[VIEWPOINT]100,000 Won Note Would Save Money

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[VIEWPOINT]100,000 Won Note Would Save Money

It would be very inconvenient for us to use a 9,000 won ($6.90) bank note instead of a 10,000 won note. It would be ridiculous to think of issuing a 9,000 won note. However, there is a country where they do use a note in this odd denomination.

The currency unit of Myanmar is the kyat. On a visit to this country, I found, to my surprise, that they use a 90 kyat note, instead of 100 kyat, and a 45 kyat note instead of a 50 kyat note.

During my week-long visit, the inconveniences of this system became immediately evident. It occurred to me that this might have contributed to Myanmar being ranked among Southeast Asia's poorest countries.

Though at the time I could find no official reason for this absurd currency note, I found out later through a long-term Korean resident of the country that they use this unit because the leader of the country had an affinity for the number nine.

It was an excellent example of a misguided political regime wrecking the economy.

There are also advanced countries where the economy is badly affected by inappropriate or unavailable currency notes.

As the economy of the United States has slowed recently, many economists have forecast that the euro, the currency of the European Monetary Union, would gain strength against the U.S. dollar. It was an elementary prediction among economists that as the United States lowered interest rates several times, demand for the euro would increase and thus the euro would strengthen against the U.S. dollar. But the expectation proved wrong. Though the U.S. economy has shown few signs of recovery, the euro remains limp against the U.S. dollar.

Why is this so? The euro is a virtual currency used on computer networks but is not yet issued in paper. Since the euro is not used apart from in electronic transactions, lots of people feel that it is not a "real" currency. So demand for euro has remained lackluster. And as the European Union is not yet a politically unified nation, the credibility of the euro has fallen, which leads to economic inefficiency.

The problem of currency notes is visible in Korea. Thirty years have passed since the 10,000 won note was issued. Over that period, the purchasing power of the note has dropped 90 percent and the scale of financial transactions has increased by a factor of about 100. Therefore we need a note of a much higher denomination since we have to carry around much more money.

These days we use bearer checks in 100,000 won denominations like notes. But the bearer checks cost much more money to issue, manage and store, and are much easier to forge than bank-notes.

Bearer checks have to be issued continuously because they can not be circulated like bank notes. An administrative fee is also charged to exchange the check for cash. And after the checks are exchanged for notes at a bank, additional costs are accrued for the bank to register and store the checks. According to one expert's calculation, each year 1 trillion won would be saved if a 100,000 won bank note were used instead of the 100,000-won bearer check.

The main reason, as I understand, that the government is holding back on issuing a 100,000 won note is that the bigger the currency unit is, the easier it is for crooks and crooked politicians to deal in large sums of "dirty" money and the more difficult it is to trace suspicious money.

This reasoning does have value in this country, where we have long way to go to see clean, just politics.

But as Korea works toward true democracy, legislation can be enacted that thwarts money laundering, corruption, leading to increased transparency in political funds.

We must free ourselves from the shackles of failing economic customs because of murky politics.


The writer is a professor of economics at Yonsei university.

by Lee Young-sun

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