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Saturday, January 17, 2004

(Money) Plans for a 100 000 won bill and/or denomination

Both Joongang Ilbo and Hankyoreh comment the Korean Bank plans to resolve the issues of issuing (!) a 100 000 won note (a note of larger denomination), raising (not lowering!) the nominal value of the currency (that is taking a few zeroes off the Korean W), and production of more counterfeit-proof notes.

Joongang questions whether these things are so urgent that they need to be solved this year; they say they themselves have recognized the need for a bigger bill several years ago. (Both papers note that one of the reasons of not issuing a 100 000 won bill has been the worry that it'll become easier to collect and store illegal political funds.) The 10 000 won note was issued in 1973 and has remained the biggest note ever since, while the economy has grown 100-fold and prices tenfold. Joongang notes that political and other corruption is a separate issue from the nominal value of money, but is bold enough to maintain that "USA and Japan which both have high-value notes cannot be said to be more corrupted (pup'aehada) than our country" (고액권이 있는 미국, 일본이 우리나라보다 더 부패했다고 볼 수 없기 때문이다). Heck, what do I know about the actual corruption, but the Corruption Perception index of Transparency International lists USA at nr. 18, Japan at 21 and South Korea at 50. Joongang is reserved towards the denomination of the currency, listing the possible effects on prices, expenses to adjust ATM and vending machines and computer programs.

Hankyoreh is not as clear as Joongang, stating only that side-effects of any eventual currency reforms must be minimized. Hm, they do say that the nominal value of won will have to be changed some day. Hankyoreh says that the government officials concerned (kwan'gye tangguk) must be able to do the preparations in a way which makes the people accept the conversion (or whatever) as a natural fact. In my view the problem will be that ROK officials usually have not been able to do so, thinking for example about the National Pension (kungmin yôn'gûm) system.

Changing from national currencies to Euro did not bring about that big confusion; old currencies are still used in calculating the value of some items which people were used to think about in the old money, for example real estate here in Finland. Some things which have become actual after the conversion are thought about only in the new money. In Finland where so little actual cash is in circulation, the old currency disappeared from circulation very quickly, as only new money was available from ATMs from the day one.

What might be a problem in Korea is that the concept of nominal value of money is not clear for people. What I have heard ordinary people (!) talk about different currencies is that as one Japanese Yen is 10 Korean won, the Japanese money is ten times more expensive and Japanese as a consequence ten times richer. And when I told that one Finnish markka is (was) about 200 won, people responded that it's a very good money (currency) then. (Joongang notes that the "undeveloped-country-like" exchange rate of more than 1000 of Won against Dollar is given as a one motive for cutting zeros out of Korean currency.)

And finally one thing, small business keepers whose pockets are nowadays heavily tested because of huge bundles of money caused by the small nominal value of money would be greatly relieved if the nominal value of money would be reformed, along with introduction of bigger bills.

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