NK Economics Resistance

North Korea Revalues Currency, Wipes Away Savings of Millions (Updated)

North Korea has shocked its entire population with a sudden announcement that it will replace its currency with new notes that drop two zeroes from the denominations. The new North Korean currency’s official exchange rates will increase by a hundredfold. The move is causing widespread outrage, panic, and a run on U.S. and Chinese currency. North Koreans throughout the country and at every socioeconomic level are reacting with shock, tears, and anger. According to some reports, people are literally weeping in the streets, as the regime reacts by filling them with police and soldiers.

North Korean sources who engage in trade with China in the eastern Chinese city of Shenyang told Yonhap News Agency that the North Korean government implemented the currency reform as of 11 a.m. Monday and the exchange for the new currency began at 2 p.m. [….]

“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.

Foreign embassies in South Korea confirmed the report, saying their missions in Pyongyang received a verbal notice of the revaluation by the North’s Foreign Ministry on Tuesday. The use of the old denominations has already become “difficult.” [Yonhap]

North Korea’s wireless broadcasting services still haven’t said a word about this first major currency revaluation in 17 years. According to the Daily NK, however, the regime has announced it over the cable radio system (think telescreen without the screen) that feeds into North Korean homes. As always, we’re left to speculate about the regime’s motives. It could be intended to boost economic output, offset the effect of sanctions, or prepare the way for a transfer of power. The most-discussed motives, however, relate to controlling the hyperinflation of the North Korean won, fueled by the rise of an underground black market, and malice toward those who have stashed away savings earned in markets:

Yang Moon-soo, an economy specialist at the University of North Korean Studies in Seoul, said he believes the currency reform has both economic and political aims. North Korea wanted to shed heavy inflationary pressure, and in the process of exchanging the denominations, the government would be able to discover and question those who have amassed wealth, he said.

“In economic terms, the government will be able to retrieve banknotes that people have amassed in their own coffers,” Yang said. “In that process, those who have legally or illegally stashed a large amount of money will be exposed to the government, and those who fear punishment will have to bury their illegally earned money. There will be less cash circulating in the market and more government control of the people.” [Yonhap]

North Koreans will have just five days to exchange their old currency. And in a flash, the “peoples’ economy” of North Korea is paralyzed: buses have quit running, train stations are packed with traders trying to get home, and markets are in chaos. Suicides were even reported, though those reports are obviously impossible to confirm. Although the official limit on the amount of currency that could be exchanged was originally 100,000 won, the angry public reaction has forced the regime to raise that limit in some places.

The regime seems to have been taken aback by the surprisingly strong public reaction — really, the closest thing to a widespread outburst of dissent we’ve yet seen in North Korea:

“North Korea appears to have carried out the reform so secretly and suddenly that no one could prepare for it,” Dong said.

“But public reaction could be much stronger than the government has expected, because this shuts the door to the growing trend of ordinary people stashing money personally from their market activities,” he said. “Most high-class people have their money in dollars or yuan.”

Good Friends, a humanitarian aid organization in Seoul, said in a bulletin posted on its Web site that shops, public bathhouses and restaurants in the North were mostly closed, and long-distance buses were not operating. Public anger mounted as the maximum amount of the new currency allowed for exchange was limited to 100,000 won per person, it said.

“I worked like a dog for two months for the winter, but the money became useless paper overnight,” the bulletin quoted a resident in Sinuiju, a city that borders China in North Phyongan Province, as saying. [Yonhap]

The Daily NK reports that the regime is taking extraordinary security precautions on the streets:

According to The Daily NK’s sources inside the country, the People’s Safety Agency (PSA) was ordered to control residents, and the National Security Agency, Defense Security Command of the People’s Army and army bases were all placed on standby. [….]

From 11 A.M., the PSA and community watch guards started monitoring residents on the streets more strictly, and at 12 P.M. military bases were placed on standby to cope with possible emergency situations. In morning People’s Unit meetings and lectures in factories and other organizations, a notice was handed down enforcing a curfew which read as follows; “After 10 P.M., all movements are prohibited. Offenders must be strictly regulated. [….]

A source from Shinuiju reported, “Loud sounds of weeping in every house have not ceased since the news was released. Weeping and fighting between couples has not stopped anywhere. The atmosphere of the city is terrible now.

He added, “This currency reform is a horrifying trick. It is the first time people have cried on the streets since the Great Leader’s death. [Daily NK]

After North Korea’s Public Distribution System Collapsed a decade ago, people have become dependent on the black market for their survival. A majority of North Koreans today get at least half their calories from food they purchase in markets. For many, the money to buy their food also comes from trading. And in recent years, most outbreaks of public dissent have been related to pocketbook issues — the regime’s confiscatory and stifling efforts to combat what amounts to spontaneous economic reform from below.

This is a story worth watching very carefully over the next few days. There are going to be long lines to exchange all that old currency. Waiting patiently in line is not a skill for which Koreans are widely renowned. The usual impatience and anger about line-cutting will be amplified by the fear that at the end of the line, one could lose the savings on which livelihoods and lives depend. It’s not hard to see how those currency lines could have an explosive potential to become angry mobs.

Update: The Washington Post’s Blaine Harden and the Wall Street Journal’s Evan Ramstad have both picked up the story. I also recommend Kushibo’s post (see comments).

While I think it’s early to say that this is could be the straw that breaks the camel’s back, I will agree with Kushibo this far — the currency change introduces a great deal of uncertainty into our perceptions of the regime’s stability. I see a Romanian scenario as unlikely to unfold in the short term. The security forces would gun down anyone who challenged them, and people are still too isolated from each other to organize and coordinate an effective opposition.

But even the regime’s overreaction would also mark a substantial change in North Korea’s domestic politics, such as they are. It would bury a few troublesome pretenses held by false experts on North Korea, as well — of a regime that enjoys popular support, of a regime with a genuine interest in economic reform, of unconditional aid policies that fuel (rather than retard) reform. It could also refocus thought in the more practical direction of how to bring the Kim Dynasty to a close with the least possible loss of life. That formula, simply stated, is to contain it, constrict it, and subvert it. Our last best hope is to help support an Albanian scenario — the replacement of a ruthless dictator with one who might hesitate to order a slaughter, opening the way for a successful popular uprising, a transitional government, and a path to structured democratization and reunification on a fixed timetable.


  1. I wonder if we have just seen the catalyst for regime change from within. As I wrote on this same subject (before I saw yours), this completely changes the calculus for individual families who up to now have thought their chances for survival are better if they do nothing than if they do something.

    In my gut, I think this may be the biggest potential game changer we’ve seen in a while. Suddenly thousands if not millions have lost their means to scrape by.


  2. Jonathan:

    Not if the old currency is worthless. There might be a market for exchanging old currency in the black market at very inflated rates, but after a while, yeah, it will not be worth it.


  3. Reach in your pocket, do you have $40? If so, you are richer than anyone in N. Korea after they exchange their old currency for new currency.


  4. mike v, you inspired me to add the following observation to my blog post: Unless there have been behind-the-scenes provisions for connected people to exchange considerably more than the $40 or $60 limit, then those middle-level party cadres who run the show outside of Pyongyang suddenly have a lot less stake in keeping the regime going.


  5. I’ve bought gold recently for fear of seeing here in the US what happened in North Korea. The US dollar is rapidly becoming worthless, as a result of a deliberate US Government policy of neglecting the dollar.



Comments are closed.