Money (That's What I Want)



In the two years since the November 2009 currency reform, North Korea has experienced high and sustained inflation.  One implication is the ever-widening gap between the official and black market exchange rates, and understandable reluctance of foreign exchange earners to convert their revenues into North Korean won at the official rate. Prior to the death of Kim Jong-il, the Daily NK published a somewhat confusing piece that claimed that the ChosunTrade Bank was offering the carrot of better-than-official rates to obtain foreign currency deposits, while the regime was also brandishing the stick of special inspections of units suspected of hoarding foreign exchange. One response by enterprise managers has been to stash foreign exchange earnings into local trade banks where bank officials are bribed to disguise the magnitude of the deposits and to maintain access to foreign exchange loans. The reputed consensus among market participants was that deposits in banks controlled by the central government were subject to seizure in the run-up to the Kim Il-sung centenary.

Uncertainty following the death of Kim Jong-il seems to have intensified these contradictions.  IFES reports that “the DPRK government is forcing businesses and trading companies to deposit all foreign currency earned in the trade bank.  However, most companies prefer to hold on to their foreign reserves to avoid complex deposit and withdrawal processes.” In other words, they don’t trust the banks so they are stuffing the dollars and yuan into their mattresses.  IFES continues, “They also seem to be using private money brokers to exchange money.” Translation: for what its worth, the North Korean banking system is being drained of deposits. “Recognizing this, North Korean authorities have been cracking down on such illegal “private money exchangers” every year.”  And with whom are these capitalist parasites affiliated?  If you answered “the security services” you may have a future in business.

Not to worry, according to Yonhap, help is on the way.  The South Korean news agency reports that North Korea plans to issue gold and silver coins in honor of Kim Jong-il. Yonhap quotes North Korea's KCNA to the effect that the commemorative coins are to celebrate Dear Leader’s “immortal achievements" of making North Korea an invincible military power with nuclear weapons that no enemy can dare touch under his "songun" or military-first leadership, and to keep such feats "shining through generations.” According to the KCNA, the gold coins are to be minted 35 millimeters in diameter, 2mm thick, while silver ones will be 40mm in diameter and 3mm thick. No information on fineness was reported.

Setting aside the fact that such coins may never be minted, it is amusing to contemplate the possibility that such coins could circulate in North Korea.  Presumably their value would be established by their gold weight at international prices and as such would act both as a hedge against inflation as well as an indicator of its virulence.  As a North Korean, one would not have to possess the portfolio preferences of Ron Paul to see the attraction of acquiring some of the coins.

As for the rest of us, South Africa’s Krugerrands were famously subject to international boycotts during the apartheid era, and given existing UN sanctions on North Korea, it may be a while before any “Golden Kims” reach our shores.

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