy started on a small scale amid famine a decade ago, when the state-run distribution system broke down and people began selling goods and food from homes and farms. Sizable markets grew in nearly every town and city.
    [N Korea]

    By this year, the sprawling Pyongsong market on the outskirts of North Korea's capital, Pyongyang, was believed to host 30,000 small vendors. The massive complex provided an alternative to the government-led economy as well as a place where the elite from the capital could meet North Koreans who weren't allowed into the restricted city.

    Over the past year, say aid groups and North Korea watchers, the government has cracked down on these markets. They say authorities have forced women, who more often than men are found selling goods in markets, into work at state-run factories and farms. In June, the government closed Pyongsong.

    "It's another way of limiting, harassing and punishing people who have had the bad political sense to engage in market activity," said Nicholas Eberstadt, political economist and North Korea scholar at the American Enterprise Institute in Washington.

    The redenomination was reported in South Korean media early Tuesday and confirmed later by China's state news agency, Xinhua, which has an office in Pyongyang. Xinhua quoted one store clerk as saying that state-run stores in the city are closed this week so employees can reprice goods.

    Initial reports indicated the government would allow only 100,000 old won to be exchanged, likely wiping out the holdings of people who have saved for years from market activities. Those who have saved in foreign currencies -- which, though not illegal, is difficult for ordinary North Koreans -- appear unaffected so far.

    According to NKNet, a Seoul-based Web service focused on North Korea, people in Pyongyang pressed party officials Monday night to allow more money to be exchanged. In response, according to the report, officials lifted the exchangeable amount to 150,000 won in cash and 300,000 won in savings accounts.

    Officially, the North Korean won trades at 135 per U.S. dollar. But defectors say it is routinely traded in North Korean border cities, where foreign currency is most necessary, for 2,000 to 3,000 per dollar. A typical person in the impoverished country may earn only about 5,000 won a day, aid workers and defectors say.

    The move will have little economic impact outside the country, since the North Korea won isn't used for trade and isn't recognized for exchange by any country, even China, its chief trading partner and political benefactor.
    —Jaeyeon Woo in Seoul and Gordon Fairclough in Shanghai contributed to this article.

    Write to Evan Ramstad at evan.ramstad@wsj.com
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    I guess I am lucky for not hoarding the DPRK Won.
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    Defense Professional Dreadnought's Avatar
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    How can you devalue something that has no value whatsoever?)
    Fortitude.....The strength to persist...The courage to endure.

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    I thought the national currency of the DPRK was the counterfeit 100 dollar bill?

    Quote Originally Posted by Dreadnought View Post
    How can you devalue something that has no value whatsoever?)
    It was worth something to the millions of starving North Koreans that just got a royal screwing by their benevolent and wise Dear Leader.

    Emphasis on "was"
    Far better it is to dare mighty things, than to take rank with those poor, timid spirits who know neither victory nor defeat ~ Theodore Roosevelt

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    Defense Professional Dreadnought's Avatar
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    Quote Originally Posted by TopHatter View Post
    I thought the national currency of the DPRK was the counterfeit 100 dollar bill?



    It was worth something to the millions of starving North Koreans that just got a royal screwing by their benevolent and wise Dear Leader.

    Emphasis on "was"
    They just need to storm dear leaders home in mass, millions of them, although many will be cut down, atleast a few should be able to put their hands around his neck!)
    Fortitude.....The strength to persist...The courage to endure.

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    Quote Originally Posted by Dreadnought View Post
    They just need to storm dear leaders home in mass, millions of them, although many will be cut down, atleast a few should be able to put their hands around his neck!)
    Should be interesting to watch in the coming days.




    N.Korea military on guard against unrest: reports

    (AFP) –

    SEOUL — North Korea's military was on guard as public anger grew over the communist country's shock currency revaluation, reports said Thursday.

    The revaluation implemented Monday has sparked fury and frustration as some citizens saw much of their savings wiped out, according to reports and observers.

    They said the North had tightened security against possible agitation, with a curfew reportedly imposed in a border region and shops closed across the country during the changeover period to a new currency, which ends Sunday.

    Military authorities have strengthened vigilance and are monitoring people's movements to forestall unrest, South Korea's Yonhap news agency said, citing North Korean merchants in China.

    Media reports and embassies in Pyongyang said people had been given a week to exchange money at the rate of 100 old won for one new won -- but the total they can change is heavily restricted.

    Reports said authorities initially limited the total sum that an individual can exchange for new currency to 100,000 won. The limit was later raised to 150,000 won in cash and 300,000 won in bank savings.

    DailyNK, an online newspaper with informants in the North, said the rule has now been changed a second time.

    It said the exchange rate is still 100:1 for the first 100,000 old won. But people can now change the rest of their money at a rate of 1,000:1.

    The official exchange rate for the old currency was 135 to the dollar but the black market rate was between 2,000 and 3,000.

    Analysts said the move, still not announced by official media, appears aimed at clamping down on burgeoning free markets in an attempt to reassert the regime's control.

    "This move is part of Pyongyang's broader effort to curtail the rise of market activities and the development of pathways to wealth -- and potentially power -- beyond state control," Marcus Noland of the Peterson Institute for International Economics wrote in the Asian Wall Street Journal.

    South Korea's Chosun Ilbo newspaper said North Koreans are publicly voicing their anger despite the increased presence of security agents on the streets.

    "There are accounts of people loudly cursing the government in the markets in major cities," it said.

    Prices of goods have soared but it is still unclear whether authorities will cut prices to match the new currency, the daily said.

    The regime has already taken steps to curb free street markets. These sprang up after the national food distribution system collapsed during famines in the 1990s, but are now seen as threatening the state's grip.

    "Residents are lamenting bitterly that this was the disaster they were talking about when people mentioned that this is the year of disaster," Kim Keun-Soo, a fruit trader in the northern border city of Sinuiju, told Good Friends.

    The Seoul welfare group has extensive contacts in the North.

    "I would not complain about it if they provided food rations. Nothing can stop people after starving for three days. I get depressed when I think of the bleak future."
    AFP: N.Korea military on guard against unrest: reports
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    Administrator Tarek Morgen's Avatar
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    Not directly related to the new Won but still the most fitting active thread I guess:

    My Sister works for a company that makes Aerial work platform, usually for fire fighters, but also other areas. These get sold all over the world and recently one was bought by North Korea.

    This meant that as usual someone from the company gets send to the country to deliever the machine/truck, introduce them to the technic and finish the deal etc. This was also the case here, but luckily it was not my sister who had to go but a co worker of hers.

    He reported the following after returning home:

    Of course he was always not just with a translator but also with a watchdog. Though he had more the feeling that his job was more about watching the people he had to deal with and less him.

    Further that the state propaganda seems to be very effective at giving the Koreans an..unique view on the world. They do believe that they are one of the richest and most advances countries on the earth.
    The reason why the US does not dare the attack (again) is because North Korea has nuclear armed subs at their cost ready to destroy all their major cities.

    "Major incoursons" into North Korea by South Korea and American Forces are apparrantly repelled on a regular basis. He was told that just recently an American spy plane was shot down.

    Next to the US Japan is the biggest boogie man, but plays a much smaller role. Europe seems not be as much hated, though maybe they just toned it down a bot or soften the translations for him.

    But the whole trip was finished several weeks ago, before the reform.

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    Senior Contributor Bigfella's Avatar
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    Boy are they going to be in for a HUGE surprise one day. This sort of brainwashing will take a generation or more to unpick. The economy might take as long or longer. Feel sorry for the poor b*stards who will get that job.


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    Senior Contributor Mihais's Avatar
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    I almost pity Kim and his clan when the system will fall apart.The party middle class and security apparatus will be fine and prosperous,but somebody will have to be the scapegoat.
    Those who know don't speak
    He said to them, "But now if you have a purse, take it, and also a bag; and if you don't have a sword, sell your cloak and buy one. Luke 22:36

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    When a head has outlived its usefulness...

    Quote Originally Posted by Mihais View Post
    I almost pity Kim and his clan when the system will fall apart.The party middle class and security apparatus will be fine and prosperous,but somebody will have to be the scapegoat.
    Of course the NK security people can just get rid of the Kim clan and put another leader in their place

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    Someone needs to put them out of their misery... im thinking Arc Light

    Honestly i really do wonder what will happen to these people after an inevitable war sometime in the future when they are completelly crushed and realise that they have been the laughing stock of the world for half a century as well as being completelly militarily inept.

    The kind of worldview shock that could drive some weak people insane.
    The best part of repentance is the sin

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    Colonist Senior Contributor
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    Quote Originally Posted by Dreadnought View Post
    How can you devalue something that has no value whatsoever?)
    Here's your chance to buy a footnote in history mate... will be worth something for the 'history' factor.

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    I very much doubt if it's anything to do with realism or real markets.

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    Quote Originally Posted by snapper View Post
    I very much doubt if it's anything to do with realism or real markets.
    But very much to do with real lives.

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