Author Topic: North Korea Confirms Currency Reform  (Read 4635 times)

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Offline Bimat

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North Korea Confirms Currency Reform
« on: December 04, 2009, 06:11:58 PM »
 
N. Korea confirms currency reform, vows to normalize economy

By Kim Hyun
SEOUL, Dec. 4 (Yonhap) -- North Korea confirmed its surprise currency reform and said the move seeks to tackle inflation and normalize an economy that has dilapidated since the 1990s, a pro-Pyongyang newspaper said Friday, citing an official at the North's Central Bank.

   "This currency exchange is aimed at first raising the value of our currency to smoothen its circulation," the bank official, named Jo Song-hyon, was quoted as saying in an interview held Thursday with the Choson Sinbo. The Japan-based paper has a branch in Pyongyang.

The interview was the first confirmation by North Korea of Monday's redenomination, while state media still remained silent.

   The official said North Korea has suffered economic hardship under the combined effect of international sanctions, natural disasters and the fall of the communist bloc in the 1990s.

   "The imperialists' vicious isolation and suffocation maneuvers against us, subsequent natural disasters and the fall of the socialist market have posed great impediments to the normal economic development of our country," Jo said.

   Productivity fell and the government was forced to spend lavishly to strengthen its military and implement public policies, the official said.

   "As a result, the currency has inflated and an abnormal imbalance in the people's economic development has ensued," the official said.

   The exchange to new banknotes will be available for seven days until Sunday. "Bills that were not exchanged during the period and our currency that has been illegally taken outside the country will become entirely invalid," the official said.

   The exchange rate to new denominations was 100 to one, but bank deposits will receive benefits of a 10 to one rate in a policy to encourage savings, he said.

   Prices of market commodities will be returned to the level of the 2002 economic reform, after which inflation mounted, he said.

   The Choson Sinbo ran images of the new banknotes that feature pictures of the country's founder Kim Il-sung and his birth home in Pyongyang. The Central bank issues notes in 5,000 won, 2,000 won, 1,000 won, 100 won, 50 won and 10 won, and lower denominations are in coins, the report said.

   hkim@yna.co.kr
(END)

Source : Yonhap News
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andyg

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Re: North Korea Confirms Currency Reform
« Reply #1 on: December 04, 2009, 06:50:05 PM »
It doesn't say;
*that North Koreans can only exchange 15000 (US$60) Old Won for new won, amounts above this are forfeit.
*the old notes ceased to be legal tender on 30th November, yet new notes are not to be issued before 7th December.

Offline BCNumismatics

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North Korea confirms currency reform.
« Reply #2 on: December 04, 2009, 10:53:37 PM »
I can guess that North Korea is now the Asian equivilant of Zimbabwe in a sense.

Aidan.

Offline Figleaf

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Re: North Korea Confirms Currency Reform
« Reply #3 on: December 05, 2009, 07:45:29 PM »
I think there are some important differences. The most important one is that while Zimbabwe's currency was convertible (at least in theory), the N. Korean won isn't. It may seem technical, but there are important consequences, one being that in principle, nothing forced the North Koreans to reform their money.

North Korea's economy is horribly mishandled, but there is no way to escape it. You can't import stuff without a license and you can't emigrate. The only way out is smuggling and the only border that is porous enough is the one with China. Smuggling does take place and it is probably hugely profitable. This must have created a class of wealthy smugglers, gathering economic power beyond the control of the governing maffia.

Reforming the currency is a great way to pull the rug from under the smugglers feet. Just declare their stashed money invalid. Don't change any large amount. That'll teach them. The sentence "Bills that were not exchanged during the period and our currency that has been illegally taken outside the country will become entirely invalid" says enough.

Peter
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Offline thelawnet

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Re: North Korea Confirms Currency Reform
« Reply #4 on: December 05, 2009, 08:37:01 PM »
Indeed, seems like a means of government control as much as a response to inflation. Hammer the black market currency traders and others will stashes of won, teaches them a lesson.

Offline Bimat

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North Korea Confirms Currency Reform
« Reply #5 on: December 07, 2009, 06:10:01 PM »
Here are some updates:

North Korea is Almost through with Currency Reform
12:33, 07.12.2009 | Приморский край
This is the first time for the past 17 years that DPRK increased considerably the national currency exchange rate.

VLADIVOSTOK. December 7. VOSTOK-MEDIA – The currency reform in North Korea, which was announced on December 30, has nearly completed. The currency reform involved the exchange of only limited amounts of old bills ranging from 100 to 450 thousands per family at a rate of 100:1, regardless of number of family members and income, BBC reports.


To avoid scare buying with the old money many shops closed down for the week. South Korean media have reported that the move triggered massive rallies and circulating of anti-government leaflets throughout the North Korean population. However, this information has not been officially confirmed.


DPRK authorities stated that this measure is aimed at “fighting against growing inflation and economic imbalance” and the move “was welcomed by the overwhelming majority of workers, farmers and civil servants”.


Foreign nationals who are at present in Pyongyang say that hotels, restaurants and gift shops are still accepting US Dollars, Euros and Yuans despite the statement made by a spokesman for the North Korea’s central bank in an interview to The Choson Sibo newspaper published by General Association of Korean Residents that one of the objectives of the currency reform is to abandon the use of foreign currency for payments. 
New banknotes in nominal value of 5, 10, 50, 100, 200, 500, 1,000, 2,000, 5,000 won and coins in value of 1, 5, 10, 50 chon and 1 won have been already put into circulation.

 
The 2,000 won note bears the picture of hut situated on Baekdu Mountain, in which, according to official biography, Kim Jong-il was born. Soviet records show, however, that Kim Jong-il was born in the village of Vyatskoye, near Khabarovsk, in 1941, where his father, Kim Il-sung, commanded the 1st Battalion of the Soviet 88th Brigade, made up of Chinese and Korean exiles.


This is the first time that a picture associated with the present North Korean leader appeared on the country’s currency. As it has in the past, the new highest-denominated note of 5,000 won features the picture of Kim Il-sung.


This is the first time for the past 17 years that DPRK increased considerably the national currency exchange rate. Analysts in Seoul believe that the redenomination of the North Korea’s won was triggered by the necessity to fight against inflation and growing black market.


Meanwhile, the decision of North Korean Government turned out to be a bolt from the blue for the local market. “People were taken by surprise; many of those who managed to save some money rushed to black market to swap the defunct wons for Chinese yuans or US dollars. As a result the foreign exchange rate soared,” a source in North Korea stated.

Source : VostokMedia
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Offline Harald

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Re: North Korea Confirms Currency Reform
« Reply #6 on: December 08, 2009, 08:58:29 PM »
It was the third time North Korea has done a currency confiscation
-> 30.11.2009 within 6 days, maximum amount originally 100'000 won, raised to 150'000 won (cash)
-> 15.07.1992 within 6 days, maximum amount 400 won (cash), 30'000 won (deposit)
-> sometime in 1979: if anyone has details, please post!
The banknote exchanges in 1979 and 1992 went without revaluation of the currency (just for elimination of the surplus liquidity).

The article from VostokMedia contains so many faults that I tend not to believe the sentence "coins in value of 1, 5, 10, 50 chon
and 1 won have been already put into circulation". or has anyone seen them yet?

cheers
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Harald
http://www.liganda.ch (monetary history & numismatic linguistics)

andyg

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Re: North Korea Confirms Currency Reform
« Reply #7 on: December 08, 2009, 09:32:49 PM »
It was the third time North Korea has done a currency confiscation
-> 30.11.2009 within 6 days, maximum amount originally 100'000 won, raised to 150'000 won (cash)
-> 15.07.1992 within 6 days, maximum amount 400 won (cash), 30'000 won (deposit)
-> sometime in 1979: if anyone has details, please post!
The banknote exchanges in 1979 and 1992 went without revaluation of the currency (just for elimination of the surplus liquidity).

The article from VostokMedia contains so many faults that I tend not to believe the sentence "coins in value of 1, 5, 10, 50 chon
and 1 won have been already put into circulation". or has anyone seen them yet?

cheers
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Harald

see here
oddly the 2002 date is before the 2005 date on the last set of coins issued!

Offline Figleaf

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Re: North Korea Confirms Currency Reform
« Reply #8 on: December 08, 2009, 11:18:10 PM »
Saving the pictures, just in case.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline Harald

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Re: North Korea Confirms Currency Reform
« Reply #9 on: December 10, 2009, 08:51:33 PM »
On 1 July 2002 North Korea has changed its currency policy, also in having a (sort of) floating exchange rate against the USD.
could be that the new coins were originally meant to be released on this occasion.

cheers
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Harald
http://www.liganda.ch (monetary history & numismatic linguistics)

Offline Rasmus

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Re: North Korea Confirms Currency Reform
« Reply #10 on: January 07, 2010, 07:17:10 PM »
what about these 10 & 100 won 2005 dated coins?

Offline Harald

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Re: North Korea Confirms Currency Reform
« Reply #11 on: January 07, 2010, 09:21:30 PM »
good question

in principle, all money was exchanged until 6 December and demonetised afterwards, means the coins were probably dumped.
maybe the coins (there is also a 50 won) have remained in circulation and are now used as 1/10, 1/2 and 1 (revalued) won,
since the cost for an exchange exceeds their nominal value.

cheers
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Harald
http://www.liganda.ch (monetary history & numismatic linguistics)

Offline Figleaf

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Re: North Korea Confirms Currency Reform
« Reply #12 on: January 14, 2010, 11:30:46 AM »
North Korean Money Troubles
Kim Jong Il's currency revaluation is on the verge of sparking a hyperinflation.

(...)
On Nov. 30, 2009, Pyongyang announced without warning an immediate "currency reform." New won notes were issued for old ones on a 1-for-100 basis; no more than 100,000 old won per person (under $40 at unofficial rates) could be converted; and old currency was completely void at the end of the week. This amounted to an overnight confiscation of the overwhelming majority of won holdings by ordinary households, and severely disrupted the workings of the country's already fragile markets for foodstuffs and other goods.

For the first time in the regime's history, a Pyongyang ukase generated widespread public resistance visible to the outside world. International news coverage reported market women cursing their government, and even told of local riots that were only suppressed by force of arms. The government backtracked, conceding that slightly larger personal holdings of old money might be exchanged for new.

Belatedly, the government also apparently realized that foreign currency plays a role in North Korea's consumer economy, too. By some estimates, the convertible foreign exchange holdings of families may total $1 billion or more, largely in dollars, yuan and euros. Three weeks after the currency reform, Pyongyang ordered that foreign currency could no longer be used in domestic transactions (as had been occurring, albeit illegally), and that all foreign notes must be exchanged at wildly unrealistic official rates. The won went into freefall.

The speed and depth of the won's resulting plunge has been dizzying. The nominal market price of rice is reportedly higher today than it was in November 2009, before currency reform. This would imply 100-fold inflation and then some in just over one month. The won-yuan exchange rate along the North Korea-China border has reportedly dropped by almost 50% over the past month, even after discounting for the 100-to-1 currency conversion. The government apparently has no confidence in its own currency move, and is now betting against it. News reports indicate that Pyongyang this month is issuing soldiers in its public security forces twice their nominal monthly pre-reform wages (a 20,000% raise in light of the currency conversion). If the government finances more wage hikes like this by running the printing presses, it will turn the currency into a toxic asset no one wants to hold.

North Korea appears to be approaching the brink of hyperinflation. (...)

Source: Wall Street Journal (relevant and factual part only)
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline Harald

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Re: North Korea Confirms Currency Reform
« Reply #13 on: March 09, 2010, 09:42:45 PM »
It appears that the coins of the 2009 reform are now on the numismatic market, but only the values of 1 won, 50 & 10 chon. the small denominations of 5 and 1 chon (the ones dated 2008) were maybe not issued at all due to too low a value. or the Korean government does not let them out for some reason.

something similar applies to the previous coins. the 100 won is offered everywhere, but not so the 50 and 10 won which remain scarce for the moment.

cheers
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Harald
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Offline ciscoins

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Re: North Korea Confirms Currency Reform
« Reply #14 on: March 10, 2010, 12:58:12 PM »
maybe not issued at all due to too low a value. or the Korean government does not let them out for some reason.

The reason is not far to seek. The new money completely depreciated in 5-6 weeks after the reform. In November 1 USD (at black market) was equal to 35 DPRK new won, and now it costs 1750 new won. 4900% for 3 months.

The prices for 1 kg of rice have grown from 18 to 1500 won. So the real inflation is even higher: about 8000% for 3 months.

The situation already looks like in Zimbabwe.
Ivan
Moscow, Russia