9 ms·
North Korea Changes Currency
- myth_drannon 17y agoThat is very sad and reminds me of Soviet Union collapse. Old people who saved their entire lives had bags full of money that suddenly became worthless ( well some used it as a toilet paper...). It's a recurring theme in Russian movies from 90's , bag of useless cash. PEOPLE ! The most important thing in your life is your close ones.
- CWuestefeld 17y agoHow different is this from officially devaluing the currency in situ? This has been done more than once in the USA (see http://en.wikipedia.org/wiki/History_of_the_United_States_dollar http://en.wikipedia.org/wiki/History_of_the_United_States_do... )
- DrJokepu 17y agoVery different. This is capping, not just devaluating. If you're devaluating, let's say, by 10%, if you had $10 you will have $9 (it will be still $10 but it will be only worth $9), if you had $100 you will have $90, if you had $1000 you will have $900, etc. In this case, they're capping as well at $40. If you had $10 you will still have only $9, but if you had $100 (or $1000 or a million) you will only have $40. That's it. That's not just taxing wealth, it's taking all the wealth away.
- Retric 17y agoAt the same time there was no physical destruction of physical stuff, so it was wealth transfer not wealth destruction. In theory the country should be approximately as wealthy after this action as it was before it. PS: Ignoring the intangibles.
- CWuestefeld 17y agoSo it's like devaluation, but with a "progressive" twist?
- DrJokepu 17y agoWell, yeah, infinitely progressive. It's like if the tax rate above a range was 100%.
- gaius 17y agoit's taking all the wealth away It's taking the liquidity away. People can no longer trade amongst themselves; they can only "trade" with the government.
- etherealG 17y agoholy crap, did a government legally just steal all the money from it's people?
- sirrocco 17y agoI'm not sure it's that uncommon in communism. My grandparents told me that the same thing happened in Romania when it was under communist rule. When we recently slashed a few zeros from our currency (denomination i believe it's called) they were afraid that the same thing would happen again.
- josefresco 17y agoIt isn't uncommon, FTA: "The absence of information in official media adds to the unusual circumstances of the action. North Korea has reissued currency four times previously, all with great fanfare and explanation to the outside world."
- turkishrevenge 17y agoUnfortunately Ceauşescu's reign of terror resulted in a lot of horrible policies under the banner of "socialism" Just look at the ban he placed on abortion and the curtailing of womens rights, which is probably the most reactionary thing a government can do.
- joss82 17y agoWhat if people disagree and just keep using the old currency among them ? Yeah, I guess they'll get shot. Also, the mention of "closed-circuit system that feeds into speakers in homes and on streets but can't be monitored outside the country" reminds me so much of Brave New World/1984/Big Brother stuff.
- josefresco 17y agoWould be scary if NK had more power. Fortunately for us (and unfortunate for their people) the country is very poor and relies almost entirely on aid from other countries (China) to keep things going.
- lecha 17y agoThis reads like an Onion news story. If only it was...
- mattmcknight 17y agoGiven that it's happened before there, I'd favor commodities to currency. It's hasn't been a bad strategy when your government is creating new money at rapid rate and calling it quantitative easing either.
- idlewords 17y agoThe hard part is choosing the commodity, and figuring out how to store it. If you really think all hell is going to break loose, to the extent that the dollar might one day lose a bunch of its value overnight, then you are limited to stuff you can store in your own house, with all the attendant security problems.
- turkishrevenge 17y agoI wouldn't rule anything out in the DPRK. As an example, here's Juche, the official state ideology, summed up in an exchange: Peasant: "I am hungry. I need bread". Soldier (part of the supposed "revolutionary" class): points gun at peasant. "Are you hungry now?" Peasant: gulp "No". Stalinism to its logical conclusion.
- idleworx 17y agowhat's happening in north korea is an abomination of human rights infringements. i think most westners, especially those who's countries never experienced communism, can't really imagine/comprehend daily life there. I watched this documentary on North Korea a while ago and found it very interesting [http://educatedearth.org/video.php?id=2642 http://educatedearth.org/video.php?id=2642]
- jlgosse 17y agoThe background music and production reminds me of Lost. Maybe Lost is actually based on North Korea. It wouldn't be all that far fetched.
- shughes 17y agoThis only affects paper cash though, right? So assuming they have most of their value in a bank, savings, stock, physical assets, or whatever it is they do in "DPRK," then they should be sort of okay. But I have nooo idea how the banking thing works in DPRK. For all I know, everyone's "bank" is a box filled with cash. Which would make this currency switch suck a lot.
- idlewords 17y agoStock? Bank accounts? What planet do you live on?
- shughes 17y agoI live on Earth. Also, North Korea uses the Korea Exchange: http://www.mapsofworld.com/north-korea/economy/stock-exchange.html http://www.mapsofworld.com/north-korea/economy/stock-exchang... My point is that North Koreans, like anyone else in the world, communist or capitalist, have very little of their value in the form of paper currency. Whether it be goats, rice, gold, stock, bank accounts, etc.. They may value themselves based on a nationally recognized currency (the won?), but that doesn't mean that most of their value is in the form of liquid cash. The theory of currency recognizes the value of a currency based on its level of trust (to be paid back). Soo in a country like North Korea (ESPECIALLY), citizens probably rarely maintain their worth in the form of paper currency. Because they don't trust it (whether they consciously realize it or not). If Americans don't trust the US dollar, you can imagine that North Koreans don't trust their own currency. Educated or not, brain washed or not, that's common sense. Another example. I personally trust the American dollar very much. But how much do I have in the form of liquid cash? About $50 in my wallet. The rest of my worth is in assets, stock, savings, 401k, car, tv, intellect, etc. Just not liquid cash. So if America changed currencies all of the sudden, I'd say, "Rats, I just lost $50." Sooo, again, my point is that this probably doesn't change much for North Koreans. Especially since most of them probably have very little personal wealth anyway (paper cash or other forms of value). Heavens.
- anigbrowl 17y agoYou are partially right. Not about the banking system (which is as much a joke and tool of the NK government as the currency), but insofar as you are better off if most of your assets are in the form of rice or some other physcial commodity. On the other hand, it's pretty likely that having more than a certain quantity of any commodity outside a government-operated warehouse is classified as 'illegal hoarding' and would be grounds for confiscation and imprisonment. North Korea practices such an extreme form of socialism that private property is a meaningless concept there. For all practical purposes it is a feudal society which claims all people, land and commodities as state property.
- huangm 17y agoThis seems like one of those hypothetical microeconomics questions... you know, the ones that are never really supposed to happen. "It also reported instances of wealthy people from cities rushing to rural areas on Monday in hopes of buying commodities with the old currency before people in those areas heard about the exchange process."
- idlewords 17y agoIn Poland (and I imagine other socialist countries), people who made a bunch of money took pains not to get stuck with cash, for exactly this reason. Since it was illegal to own foreign currency, a popular solution was to buy and store grain alcohol, on the assumption that no conceivable change in political system would ever make booze lose its value. The approach had two main drawbacks - you needed a fair amount of space to store large quantities of ethanol, and you had to safeguard the storage room against the depredations of local aficionados.
- misterbwong 17y agoMy grandma used to tell me a similar story about her old country (Burma) except they used gold jewelry.
- lallysingh 17y agoGold jewelry's pretty popular in India for about the same reason.
- endtime 17y agoI believe German Jews bought a lot of jewelery in the late 1930's for...similar reasons. It was easier to hide than cash, and they could always try to pass it off as some family heirloom with no more than sentimental value.
- jan_g 17y agoYes, you are correct in respect with local currency. However, in my country there used to be quite vibrant currency black market instead of alcohol storing. People most often replaced all excess local currency with deutsch marks. At the expense of exorbitant fees, of course. But it was still better to have some deutsch marks than none. All of it was of course illegal, but the government wasn't too keen to penalise such behaviour. At least I don't remember anyone getting caught.
- idlewords 17y ago
- gojomo 17y agoVaguely similar currency-expiring policies have been suggested for the US, as well. See this column from Harvard's Gregory Mankiw in April of this year: http://www.nytimes.com/2009/04/19/business/economy/19view.html http://www.nytimes.com/2009/04/19/business/economy/19view.ht...
- protomyth 17y agoWTF? - "North Korea's official news agency, TV station and major newspapers, which are monitored in South Korea and Japan, by late Wednesday still had not announced the currency exchange. Instead, authorities continued to transmit information through a closed-circuit system that feeds into speakers in homes and on streets but can't be monitored outside the country." Can we just buy the country and let the leaders go into exile?
- shiranaihito 17y ago> Can we just buy the country and let the leaders go into exile? That's actually an interesting idea. Instead of pouring hundreds of billions of dollars - that will get stolen or end up actually being harmful - in Africa's general direction, the West could do something to really help a country's people.
- dpatru 17y agoThis illustrates why government should not be trusted with the control of money. What N. Korea is doing is massive theft, but so is the issuing of any fiat currency. The Federal Reserve is just a better thief than N. Korea because it steals at a slower, smoother rate, thus not totally killing the incentive to produce.
- Evgeny 17y agoVery similar to the Pavlov monetary reform in the Soviet Union - I was just a kid but I can remember that: "Within hours of the stunning announcement, massive lines had formed in the bitter, early-morning cold, waiting for banks to open. "People are afraid," says Vladimir Kuzmichov, a retired engineer nervously fingering his cash notes outside a Moscow bank. The Soviet state bank had just proclaimed that all 50- and 100-ruble notes would be banned and saving accounts would be partly frozen. Each person could exchange up to 1,000 rubles, the equivalent of less than four months' average pay, for small-denomination notes." http://www.businessweek.com/archives/1991/b319837.arc.htm http://www.businessweek.com/archives/1991/b319837.arc.htm
- sliverstorm 17y agoMaybe I'm totally missing something, but how exactly do they expect their citizens to buy food now? If everyone suddenly has $40 and that's it, that sounds an awful lot like an awful lot of people are going to starve to death.
- naa42 17y agoWell, there are several levels of answer to your question. First of all, there are no currency exchange there and people are not allowed to have a foreign currency (USD). So this "equivalence" is established with black market exchange rate which represents not the parity of prices of commodities but the (high) value of USD for the back market participants. It is normal since the black market participants are involved into contraband and they need foreign currency badly. So for $ 40 in black market exchange rate you can get a lot of food there. The second level of the problem is that the food/goods market there is government-controlled and for some goods there is no market at all - they are centrally distributed by the executives. So the amount of savings is not directly connected with the consumption level. And the next point is that the person who have a job and a regular paycheck doesn't need to have a lot of savings in order not to starve. As I can understand the social contract of the socialists' states is the lack of unemployment, so anyone is employed even if his work is not needed.
- blahedo 17y agoThey're supposed to depend on the government. Having $40 in your pocket would force you into the bread lines pretty quick, eh? And if you're in the bread lines it becomes a lot harder to actively protest the government....