North Korea sharply revalues currency

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cpkj's picture
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Joined: Apr 14 2009
Posts: 26
North Korea sharply revalues currency


What does this mean to the US markets?

Davos's picture
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Joined: Sep 17 2008
Posts: 3620
Re: North Korea sharply revalues currency
cpkj wrote:


What does this mean to the US markets?

100:1. Wonder what ours will be with over 100 trillion in unfunded liabilities...

nickbert's picture
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Joined: Jan 14 2009
Posts: 1208
Re: North Korea sharply revalues currency

I'm not an expert, but I think it'd be reasonable to expect North Korean revaluation to have very little effect on US or most other markets.  They are a very closed society with a relatively small amount of international trade and economic activity compared to most nations, so there probably isn't many ways for outside parties to be exposed to revaluations in their currency.  I think China is their biggest trade partner, but their trade with North Korea is probably very small compared to their overall economy.  Of course this isolation of North Korea's probably helps them in one way.... they end up having limited direct exposure to any impending worldwide economic crisis.  Of course if they can't survive on their own without food and energy aid by China and other nations, they are still boned in the long run when those nations suspend aid in order to address their own problems...

- Nickbert

machinehead's picture
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Posts: 1077
Re: North Korea exchanges currency

The term 'revaluation' could be misleading here. The external value of the North Korean currency hasn't changed. Rather, they are lopping two zeros off banknote denominations and domestic prices, in order to have more convenient amounts.

The U.S. is feeling the same pressure, because the metallic value of small coins such as pennies and nickels has exceeded their face value on several occasions. Also, pennies have become a microscopically small unit of value, with only 1/20th the purchasing power they enjoyed before the larcenous Federal Reserve counterfeiters appeared on the scene. Note the 'give a penny, take a penny' cups at the cash register of many mom-and-pop stores. Many shopkeepers are happy to round off prices.

It's somewhat more probable that the U.S. will simply drop pennies, and perhaps redesign or rebadge nickels and dimes, rather than lopping a zero off all domestic prices. But either approach would suffice. And, within the next decade, something will have to be done. With the futile escalation of the long-lost Afpak war, there's going to be a LOT of domestic price inflation in this hollowed-out, dying empire.

Apparently the same is true in North Korea, which applies far too much of its scarce capital to fierce military posturing against its cousins across the DMZ. North Korea's centrally-planned communist economy hasn't a hope in hell of competing against South Korea's quasi-free enterprise industrial machine. So of course, North Korea endures chronic inflation.

This is why I often say that gold, as the foundation of a monetary system, is a peacekeeper. Paper money ultimately is a system of war finance. It's what allows ridiculous unaffordable military machines like North Korea and the United States to keep goosestepping along, shaking their fists at the world. Poor, deluded suckers -- no amount of military might will keep you afloat when you're internally bankrupt.

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