Friday, December 18, 2009
North Korea Shows the Way
"North Korea [NK] 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 on by its authoritarian government. ... [NK] 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 seior research fellow at the Peterson Institute for International Economics in Washington. ... 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 the exchanges from Tuesday to Saturday. ... [NK'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. ... 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 saved in foreign currencies--which, theough not illegal, is difficult for ordinary North Koreans--appear unaffected so far", Evan Ramstad at the WSJ, 2 December 2009, link: http://online.wsj.com/article/SB125963843649570793.html.
Americans study this. Walter Wriston's ghost must be in shock. Don't laugh, some form of debt repudiation is coming to America. I'm sure Timmy Boy and Zimbabwe Ben are studying NK's actions carefully.