Major North Korea Currency Devaluation

North Korea has devalued its currency by 100 to 1, Kim Sue-young at the Korea Times is reporting.

Sue-young writes:

A North Korea watcher said Tuesday that Pyongyang's reported revaluation of its currency was aimed at increasing the wealth of the nation and beefing up state-run companies.According to reports, the secretive state suddenly removed two zeros from the nominal value of banknotes Monday to curb inflation and black marketeering. The adjustment was the first in 17 years...

``An individual is reportedly allowed to exchange up to 100,000 won (about $86) for the new banknotes,'' said Park Hyeong-jung, a senior research fellow at the Korea Institute for National Unification (KINU). The measure negatively affects the middle class who possess the North Korean currency and only benefits those who have foreign currency, he told The Korea Times...

A North Korean foreign trading official based in China reportedly said the reclusive state set the exchange rate as 100 to 1 and accordingly, the old denomination of 1,000 won is replaced by the new 10 won. According to North Korea's fixed exchange rate before the revaluation, a U.S. dollar was equivalent to 135 North Korean won.

``Black markets in Pyongyang have turned chaotic as people rushed to convert the local currency into Chinese yuan or the U.S. dollar,'' the official was quoted as saying by Yonhap News. The new bill will likely be put into circulation from this Sunday, according to a report.

This truly is an old trick to screw those holding large sums of cash. Now they will have to turn it in at the new rate to get the new bills, which, of course, will buy a hundred times less of foreign currency at official NK currency exchange counters.

Take notes. This could be the U.S. years down the road. First will come exchange controls and the end to fluctuating exchange rates, and then the devaluations will come.

UPDATE: WSJ reports that the devaluation has triggered chaos, according to news outlets in South Korea that specialize in obtaining information from the North, as people rushed to banks and offices of the ruling Workers Party to get information, make exchanges or trade existing North Korean won for euros and U.S. dollars.