North Korea Considers Monetary Reform

Posted: Aug 30, 2012 12:01 AM

North Korea: Several South Korean news services reported that North Korea is considering monetary reform again as a pathway out of chronic poverty. South Korean and Japanese analysts have reported that several North Korean university professors have written academic papers about the need for currency reform.

Comment: The fundamental problem with North Korean economic theory is that it is Stalinist, which means statist. It contains no incentives for entrepreneurs; no rewards for successful small businesses that are not government owned and it is not part of the integrated global economy. North Korean money is unable to be valued and will remain so until the North starts exporting marketable goods, other than obsolescent, inexpensive weapons.

In the past, North Korean exports of a limited selection of consumer goods, including textiles and bicycles, were competitive. South America, South Asia and Japan were markets when Kim Il-sung was alive.

Under Kim Chong-il, North Korea stopped exporting everything but modifications of weapons - primarily ballistic missiles -- that are obsolescent if not obsolete. He touted the national ideology of self-reliance - chuche - which is a total fabrication. North Korea has never been self-reliant.

In a statist economy that extols self-reliance, monetary reform is meaningless. North Korean money and physical plant have no value outside North Korea, which does not have a money-based economy. The last attempt at monetary reform resulted in the execution of its proponents because it was a total disaster. That hardly seems to be a reason for North Korean economists to suggest it again, but they have.

North Korea has the natural resources, manufacturing capabilities and the educated, disciplined work force to become a very prosperous nation. That will never happen while the Kim family holds power.

Egypt: Egyptian President Mursi arrived in Beijing on 28 August for a three-day state visit at the invitation of Chinese President Hu Jintao, according to Xinhua. Mursi is expected to hold talks with President Hu, Premier Wen Jiabao and other leaders to exchange views on bilateral ties, international and regional issues of common concern.

The two sides will sign a serious of cooperation documents during his visit, according to the Chinese Foreign Ministry. Mursi also will attend an economic forum between Chinese and Egyptian entrepreneurs.

Comment: Mursi is acting out his new policy of balance in Egyptian foreign affairs. The value of Chinese economic relations with Egypt is less than $100 million a year. Nevertheless, the Chinese sense opportunity in Egypt, poaching on the turf of a former American ally. They have promised $200 million in aid, which is a sign of good faith, nothing more.

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