China & Korea NK Economics

Hyperinflation in North Korea?

Exchange rates for North Korean currency are collapsing, according to Open Radio. True, a collapse in exchange rates means only so much when your currency isn’t convertible, but North Korea’s irresistable bottom-up transition to a market economy — despite the regime’s best efforts — means this will hurt both the privileged and the underprivileged who are trading with China to get food.

One of the costs of doing cross-border business is the price of bribing North Korean border guards. That cost has also risen sharply. The likely result will be more drug and sex trafficking to replace a falling currency as a medium of exchange. It’s all the more reason to float more North Korean won across the border, even if doing so won’t have a significant impact on the misery there.

Related: No doubt as a reward for abiding by its disarmament commitments and for living at peace with its neighbors, China is giving North Korea yet another bailout.

North Korea’s state media said Wednesday that China has offered Pyongyang aid, a deal that was likely reached at a recent meeting between reclusive leader Kim Jong Il and a senior Chinese official.

The Korean Central News Agency said in a brief dispatch that the aid will be “an encouragement” to North Koreans in their efforts to build “a great, prosperous, powerful nation.” It did not say what kind or how much aid China had offered. [AP, via IHT]

Our friends the ChiComs.