Nathan Lee

This is pretty messed up: North Korea changing currency by chopping several zeros off. BUT unlike say Australia’s transition from pounds or Europe’s introduction of the Euro, North Korea’s only allowing limited amount of changeover per person. Not per visit, per day or per week: per person (or is that per-family if only men can do it?)! This means any remaining money becomes worthless paper if you happen to have more than that limit.

Although North Korean officials have kept it quiet internationally (like a lot of “internal matters”) the basic idea with this sort of re-value is to reduce the numbers involved in transactions from ridiculous to semi-ridiculous, which by itself isn’t a bad idea. It saves carting wheelbarrows of money just to get a bus ticket or cup of flour. But two things about this re-valuation are pretty god-awful harsh on the population, the first is the timeframe:

North Koreans are thought to have until Sunday to change their old notes into the new currency.

I’m not sure how long the deal has been going, but I’d guess not very long at all.
The goal is:

Many experts believe the reform is intended to curb rising inflation in North Korea.

But the real “let’s take a run up while we screw the population” concept is the following:

.. there appears to be a limit on how much can be exchanged – one report says each adult can cash in only 100,000 won.

That means each adult can exchange about US$740-worth (£445) of won.

That’s 810 bucks Aussie. Or 2 and a half weeks rent at my current place. That’s not all according to the Reuters article:

South Korea’s Chosun Ilbo daily said the ruling, the first time in 50 years Pyongyang has revalued its currency, allows people to keep the equivalent of about $40 in cash — enough to keep a family of four going for two months — and deposit the rest in the bank. They may not withdraw the money on demand.

Tough luck anyone who managed to set a little aside or maybe form part of a not completely dirt poormiddle class. Nope: you guys are back to the state required level of poverty.
I think this also immediately generates the government a list of “near wealthy” (well, near US$750 bucks) people to keep an eye on.

A list of trader traitors if you will. By controlling ability to withdraw money it essentially rations any money people have and gives the government all but 40 bucks per family worth of its currency to play with. If people ever revolt, the bank can just shut off withdrawals and sweat it out for two months before people have no money left.

An expert on North Korea, Rudiger Frank said of the changes:

officials want to destroy the newly-emerging middle class, many of whom have made money trading in the free markets.

and another commentator speculates:

The North certainly wanted to get its hands on the cash held by private North Korean traders working the border with China.

So the people aren’t stupid, they didn’t want to have their savings disappear. They might be Downtrodden, scared, bullied, overworked and malnourished, but they’re certainly not stupid: what would you do if your money was about to be made useless? You’d buy anything you can in the hopes of gaining a bartering advantage. Only trouble with that is that everyone else is after the same limited goods.

.. ordinary people were trying to buy as many things as possible with the old money before it becomes worthless – leading to massive price rises.

So shit out of luck there with the goal of reducing inflation huh?

Another North Korean now living in the South said the new won notes were already being used because few people will accept the old ones.

Easy to see why no one would want the old notes: anyone with the maximum swap over amount would be insane to take on any more cash that they have an increasing chance of being stuck with.

I think the only possible way around would be to know a lot of poor people who would fall under the limit and give them a cut of transferring the cash over (and hope they don’t just run off with your money). But given the controls on the withdrawal of money (if the reuters article is correct) that’d be even more difficult to get away with.

Update: Looks like my last suggestion (dividing up money amongst people) can get you killed.

In new reporting on Tuesday, Open Radio for North Korea, a Seoul-based shortwave radio station that broadcasts news to the North, said that police killed the two men in Pyongsong, a market center outside of Pyongyang, on Friday after they divided their savings among a large group of people and urged them to exchange the money for them, attempting to get around the government’s limit.