More hardship for North Korea--new currency

samclem

samclem

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The government of North Korea is now requiring conversion of all currency to the New Won. Old currency must be exchanged for new currency at the rate of 100:1 (e.g. 1000 current Won = 10 New Won). It might seem to be just a simple math game, and all the official prices will just have two zeros lopped off. But, here's the killer: People are limited to converting $40 worth of the old currency. That's it--any other money a person may have will be worthless in a few days.

[the government] said it would limit the amount of old currency it would accept in exchange, to the equivalent of about $40 worth at unofficial exchange rates.
The rest of the money would be scrapped, in an apparent effort to make people more dependent on the government, in the most far-reaching of Pyongyang's recent moves to crack down on market activities perceived to weaken its power.
North Korea's official news agency, television station and major newspapers, which are monitored in South Korea and Japan, by late Wednesday still hadn't announced the exchange.
Instead, authorities transmitted information through a closed-circuit system that feeds into speakers in homes and on streets, but that can't be monitored outside North Korea.
Click to expand...
The purpose of the whole exercise is re-assert government control over every aspect of life in North Korea. The change wipes out any gains people have made from free market activity (i.e. the black market, which is the only economy that really functions in North Korea).

People are desperate to preserve what little savings they've got and are scrambling to buy anything of value. Corn prices are today 30 times what they were a few days ago, rice is 20 times higher. The government has instituted a curfew to head off unrest.

Another avoidable man-made disaster in a country that has seen its share.

More here.

As people living in countries where private property and the rule of law is respected, we have a lot for which to be thankful.
 
This reminds me a lot of the MPC (Military Payment Certificate) system that was used by the US Military for oversea personal. When I was stationed in Korea in the late 60's, we were paid in MPC instead of dollars. Because a lot of MPC made it way to the black market, the bills were periodically changed. One morning you would wake up and learn that today was a conversion day and you had to trade your old bills for new bills. People entering the base were limited in how much MPC they could bring onto base (to thwart the black market). The big difference with the North Korea example is that MPC converted at par.

There's a entry on Wikipedia describing Military Payment Certificate s.
 
Ouch! Probably not a lot of FIRE's in N Korea, other than top party members.

I wonder if hard assets are popular in N Korea (or legal) like other places in Asia. I'm thinking gold here mainly.

I guess only government run stores are accepting the old currency since black market private sellers of goods can only exchange $40 of the old money.
 
I am surprised that it was not renamed the Dear Leader. So, no more savings but then savings are capitalistic anyway so this is a good thing for the Dear Leader. And this would be a strong argument for gold.

On the other hand, when we were in Korea in the 70s, we had ration control plates to go with our greenbacks.
 
Somewhere in the US, a government official is watching this program carefully and taking notes... Nice way of wiping out the underground economy.
 
I have read that the Communist regime in VN did the same thing in the late 70s, or early 80s. In fact they changed the currency several times. You would think that the population would revolt and ask for the leaders' heads. Nope. The brutal regimes know how to keep people hungry enough that they have no desire to fight. Did the WWII concentration camp victims have an insurgence?

What I have seen is that people's memory is very short-lived, and they live happily, thankful and grateful when they are later cut a bit of slack. None of the foreigners who visit the oppressive countries like Vietnam or Cuba know how the local citizenry was or still is being ruled. All the visitors know are cheap food, accommodation, and entertainment.

To be fair, I will add that the double standard of treating the visiting foreigners well while ruling the local citizenry with a hard fist is not limited to these repulsive Communist regimes. I have worked with a naturalized American who came from a North African country. He told me the same story.
 
NW-Bound said:
Did the WWII concentration camp victims have an insurgence?
Click to expand...
Yes. The Warsaw ghetto uprising is well known, and there were others in other ghettos in Poland that were not nearly as successful. There were uprisings and mass escapes in several concentration camps, Treblinka, Birkeanau, and Sobibor (sp?). In the latter the uprising actually forced the Nazis to close the camp.

But you are right, starvation was one of the tools the Nazis used to keep the Jews in check and too weak to resist. Along with collaborators and other means.
 
I am not a good student of history, so my rhetoric question was only to make a somber point that these brutal regimes have been and will be more successful in their oppression than people in a free society like us could comprehend. I have not "been there", but try to picture how it could become so bad. I guess it is something along the line of the frog in boiling water.
 
Your boiling frog premise is correct. Read John Hersey's The Wall to get an idea of how it could happen.
 
Gumby said:
Your boiling frog premise is correct. Read John Hersey's The Wall to get an idea of how it could happen.
Click to expand...
Yep. The best way is to convince us that it's for our own good, such as for "safety" and "security", whether physical or economic -- both of which, when sought to their extremes, result in measures that are the enemies of freedom and a boost to "centralized control".

The people would not accept a one-fell-swoop initiative to crush most of our liberties, but if authorities can make a case, one small incremental step at a time, that it's "for our own good" then they can succeed. It helps if the leaders are persuasive and charismatic, too (and that is NOT a statement about the current U.S. leadership, so please let's not go there).

There is only so much you can provide for "security" and "safety" in a relatively free society. People can and will disagree about where that line is drawn, but I don't think many can dispute the general premise.
 
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ziggy29 said:
It helps if the leaders are persuasive and charismatic, too (and that is NOT a statement about the current U.S. leadership, so please let's not go there).
Click to expand...

I agree that we shall not talk about the US.

Now, Hitler was supposedly very convincing and persuasive to the German population then. Same with Uncle Ho, Mao, and the North Korean's Kim Sung Il towards the people they ruled.

What a bunch of murderous clowns, as we view them now! I suspect that not all the populace got fooled by the nut cases, but the minority did not dare speak up. Or more likely, the dissenters did and were quickly squelched.
 
NW-Bound said:
What a bunch of murderous clowns, as we view them now! I suspect that not all the populace got fooled by the nut cases, but the minority did not dare speak up. Or more likely, the dissenters did and were quickly squelched.
Click to expand...

These type governments set up a system of complimentary incentives and disincentives. You follow the party line and play nice, you get rewarded (better pay, more bread tickets and ration cards, free stuff, perks, imported/illegal goods, etc). You dissent, you face political, social, and economic ostracism, being hunted down, disappeared to Siberia, etc. Unfortunately for many, their individual opinions or external manifestations of their beliefs were irrelevant if they came from a family of means, a family of educated elite, entrepreneurs, opposition political or military backgrounds, etc. Guilt by association basically.

It makes me wonder whether I'd be the unprincipled amoral individual to climb through the party ranks selfishly to benefit myself only (the easy way), or one who secretly fought against the crazy government but risk life and limb for myself and family.

I'm in the middle of reading "We The Living" by Ayn Rand right now (a loosely autobiographical account of living in communist Russia in the 1920's), and watching a documentary on her life which included growing up during the revolutionary period in Russia. Timely thread I must say.
 
NW-Bound said:
I agree that we shall not talk about the US.

Now, Hitler was supposedly very convincing and persuasive to the German population then. Same with Uncle Ho, Mao, and the North Korean's Kim Sung Il towards the people they ruled.

What a bunch of murderous clowns, as we view them now! I suspect that not all the populace got fooled by the nut cases, but the minority did not dare speak up. Or more likely, the dissenters did and were quickly squelched.
Click to expand...


You left out Hugo Chavez...
 
NW-Bound said:
Now, Hitler was supposedly very convincing and persuasive to the German population then.
Click to expand...

My father, who did not speak German, said that he heard speeches by Hitler on the radio, and saw him in newsreels - this was before the war, here in the States.

"I didn't understand a word, but he made you listen."

ta,
mew
 
 
The failure of their North Korean centrally planned economy continues, and now even the government is scared of the social upheaval that might result.

In the latest twist, Pyongyang has decided to allow an unrestricted free market in food.

From the Washington Post :

SEOUL -- Bowing to reality, the North Korean government has lifted all restrictions on private markets -- a last-resort option for a leadership desperate to prevent its people from starving.
In recent weeks, according to North Korea observers and defector groups with sources in the country, Kim Jong Il's government admitted its inability to solve the current food shortage and encouraged its people to rely on private markets for the purchase of goods. Though the policy reversal will not alter daily patterns -- North Koreans have depended on such markets for more than 15 years -- the latest order from Pyongyang abandons a key pillar of a central, planned economy.
Click to expand...
I'm sure this will work to some degree--there will be more food available if people are allowed to benefit from their own labor. The compounding tragedy is that the government's currency confiscation of Nov 2009 (see start of this thread--it was designed to eliminate the free market. That's the system the government is now counting on to feed the people) wiped out all the savings of many North Koreans, so many people have no money to use for food purchases.

The only thing the N. Korean government fears more than internal free enterprise is public awareness of the real conditions in S. Korea. But they can't keep the shades drawn forever. Eventually, the only question will be: Will the country explode or implode? China, the only nation with any leverage there, is doing its best, in total disregard for the welfare of the N. Korean people, to just keep a lid on the situation indefinitely, allowing the Kim dynasty to limp along forever.

"The market" and "Government control" both have advantages in various situations. But, one attribute of "the market" is that the rules don't suddenly change. Prices might spike and drop, but "how it happened" is usually clear. Because the underlying rules remain the same, people can take actions to hedge or cushion against eventualities, and this, in itself, serves as a brake against the very turbulence that people dread. Not so with "the government"--the changes can be so rapid and so unpredictable that it is impossible to hedge. And the government, by fiat, can rule that the hedges are illegal. This is not a comment about present US government plans for change, but about centralized control in general.
 
The biggest problem with centralized control is the person(s) at the top. You could have [-]Jesus Christ[/-] Jack Welch, or you could have [-]Satan[/-] Kim Jong-Ill...

Spelling error intentional... :cool:
 
HFWR said:
The biggest problem with centralized control is the person(s) at the top. You could have [-]Jesus Christ[/-] Jack Welch, or you could have [-]Satan[/-] Kim Jong-Ill...
Click to expand...
That's certainly one of the big problems. But even a benevolent leader can't fix the inherent problems of a command economy. The biggest problems come with the lack of price signals in such an economy, which leads to tremendous misallocation of resources. Agriculture is a great example: There's virtually no central planning in the US agriculture system. No manager decides which land will be put into which crop, who will get what types of fertilizer and how much will be produced, how the tractors will be allocated, and if they should be bought or leased, where the farm labor will be sent and when, how the crops will be processed for greatest value, and how they'll be sold, etc. All these decisions are made by individual farmers and tens of thousands of suppliers, shippers, retailers, etc. And all are allocating resources according to pricing signals. The result is an agricultural system that continually outperforms any system planned centrally--as now even the North Korean leadership is admitting. But the same holds true for every industry.

But an even bigger problem with all these collectivization schemes is that people aren't insects. They have individual hopes, wants, and dreams that have first call on their talents and efforts, and most just won't subordinate their own good and that of their family to some greater community.
 
samclem said:
That's certainly one of the big problems. But even a benevolent leader can't fix the inherent problems of a command economy. The biggest problems come with the lack of price signals in such an economy, which leads to tremendous misallocation of resources. Agriculture is a great example: There's virtually no central planning in the US agriculture system. No manager decides which land will be put into which crop, who will get what types of fertilizer and how much will be produced, how the tractors will be allocated, and if they should be bought or leased, where the farm labor will be sent and when, how the crops will be processed for greatest value, and how they'll be sold, etc. All these decisions are made by individual farmers and tens of thousands of suppliers, shippers, retailers, etc. And all are allocating resources according to pricing signals. The result is an agricultural system that continually outperforms any system planned centrally--as now even the North Korean leadership is admitting. But the same holds true for every industry.

But an even bigger problem with all these collectivization schemes is that people aren't insects. They have individual hopes, wants, and dreams that have first call on their talents and efforts, and most just won't subordinate their own good and that of their family to some greater community.
Click to expand...

Not arguing your overall point at all and am clearly totally on board with the anti-communism thing, but I have been under the impression that many (most?) farmers in the US can only manage to stay in business with government subsidies (ie. large scale farming isn't profitable).

"The United States currently pays around $20 billion per year to farmers in direct subsidies as "farm income stabilization"[10][11][12] via U.S. farm bills."
Agricultural subsidy - Wikipedia, the free encyclopedia

So even in a free market economy, the government influences agriculture as I would think they wouldn't dole out the money without setting rules on how the money can be spent. Isn't that some sort of central planning? (even if not to the same extent as N. Korea).
 
Trek said:
Not arguing your overall point at all and am clearly totally on board with the anti-communism thing, but I have been under the impression that many (most?) farmers in the US can only manage to stay in business with government subsidies (ie. large scale farming isn't profitable).

"The United States currently pays around $20 billion per year to farmers in direct subsidies as "farm income stabilization"[10][11][12] via U.S. farm bills."
Agricultural subsidy - Wikipedia, the free encyclopedia

So even in a free market economy, the government influences agriculture as I would think they wouldn't dole out the money without setting rules on how the money can be spent. Isn't that some sort of central planning? (even if not to the same extent as N. Korea).
Click to expand...
Yes, there is government meddling (that's why I had to say "virtually no central planning":)). The market value of US agricultural products was approx $300 billion dollars in 2007 (link), so at least on the face of it the $20B in government payments shouldn't cause a large degree of "steering."

I don't know much about price supports and subsidies. My impression is that much of this is intended to benefit smaller farmers (to allow them to stay in business) and is really more of a social program (govt assistance to help maintain a traditional way of rural life in America) than a program designed to shape agricultural production. But, that's just a guess.

It's interesting how agricultural subsidies have unanticipated consequences. I don't know the situation now, but in the 1970s and 1980s, "green" Western Europe used far more pesticides on their crops than the US. It was a by-product of the very large European agricultural subsidies. A US farmer would use a small amount of pesticide because the stuff was expensive and he had to watch every dime. In Europe, the government paid so much more to farmers for their crops that it was worth it to use even 2-3 times more insecticides, fungicides, herbicides, etc to get that last 5% of production.
 
Dudester said:
This reminds me a lot of the MPC (Military Payment Certificate) system that was used by the US Military for oversea personal. When I was stationed in Korea in the late 60's, we were paid in MPC instead of dollars. Because a lot of MPC made it way to the black market, the bills were periodically changed. One morning you would wake up and learn that today was a conversion day and you had to trade your old bills for new bills. People entering the base were limited in how much MPC they could bring onto base (to thwart the black market). The big difference with the North Korea example is that MPC converted at par.

There's a entry on Wikipedia describing Military Payment Certificate s.
Click to expand...

I recall that they did this in Vietnam in 1968-69. But since only Americans could legally have MPCs, only GIs could convert and only so much according to your rank. (A private had no business converting the same amount as a General). I recall the sight of many local store owners and bar-girls that had accepted MPCs in he past stuck with bunches of worthless paper. As I recall they continued to accept the new MPCs the next day, but prices probably were increased.
 
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