Tales from the DPRK

[DontSayBanana]

American backed dictators >>> Chinese backed dictators

Glad to see somebody responds to my trolling.

[HisMajestyBOB]

I was going to make a post about the (possible) attempt on Kim Jong Il's life a year or a few ago, but instead I'll post something a little more current:

North Korea Revalues Currency, Wipes Away Savings of Millions

Posted by Joshua Stanton on December 1, 2009 at 8:06 am · Filed under NK Economics, Resistance

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. 

http://www.freekorea.us/2009/12/01/north-korea-revalues-currency-wipes-away-savings-of-millions/
See also: http://kushibo.blogspot.com/2009/12/is-north-koreas-currency-revaluation.html and http://www.nkeconwatch.com/2009/11/30/dprk-renominates-currency/

This will put intense pressure on the regime, and while they can call out the army, they can no longer really rely on the discipline of the conscripts. Many soldiers make a living through the black market, selling food, supplies and equipment to feed their families. Higher ranking officers, Kim's inner circle, and possibly some of the special forces and elite units almost certainly knew about this before hand and could prepare (through the grapevine if nothing else), but those that are actually expected to go out on patrol and fire on their fellow citizens are the ones who have seen their stashed cash effectively wiped out. Worse, this was done right before winter, when everyone is trying to pull together enough cash, fuel and food to survive the bitter cold.

Many people are going to be facing the possibility of starvation and freezing to death despite their efforts to save and avoid it. Facing death from the winter or death from the government, we might see many people choosing to face the latter in mass protest. Unfortunately, I think in the end we'll see the regime back down over this and try again later, with a different approach, rather than facing a general uprising. If they don't, though, the regime will almost certainly be under quite a bit of unprecedented pressure.

[Caliga]

That story would have been cooler if it had bookends starring the Crypt Keeper. 

[Valmy]

China would be foolish to let the N.Korean regime fall.

Why?  How does an unstable and impoverished country at their borders encouraging Japan and South Korea to build up their militaries and possibly get nuclear weapons and an excuse for the US to post an army near their territory help them?

[Camerus]

China would be foolish to let the N.Korean regime fall.

Why?  How does an unstable and impoverished country at their borders encouraging Japan and South Korea to build up their militaries and possibly get nuclear weapons and an excuse for the US to post an army near their territory help them?

IMO, the DPRK offers China the following advantages:

(1) It is one of China's (relatively) few allies
(2) NK is a constant thorn in America's side, which ties up US political capital and has the potential to weaken American prestige internationally.
(3) NK offers a useful bargaining chip for the Chinese - they can always offer to put pressure on the regime in exchange for other concessions
(4) Keeping N.Korea weak and the Korean peninsula divided hurts their economic and ideological rivals, the Koreans.  This consequently strengthens Chinese influence in the region
(5) The NK situation keeps US troops and resources tied down in Korea at all times, reducing potential American influence in other theatres, including other Asian ones.
(6) Even if the US didn't have an obvious reason to keep troops in Korea, it still has a sizeable number of troops in nearby Japan, and has the potential to increase that number.  As well, there is no guarantee that all American troops would ever actually leave S.Korea in the event of unification or N.Korean regime change.
(7) N.Korea provides a buffer against the Koreans and potentially the Japanese.  The Chinese still are quite paranoid about Japanese intentions.


Those are just some of the reasons I came up with off the top of my head.  Presumably there are more that the PRC's strategic gurus could come up with.  I'm not saying there aren't disadvantages to the PRC by having the NK regime being what it is, but I think the advantages far outweigh the drawbacks for the ChiComs.

[Admiral Yi]

Hey Pee Pee, do you sort of have to watch what you post?

[Camerus]

pee pee can not to talk now.  but he say he do not watch postings now. he very happiness in people's republic

[Admiral Yi]

 

[jimmy olsen]

Interesting news Bob.

[HisMajestyBOB]

China would be foolish to let the N.Korean regime fall.

Why?  How does an unstable and impoverished country at their borders encouraging Japan and South Korea to build up their militaries and possibly get nuclear weapons and an excuse for the US to post an army near their territory help them?

IMO, the DPRK offers China the following advantages:

(1) It is one of China's (relatively) few allies
(2) NK is a constant thorn in America's side, which ties up US political capital and has the potential to weaken American prestige internationally.
(3) NK offers a useful bargaining chip for the Chinese - they can always offer to put pressure on the regime in exchange for other concessions
(4) Keeping N.Korea weak and the Korean peninsula divided hurts their economic and ideological rivals, the Koreans.  This consequently strengthens Chinese influence in the region
(5) The NK situation keeps US troops and resources tied down in Korea at all times, reducing potential American influence in other theatres, including other Asian ones.
(6) Even if the US didn't have an obvious reason to keep troops in Korea, it still has a sizeable number of troops in nearby Japan, and has the potential to increase that number.  As well, there is no guarantee that all American troops would ever actually leave S.Korea in the event of unification or N.Korean regime change.
(7) N.Korea provides a buffer against the Koreans and potentially the Japanese.  The Chinese still are quite paranoid about Japanese intentions.


Those are just some of the reasons I came up with off the top of my head.  Presumably there are more that the PRC's strategic gurus could come up with.  I'm not saying there aren't disadvantages to the PRC by having the NK regime being what it is, but I think the advantages far outweigh the drawbacks for the ChiComs.

That's why I'm really hoping that when the DPRK collapses, we have a strong and intelligent President who will tell China, in no uncertain terms, that we support Korean unification and expect them to stay out. I don't doubt we'll have to make some compromises, likely withdrawing forces from the Korean peninsula for a start. So hopefully, the DPRK won't collapse during Obama's term, because he'd probably apologize for sending forces to Korea in 1950.


Anyway, the WSJ has a good analysis on the Nork's currency reform: http://online.wsj.com/article/SB10001424052748704107104574570653594393732.html#printMode

[Josquius]

I
That's why I'm really hoping that when the DPRK collapses, we have a strong and intelligent President who will tell China, in no uncertain terms, that we support Korean unification and expect them to stay out. I don't doubt we'll have to make some compromises, likely withdrawing forces from the Korean peninsula for a start. So hopefully, the DPRK won't collapse during Obama's term, because he'd probably apologize for sending forces to Korea in 1950.


Anyway, the WSJ has a good analysis on the Nork's currency reform: http://online.wsj.com/article/SB10001424052748704107104574570653594393732.html#printMode

Whats wrong with withdrawing from Korea?
Especially with no N.Korea to worry about. The S.Koreans themselves aren't exactly happy about the US being there, it saves American money and helps foreign relations with....well everyone concerned.

[derspiess]

pee pee can not to talk now.  but he say he do not watch postings now. he very happiness in people's republic

[Caliga]

Henceforth I dub PP: Zig Zag.

[Jacob]

IMO, the DPRK offers China the following advantages:

(1) It is one of China's (relatively) few allies
(2) NK is a constant thorn in America's side, which ties up US political capital and has the potential to weaken American prestige internationally.
(3) NK offers a useful bargaining chip for the Chinese - they can always offer to put pressure on the regime in exchange for other concessions
(4) Keeping N.Korea weak and the Korean peninsula divided hurts their economic and ideological rivals, the Koreans.  This consequently strengthens Chinese influence in the region
(5) The NK situation keeps US troops and resources tied down in Korea at all times, reducing potential American influence in other theatres, including other Asian ones.
(6) Even if the US didn't have an obvious reason to keep troops in Korea, it still has a sizeable number of troops in nearby Japan, and has the potential to increase that number.  As well, there is no guarantee that all American troops would ever actually leave S.Korea in the event of unification or N.Korean regime change.
(7) N.Korea provides a buffer against the Koreans and potentially the Japanese.  The Chinese still are quite paranoid about Japanese intentions.


Those are just some of the reasons I came up with off the top of my head.  Presumably there are more that the PRC's strategic gurus could come up with.  I'm not saying there aren't disadvantages to the PRC by having the NK regime being what it is, but I think the advantages far outweigh the drawbacks for the ChiComs.

Also - in the event of a showdown over Taiwan (or even a run up to such a showdown) it's a great place to quagmire a bunch of American troops so they're not available elsewhere.