Wednesday, December 02, 2009

Kimfiscatory monetary reform 

North Korea takes a page from the later Gorbachev monetary policy playbook.
Chaos reportedly erupted in North Korea on Tuesday after the government of Kim Jong Il revalued the country's currency, sharply restricting the amount of old bills that could be traded for new and wiping out personal savings.

The revaluation and exchange limits triggered panic and anger, particularly among market traders with substantial hoards of old North Korean won -- much of which has apparently become worthless, according to news agency reports from South Korea and China and from groups with contacts in North Korea.

The currency move appeared to be part of a continuing government crackdown on private markets, which have become an essential part of the food-supply system in the chronically hungry North.

In recent years, some market traders have stashed away substantial amounts of cash, while establishing themselves in profitable businesses that the government struggles to control.

But under the rules of the new currency system, the wealth of these traders has largely disappeared, unless it is held in euros, dollars or Chinese yuan.

The revaluation replaces 1,000-won notes with 10-won notes but strictly limits the amount of old currency that can be exchanged, news reports said.

According to two Web-based groups with sources in the North, that limit was set Monday at 100,000 won, which at current black-market rates amounts to $40. All North Korean currency that individuals possess in excess of that amount becomes worthless under the revaluation.

Back in 1991, Mikhail Gorbachev confiscated old ruble notes in much the same way. Rather than make them worthless he forced citizens to deposit excess cash rubles into state-owned banks with the accounts frozen for five years. Hyperinflation in 1992-93 did the same work that Kim Jong-Il is doing to his citizens.

For many in poor countries like North Korea, banks are shunned because of a lack of transparency and poor service. People prefer to hold cash. It is not just speculators but average citizens who put their cash in safes, shoeboxes, mattresses, etc. To do this as winter sets in virtually assures that some small farmers, who will have converted crops to cash so they can buy food later, will now go hungry.

The confiscation of won will most likely stall inflation in North Korea. As the Soviet economy wound down additional rubles were printed to pay bills that could no longer be covered by a crumbling state industrial sector. It is less than a year from the confiscation to the end of the USSR. Not to predict that North Korea is going out of business soon, but this is certainly a sign of serious stress within the North Korean economy and political structure. To see what happened next, consider this account from Yuri Maltsev:
Everyone in the higher reaches of power had known for some time that a coup against Gorbachev [in the summer of 1991] would be a snap. One evening in Moscow, I discussed the possibility with a friend of mine, a general in the Soviet Army. He told me that an actual coup would be the easy part. "We could take power in ten minutes," he said. "But then what? We have no sausages, no bread � nothing to offer the people." The Moscow junta hoped its power grab would be bolstered by Gorbachev's low popularity. But as much as the people hated their ruler, they hated the coup leaders more. The coup government achieved only a short moment of glory. Once in power, it faced a people seething with anger at the crimes of totalitarianism and the poverty of socialism. The coup leaders also faced a hard winter, a very bad harvest, and the prospect of mass starvation. They lost their nerve, and Boris Yeltsin thwarted their efforts.
Does North Korea have a Yeltsin? I have no idea, but I'm going to be watching.

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Monday, November 09, 2009

Ein Volk, Ein Plan, ... 

Courtesy Steven Horwitz, from last weekend in Ithaca, NY. That sign is created by this group. If you scroll all the way to the bottom of their pages, you find a symbol for this group that would indicate the latter is parent of the former.

Yes, them be Wobblies.

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Lawrence Reed, 2001 (reprinted today):

August marks the anniversary of the building of the Berlin Wall that for 28 years thereafter, divided the city of Berlin and closed off the only remaining escape hatch for people in the communist East who wanted freedom in the West. It was a shocking surprise when it happened because no warning was given before East German soldiers and police first stretched barbed wire and then began planting the infamous wall, guard towers, dog runs, and landmines behind it.

By one estimate, a total of 254 people died at the wall during those 28 years�shot by police, ensnared by the barbed wire, mauled by dogs, or blown to bits by land mines as the �Workers� Paradise� sought to keep them imprisoned in a statist hell.


We believers in freedom and free markets are often attacked by socialists as obsessed with self-interest. They like to remind us of every shortcoming or every problem that hasn�t yet been solved, no matter the degree to which freedom has already worked to solve it. But we don�t believe in shooting people because they don�t conform, and that is ultimately what socialism is all about. We don�t plan other people�s lives because we�re too busy at the full-time job of reforming and improving our own. We believe in persuasion, not coercion. We solve problems at penpoint, not gunpoint. Unlike the socialists of the old East, or homespun statists like Sen. Edward Kennedy, we�re never so smugly self-righteous in our beliefs that we�re ready at the drop of a hat to dragoon the rest of society into our schemes.

All this is why so many of us get a rush every time we think of Ronald Reagan standing in front of the Brandenburg Gate in 1987 and boldly declaring, �Mr. Gorbachev, TEAR DOWN THIS WALL!� This is why we were brought to tears in the heady days of fall 1989 when thousands of Berliners scaled the wall with their hammers, picks, and fists and pummeled into the dustbin of history that terrible wall and the Marxist vision that fostered it. That was a �Kodak moment� if ever there was one! For today�s young people who have no concept of what it was like for millions to live under socialism behind walls and barbed wire, or who have no appreciation for the blood, sweat, tears, and treasure spent by millions here and abroad to combat it, this anniversary is an opportunity to learn a little history.

It was later established that more that 254 people died there -- the number may have been more than a thousand. I recall a movie I've discussed before here: The Lives of Others. If you can rent it tonight, it would make a good tribute.

Not A Sheep provides a list of the 254.

UPDATE: Anthony Daniels on the role of intellectuals in supporting this monstrosity: "They thought that if nothing great could be built without sacrifice, then so great a sacrifice must be building something great."

UPDATE 2: Pete Boettke -- in a very useful history of the Wall that deserves your reading -- reminds us of the story of Hans Ulrich Lenzlinger, who helped smuggle many out of East Germany:
There also emerged a smuggling business that ran ads in West German newspapers. One such company, Aramco, with headquarters in Zurich, Switzerland, gave out press releases referring to their �most modern technical methods.� The company�s prices were not that unreasonable: $10,000 to $12,000 per person, with �quantity discounts� for families, payable into a numbered account in a Swiss bank. If an escape attempt failed, the company refunded most of the money to the person financially sponsoring the breakout.

The East German government issued �wanted� posters on the East Berlin side of Checkpoint Charlie, offering 500,000 German marks for the director of Aramco, Hans Ulrich Lenzlinger. The �wanted� posters negatively referred to him as a �trader in people.� In February 1979, someone collected the bounty on Lenzlinger�s head, after he was shot repeatedly in the chest and killed at his home in Zurich.
They eventually got the Stasi assassin that killed Lenzlinger. (Mitch, that last link will be delicious for you.)

LAST UPDATE: Courtesy Fausta, a story from a blogger in Cuba, where the wall is still intact:
We cried in each others arms in the middle of the sidewalk, thinking about Teo, for God�s sake how am I going to explain all these bruises. How am I going to tell him that we live in a country where this can happen, how will I look at him and tell him that his mother, for writing a blog and putting her opinions in kilobytes, has been beaten up on a public street. How to describe the despotic faces of those who forced us into that car, their enjoyment that I could see as they beat us, their lifting my skirt as they dragged me half naked to the car.
Maybe 254 squared would be better for Cuba.

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Monday, October 20, 2008

Quote of the day, early edition 

Someone please name one Obama policy that any left-wing party in Europe would disagree with. If you can find any left-wing parties in Europe still in power, that is.

(Side note: a promo for Life on Mars, wherein someone from our decade gets the joyous experience of reliving the 70s, apparently to teach all of us how far we've come since then. And yet, how far we have left to go.)

Joshua Sharf. We should reprise Hugh's column on whether Obama is left of 1972 George McGovern. Based on card check, he's already left of 2008 McGovern.

And I don't need Life on Mars to remind me of the 1970s. �I still have a WIN button and the sweaters Carter thought I should wear while turning down my thermostats.

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