
North Korea Changes Currency - garply
http://online.wsj.com/article/SB125975276400572645.html
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idlewords
In 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.

~~~
DrJokepu
The automatic response of the North Korean government would be introducing a
prohibition. Or maybe that already happened, who knows.

~~~
mustpax
They don't even need to go that far. They can just ration supply, forbid
stockpiling and fix the price to artificially low levels.

This was occurring as recently as last year all over the world when
commodity/food prices spiked. Anywhere you see black markets, you can find
rationing and price fixing nearby.

~~~
arohner
The reverse is often true as well. Anywhere you see rationing and price
fixing, you can find black markets nearby, assuming the distortion is high
enough.

~~~
adamsmith
Yes, seems like trying to stop free markets from developing is just like
trying to hide information or keep a theatre free of ringing phones. It can be
tried, and sometimes even successful, but gosh it's a lot of work.

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huangm
This 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."

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turkishrevenge
I 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.

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idleworx
what'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>]

~~~
jlgosse
The background music and production reminds me of Lost. Maybe Lost is actually
based on North Korea. It wouldn't be all that far fetched.

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etherealG
holy crap, did a government legally just steal all the money from it's people?

~~~
joss82
What 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.

~~~
listic
Re: 1984

My first thought was "How wicked!" Second thought was "Hey, but we have those
thingies in Russia too!"

There is a wired radio system in Russia, established way back in the Soviet
era, which transmits three radio channels. Simple receiver can consist
basically of a loudspeaker and variable resistor as a volume knob, while more
complicated receiver can receive one of 3 channels. There's a simple receiver
on the wall next to me as I write this. Interestingly, I couldn't find any
pictures of my exact model, so here's my (lame) attempt:
<http://www.flickr.com/photos/22022497@N04/4154137046/> There's another,
3-channel one, of the latest incarnation (late 80's or early 90's) in the
kitchen. When my dad bought it, I remember everyone coming to our house
thinking it's a VCR, so that should say something of its size and form factor.
It still sits up there near the ceiling mainly because of its large
luminiscent clock on the front panel. We don't turn these radios on except
maybe twice a year out of curiosity :)

These things fit the description "closed-circuit system that... can't be
monitored outside the country" if by that you mean "wired"

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steve19
What do they play on these channels?

~~~
listic
Music and various programes; nothing special.

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myth_drannon
That 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.

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lecha
This reads like an Onion news story. If only it was...

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gojomo
Vaguely 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.ht...](http://www.nytimes.com/2009/04/19/business/economy/19view.html)

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Evgeny
Very 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>

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protomyth
WTF? - "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?

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dpatru
This 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.

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CWuestefeld
How 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_do...](http://en.wikipedia.org/wiki/History_of_the_United_States_dollar)
)

~~~
DrJokepu
Very 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.

~~~
CWuestefeld
So it's like devaluation, but with a "progressive" twist?

~~~
DrJokepu
Well, yeah, infinitely progressive. It's like if the tax rate above a range
was 100%.

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sliverstorm
Maybe 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
Well, 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.

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mattmcknight
Given 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
The 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.

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shughes
This 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
Stock? Bank accounts? What planet do you live on?

~~~
shughes
I live on Earth. Also, North Korea uses the Korea Exchange:
[http://www.mapsofworld.com/north-korea/economy/stock-
exchang...](http://www.mapsofworld.com/north-korea/economy/stock-
exchange.html)

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.

