According to international press reports the North Korean government just effected a surprise “currency reform” last night. Under the terms of this new measure, North Korean citizens have exactly one week to turn in their holdings of DPRK won for newly issued bills (swapping old for new on a 100 to 1 basis). After December 6, the former currency will be invalid and officially worthless. And according to these same stories, ordinary North Koreans will be permitted to exchange no more than 100,000 won currency for their country’s new and improved currency—at current informal exchange rates, that works out to less than $40 per person.
This is not the first time Pyongyang has lightened its subjects’ pockets through a sudden “currency reform” ukase: similar measures were implemented, always without warning, in the 1950s, late 1970s, and the 1990s. But blitzkrieg-style currency replacement has always been a sign of heightened crisis within the perennially troubled and distorted DPRK economy. So it is today.
The immediate intentions of the latest round of North Korean-style currency reform is to bring out-of-control domestic inflation back in line by expropriating the assets of the country’s more financially successful citizens. Since these wealth holders are disproportionately entrepreneurs in the country’s unsanctioned local markets, the measure has the added bonus of striking a blow at the “capitalist” and “imperialist” elements Pyongyang leadership desperately fears to see gathering within the nation. A decade ago, DPRK media proclaimed that “opening and reform” were nothing but “honey-coated poison” for the North Korean system—so, too, for independent economic activity within the socialist paradise.
The timing of this “currency reform” should not go unmentioned: it has taken place on the eve of what is to be the Obama administration’s first high-level mission to Pyongyang for bilateral talks. North Korea’s rulers have just signaled that their economy is caught in the grip of an unusually severe economic crisis. Look for a big payout from Uncle Sam to figure prominently on their agenda in the upcoming meetings.