South Korean Coin Database

[Verify-12]

I have written about South Korean coins in narrative format in the past, but it seems that many people interested in these coins are looking for database-formatted information that online world-coin references like numista and colnect provide. However, I find many errors in their databases with their Korean-coin listings. To be fair, they are trying to catalog pretty much everything, so there's only so much that they can do.  I want to make sure that I don't do the same thing, so I will update any of this information when I find errors or new data.  I'll also update this database with more coins, i.e., commemoratives, if I get the chance. 

Take a look if interested: http://dokdo-research.com/southkoreancoindata.html

[Arminius]

Thanks for your efforts compiling these information!

[Verify-12]

Thanks for your efforts compiling these information!

Thanks for your kind words, Arminius.

The thing I enjoyed about putting this together was that I was quite happy to find enough information about each coin's cost of manufacture (per coin), and the seigniorage gained from minting these coins.  Basically, only the 500-Won, 100-Won and, barely, the 50-Won produce a profit today.  The 10 Won hadn't produced seigniorage since 1974, and all the smaller denominations had almost never done so.   Seigniorage for S. Korean banknotes, of course, is much higher.   

I want to look more into seigniorage and what it meant for Korea in the 70s and 80s.  I had read that the South Korean government kept the domestic money supply low in the 1970s so that the value of the currency remained high among businesses wishing to borrow money from banks. This tight money supply supposedly boosted the Bank of Korea's seigniorage, which they turned into policy loans for businesses involved in their key industries at the time.

[Figleaf]

I haven't been in Korea for a long time, but even a long time ago, I wouldn't see denominations below 50 won.

The story of generating loans from seigniorage is not credible, if only because seigniorage is a really tiny percentage of what businesses need. If there were some way to plough back seigniorage as business loans, it wouldn't make any difference.

Keeping the money supply low in the closed economy Korea had in the seventies will increase the interest rate, which will depress investments and result in unemployment, ultimately putting a brake on economic growth. It is, however, necessary to fight inflation. Inflation is high when the government budget shows a large deficit. High inflation can also be caused by a sudden price rise of a vital commodity, such as oil - even in a closed economy if it doesn't produce (enough) of that commodity itself.

Peter

[Verify-12]

I haven't been in Korea for a long time, but even a long time ago, I wouldn't see denominations below 50 won.

The story of generating loans from seigniorage is not credible, if only because seigniorage is a really tiny percentage of what businesses need. If there were some way to plough back seigniorage as business loans, it wouldn't make any difference.

Keeping the money supply low in the closed economy Korea had in the seventies will increase the interest rate, which will depress investments and result in unemployment, ultimately putting a brake on economic growth. It is, however, necessary to fight inflation. Inflation is high when the government budget shows a large deficit. High inflation can also be caused by a sudden price rise of a vital commodity, such as oil - even in a closed economy if it doesn't produce (enough) of that commodity itself.

Thanks, Peter.  I have to look more into this issue of seigniorage, as I have been reading that some countries with a small tax base often relied on seigniorage for revenue.  Is it really that small of a profit?   I know that the Korean Olympic committee fought with the Bank of Korea over the right to skim the seigniorage from the 1982-83 "Olympic Promotion" commemorative coins and use these profits to fund the Committees activities. 

[Figleaf]

Government budgets are expressed in billions or trillions of USD, GBP or EUR. Seigniorage is counted in millions. In a country like South Korea, seigniorage would be expressed in basis points, rather than percentage points of the budget.

The budget of the Korean Olympic committee would be a fraction of that of the government (say USD 5 billion.) To them, getting some of the seigniorage (a government privilege; the same thing in the private sphere would be called profit) could be very important, especially in a situation where it can make the difference between profit and loss of the Olympic games project.

Suppose that all Korean exports need 3 months financing on average. The 2016 amount is USD 483 billion, so you would need around USD 121 billion annually to finance that. Last mintage figures in KM are from 2007:

1 won: negligible
5 won: negligible
10 won: 210 billion ==> W 2 100 billion
50 won: 50 billion ==> W 2 500 billion
100 won: 207 billion ==> W 20 700 billion
500 won: 70 billion ==> W 35 000 billion

Total nominal value: around W 60 000 billion or USD 55.5 billion. In other words, if all coins could be minted with zero cost, including free metal, energy and distribution, seigniorage could not even finance half of export sales, not taking bank fees into account, let alone investments (count with 1 year for stocks, 10 years for other investments). Use more realistic figures and the amounts shrink to negligible size.

The point is not that seigniorage means nothing, but that it would be woefully inadequate to finance even the most short-term needs of business.

Peter

[Figleaf]

"Policy loans" are credits that banks are directed to issue, whether the lender is creditworthy or not. Policy loans are not financed in any other way than normal loans: by bank assets and leverage. However, they are far more risky, so that banks will take much higher reserves on these loans or simply will not write down loans in default. BOK support probably refers to government guarantees of these loans. If the government wants to prevent a systemic crisis of the banking sector, it (the central bank) can buy bad loans from the banks above their market value. In the end, this means that tax payers pay the cost of the policy loans.

The use of the word seigniorage in the second para does not refer to coins. Seigniorage coming out of coins is physical money that supports the government budget one way or the other (through the mint, central bank or the ministry of finance or a combination). It is a part of government income. Of course, part of government income can be used to free up bank reserves by buying bad loans, but it makes no difference which part of government income is used to this effect. In fact, the usual method is to pay the banks with government bonds, which effectively trades good paper for bad paper, but does not involve any physical payment.

Peter

[Verify-12]

"Policy loans" are credits that banks are directed to issue, whether the lender is creditworthy or not.

The use of the word seigniorage in the second para does not refer to coins. Seigniorage coming out of coins is physical money that supports the government budget one way or the other (through the mint, central bank or the ministry of finance or a combination). It is a part of government income.

Peter,
Thanks again for your response.  I'm actually trying to understand all of this so that I can make a reasonably intelligent explanation of S. Korea's seigniorage use in an article for which I am currently researching. I did not major in economics, as you can tell.  Your responses absolutely help!  So thanks for taking the time to suffer fools~!

Yes, coins' seigniorage is negligible, except maybe for Olympic committee members looking around for crumbs to finance their government's demand for an Olympics that the committee was probably warned "had better be good!"  I was thinking of seigniorage from banknotes, too.  Is there seigniorage from other sources other than physical money?    Here's another bit of info I found on seigniorage:

[Pabitra]

  Basically, only the 500-Won, 100-Won and, barely, the 50-Won produce a profit today.  The 10 Won hadn't produced seigniorage since 1974, and all the smaller denominations had almost never done so.   Seigniorage for S. Korean banknotes, of course, is much higher.   

The word Seigniorage is primarily used for coins.
The definition is given as enclosed.
The source, Annual Report of Royal Australian Mint, 2015-16.
The cost of retiring coins must be included.
When, due to high inflation, the lower denomination coins become useless, the cost of retiring them becomes substantial as compared to their face value. Case of Nigeria in 2006 is well known example.

As far as notes are concerned, a high percentage of the issued volume is presented back for redemption and keeping account becomes a substantial cost. Recent example of India is well known.
Thus, for all practical purposes, there is no seigniorage gain in currency notes as they are not assets of the government but a liability of the Central Bank ( unlike coins and some lower value notes).

[Verify-12]

The word Seigniorage is primarily used for coins.
The definition is given as enclosed.
The source, Annual Report of Royal Australian Mint, 2015-16.
The cost of retiring coins must be included.
When, due to high inflation, the lower denomination coins become useless, the cost of retiring them becomes substantial as compared to their face value. Case of Nigeria in 2006 is well known example.

As far as notes are concerned, a high percentage of the issued volume is presented back for redemption and keeping account becomes a substantial cost. Recent example of India is well known.
Thus, for all practical purposes, there is no seigniorage gain in currency notes as they are not assets of the government but a liability of the Central Bank ( unlike coins and some lower value notes).

Pabitra,
Thanks for your help here, and the examples you provided.  Yes, the point about banknotes being a liability of the central bank is a key one in the case of South Korea, and I have to keep that in mind, so thanks! 

The Bank of Korea in the 1950s~1990s (this era is my research focus) had a problem:  It was NOT independent, but sort of a subsidiary organization of the Korean Ministry of Finance's Monetary Policy Board.  The S. Korean government considered the BOK just another government bureau that simply IMPLEMENTED government policies, especially in regard to loans aimed at exports and growth, not a central bank that FORMULATED policy.   There was a joke among BOK staff in the 1980s in which they called the Bank of Korea building in downtown Seoul "the Myeongdong Branch of the Ministry of Finance" (Myeongdong was the neighborhood where the building stands).

[Pabitra]

The Bank of Korea in the 1950s~1990s (this era is my research focus) had a problem:  It was NOT independent, but sort of a subsidiary organization of the Korean Ministry of Finance's Monetary Policy Board.  The S. Korean government considered the BOK just another government bureau that simply IMPLEMENTED government policies, especially in regard to loans aimed at exports and growth, not a central bank that FORMULATED policy.   There was a joke among BOK staff in the 1980s in which they called the Bank of Korea building in downtown Seoul "the Myeongdong Branch of the Ministry of Finance" (Myeongdong was the neighborhood where the building stands).

Central Banking is a little understood profession and hence much maligned and manipulated.
The role of Ministry of Finance in appointing Governor ( or head ) of Central Bank leads to selection of a pliant and politically correct person since his/ her competence is never tested prior to that appointment. In addition, a Ministry of Finance mandarin expects the Central Bank to wield a wand to eliminate all economic ills in a jiffy.
A professor of Finance in USA had gone to the extent of saying that the Governor of Central Bank has to monitor about 35 parameters of Economy and fine tune about 10. In other words, he can be replace with about 100 lines software.

We all know that it may not be that simple. Example of Indis in prematurely removing(?) its central Banker recently, Issue of huge currency in a mistaken belief in Zimbabwe in 2008 or unable to keep proper accounting in Greece before the Euro etc. are examples of expecting miracles from central bank and of action without due care in accounting.

[Figleaf]

Your problem is clear to me, so let's hope I can explain what I understand

First, seigniorage. Its use in the text you posted is improper. The proper word is subsidy. That's also a word that politicians don't like, which may well be what explains the newspeak. Coins and banknotes have seigniorage. At least since around 1800, seigniorage is marginal. The rest of this post is devoted to the subsidies. There is no connection with coins and banknotes.

Second, financial policy. After the Korean war, its number one problem was a severe lack of capital. Most pre-war industrialisation before the Korean war had taken place in the North. Practically all trained engineers lived there. The destruction during the Korean war increased the need for capital and decreased its availability.

The post-war military regime stressed developing industry with military uses, including iron, steel, cement, chemicals and machinery. That development had to be financed. Some financing came from US "development aid", but most came in the form of forced savings (e.g. foreign trade licenses, unavailable passports and even puny savings such as stopping the use of elevators and escalators) and capital creation by the government (such as deficit spending).

Unsurprisingly, the military regime controlled the central banks and the central banks controlled the banks. The financial system was used in the service of creating the industries the regime wanted. The instrument was the policy loan. It was not the banks that decided who got capital, but the regime. Scarce capital flowed to the large industries through large conglomerates (Chaebol), some of which still exist (e.g. Hyundai.) This may look efficient on paper, but it creates two major problems.

First, getting loans becomes a question of who you know. Good relations in the right ministry provide economic success. This is true for any military dictatorship, but even more true when the financial sector is controlled by the dictatorship and capital is scarce. In the end, finance is condensed to corruption, which in turn induces the government's indulgence for mis-management and corrupt behaviour within its clients.

Second, capital becomes expensive and scarce for everyone else. Small businesses and individuals reverted to a mechanism called kerb financing. Its origin is in financing burials among farmers with a system that looks like a European tontine, but since the participants were supposed to re-pay, rather than die, the outcome was different. An organiser would get parties in need of small amounts of capital together. All parties participated with an amount of savings, forming the "pot". The pot was lent to the participant with the lowest capital requirement. This party used the capital, re-paid the loan and paid interest, which increased the pot. The pot was lent to the participant with the next-highest capital requirement and so on, until all had used and re-paid the capital. At that point, the organiser was paid and pot plus profit was distributed pro rata of participation among the participants.

Kerb capital has a very nasty side-effect: it cannot take repayment risk. A participant who could not (completely) re-pay was expected to commit suicide and leave all belongings to the pot. In cases with serious consequences for the participants, the organiser (mostly kisaeng) would be expected to commit suicide also. Those unwilling to commit suicide would be helped along by the organiser, if necessary assisted by other participants.

The difference, financial and otherwise (availability, risk), between the "policy loan" and the "kerb loan" is the subsidy. It is not clear to me if the author refers to subsidised finance only, or to all differences between subsidised and unsubsidised capital by what he calls seigniorage.

Peter

[Verify-12]

Thanks so much, Peter. 

First, seigniorage. Its use in the text you posted is improper. The proper word is subsidy.

Then I really wonder WHY they used "seigniorage" to describe "subsidies?"   Politicians didn't write these analyses.  Economics professors did.  And where do the "subsidies" come from if the central bank is not getting it from printing money or making money somehow with securities (isn't this "seigniorage"?)   Isn't the money gained through printing money or profiting off of securities basically the same as seigniorage (i.e., Total - Cost = Profit), except it's not specifically about coins?   

Perhaps that's why they use the word, "seigniorage?"   Maybe there is no other specific economic term that fits what they are trying to get across to the reader, so they maybe they just use "seigniorage" and that word relates to the reader what they are talking about?   "Newspeak" of politicians aside, of course.

I'm believing you, Peter, I just want to know where this money they used to fuel the loans came from.  Was it from what they call the "inflation tax" that's created by being the sole provider of money to the economy?

Kerb capital has a very nasty side-effect: it cannot take repayment risk. A participant who could not (completely) re-pay was expected to commit suicide and leave all belongings to the pot. In cases with serious consequences for the participants, the organiser (mostly kisaeng) would be expected to commit suicide also. Those unwilling to commit suicide would be helped along by the organiser, if necessary assisted by other participants.

...*gulp*! 
I think that instead of committing suicide, the defaulters would often disappear to the United States (or Japan).  I suspect a few Koreans that I may have encountered in the past were people who had had to do this years ago...

EDIT:  Hmm... Seems that I've found the author's definition of "seigniorage":

[Figleaf]

"The change in base money divided by GDP" is not a mainstream economic theory equation. It is a ratio that expresses how much money is potentially available for transactions. Base money (more commonly called monetary base) has little to do with coins and banknotes, as it is mostly bank reserves, in other words ledgers stored in computers. Note here already that banks and the central bank can create or destroy base money by leveraging or de-leveraging holdings. The best use I can think of for the equation is to measure the liquidity of the financial system.

Money for subsidies normally comes from taxes, but it can also come from a government budget deficit (this is known in the US as "printing money", which is a mis-nomer. The additional money supply is created, not printed). The government creates money by spending more than it receives. The central bank has a number of ways to create money, ranging from manipulating interest rates to changing bank's reserve requirements or trading good paper for bad paper.

Banks (and other businesses) can create money by leverage. Individuals can create or destroy money with credit. Here's an example of how you can create money. Imagine that you have 500 in cash reserves and you want to buy a house. The monetary statistics will show you contributing 500 to the money supply.

You buy the house from a Mr. X for 2000 and you finance it with a mortgage of 1500 and your 500 in cash. Monetary statistics will show your contribution to the money supply go down by 500, while Mr. X's contribution is boosted by 2000, a net money creation of 1500.

The bank that gave the mortgage and handles both your account and that of Mr. X has seen a change on its balance sheet: it has issued a secured long-term credit of 1500 and lost a deposit of 500. Its contribution to the money supply goes down by 500 as the credit doesn't count as money (I am disregarding reserve requirements and leverage here.) Note that none of these transactions involve any coins or banknotes.

As for the victims of kerb financing, they couldn't leave the country, even if they had wanted to, as normally, people wouldn't get a passport. Also, committing suicide after an important failure is part of East Asian culture.

Peter

[Figleaf]

Late thought, if you want to study the mainstream expression of the relation between money and inflation, look here. M is money, P is inflation.

Peter