In an AP article that reviews the state of North Korea's economy attention is drawn to an aspect that many other accounts fail to mention: the North Korean regime is running a highly expansionary monetary policy that is causing raging inflation.
Inflation in North Korea is believed to be running at more than 200 percent. The official value of its currency, the won, was slashed in August as part of market reforms to try to revive the economy. One U.S. dollar used to buy about 2 won, it now gets 142. Rates on the black market are as high as 700.
Inflation of a currency is a curious thing to do in a command economy. If just about everything was owned by the state there'd be no point to inflating the currency. But inflation of the currency gives government agencies cash to use to buy from the black market. The black market can at least partially compensate by raising prices in expectation of future currency expansion.
|Share |||By Randall Parker at 2003 April 13 11:43 AM Korea|