Caos monetario a Pyongyang/2.

What occurred Monday in North Korea is different. Unlike a Turkish or Ghanaian-style reform, in which all citizens are encouraged to convert all their holdings of the old currency, the North Korean regime limits the amount of currency that can be converted. This renders excess holdings worthless, and has set off the frenzy this week to get out of old won and into anything else—dollars, Chinese yuan, physical goods—that will maintain value.

This move is part of Pyongyang's broader effort to curtail the rise of market activities and the development of pathways to wealth—and potentially power—beyond state control. Participants in North Korea's bootstrap capitalism include everyone from laid-off factory workers to government officials who exploit their inside knowledge to deal privately in everything from grain to imported Chinese consumer goods.

There appear to be several particular spurs for the latest "reform." North Korea relies on local production for about two-thirds of grain consumption, with most of the rest coming through aid. The recent harvest was reportedly poor and world grain prices are rising. This makes farmers more likely to divert food from government procurement to the black market. United Nations sanctions also are disrupting the country's finances, affecting everyone and reducing the supply of luxury goods the regime dispenses as favors to supporters.

Surveys of defectors suggest that the repressive apparatus of the state is disproportionately targeting those involved in market-oriented activities. Participants in market activities are more than half again as likely to be detained as other citizens.

Prisoners enduring a typical-length incarceration in a low-level "labor training center" often used to house economic criminals observed horrific abuses at astonishing rates: execution (observed by 60%), forced starvation (90%) and death by torture or beating (20%).

(Kim Jong Il's Fake Currency 'Reform')

"Many citizens in Pyongyang were taken aback and in confusion. Those who were worried about their hidden assets rushed to the black market to exchange them with yuan or U.S. dollars. The yuan and the dollar jumped," one of the sources said.

The revaluation was the first for North Korea since 1992 and the fifth since its government was founded in 1947. In the first reform in 1947 and the third in 1979 and fourth in 1992, currencies were exchanged 1 to 1 with no adjustment of denomination values. Only the second reform in 1959 raised the exchange rate to 100 to 1 as in the reported latest move.

No signs of currency reform were detected yet in joint industrial projects, such as the factory park in the North Korean border town of Kaesong, where South Korean investors pay North Korean wages in dollars, the spokesman added.

(North Korea revalues its currency)

The cabinet resolution No.423 of currency revaluation has been issued. No.423-1 is for "stabilization and improvement of people’s livelihood" and No.423-2 is for "establishment of economic management system and order. In the meantime, the authorities handed down an order requesting the maximum punishment to be given to those who violate the rules of the currency exchange. Unlike the past currency reform in 1992, the implementation of the currency reform is executed under total control of the Party this time.

All commercial transactions will be suspended during the period of currency exchange until December 6. Already all the services and trade networks, including sauna, public bath-houses, barber shops and restaurants, stopped operations. Long-distance bus service as well as peddling has stopped as well. Any activities requiring monetary payments will be suspended until new currency will be legally circulated. The purpose of the currency revaluation is to crush private commercial activities, considered to promote anti-socialism. After December 6, old currencies will be worthless.

The streets of major cities, such as Pyongyang, Pyongsung and Sinuiju, are quiet as if they are under martial law. The only sound heard is detailed rules of the currency exchange, which is broadcasted every two hours, repeated three times each time. In markets, signs are posted saying, "Closed for a week." On the day the currency revaluation started, city dwellers went to countryside to purchase things, assuming that people in rural area would not have learned the news.
In Sinuiju, school teachers even left classes and rushed to rural areas to buy rice on bicycles.
Farmers were first excited that a crowd of city residents would buy a bowl of rice paying as much as 30,000 won, but soon their excitement turned into disbelief after learning about the revaluation.

(North Korea Today No.307-309 Hot Topics November 2009)