Six-figure prices

December 1, 2007 11:13 PM

If everything costs some multiple of 1000 won in South Korea, why don't they just redenominate the currency?

Most things in Korea seem to be priced in multiples of 1000 won - if I remember right, a subway ticket costs 1000, an average lunch 5000, etc.

Given that almost all of their prices are in multiples of 1000, why don't they just introduce a new won that equals one thousand old won, and be done with having to say "thousand" after every price, or having household appliances that are worth millions of won?

I have the same question about the Japanese yen, but in hundreds instead of thousands.

Is this a matter of tradition, a cultural thing, or something that would be a pain in the ass to implement but provide little real benefit (like renaming streets, for instance)? Or some combination of the above?

posted by pravit to work & money (38 comments total)

Is this a matter of tradition, a cultural thing, or something that would be a pain in the ass to implement but provide little real benefit (like renaming streets, for instance)?

You would have to change all of the financial systems within South Korea (or Japan), and then change all of the financial systems that interact with Korea. It would be a huge and expensive project.
posted by b1tr0t at 11:30 PM on December 1, 2007

It's also arguable that there's much advantage to a decimalized system like our dollars & cents over a whole number system. $1.23 or 123 won? Same difference most of the time.
posted by smackfu at 11:35 PM on December 1, 2007

Just to dispute b1trot's objection, Mexico did just that. they did it by introducing a new currency called the "new peso" which was equivalent to so many old pesos. By now, nobody refers to it as the new peso, effectively re-jiggering their currency.
posted by vacapinta at 11:39 PM on December 1, 2007

b1tr0t - That's kind of what I was guessing. But it seems they've redenominated their currency several times in the past, so I was wondering why they didn't just do it one more time to get it over with.

Smackfu - that's true, except it seems most things in Korea are priced at a multiple of 1,000 won. If you buy something that costs 10,000 won, you just hand over a 10,000 won bill, instead of paying, say, 10,721 with taxes. So it seems most prices have an arbitrary 3 zeros after them. And you have to say "thousand" every time.
posted by pravit at 11:43 PM on December 1, 2007

I've wondered the same thing. I work in commercial insurance. At least a few times a year we get market updates about new currencies being introduced, so the concepts of how to revalue a currency are pretty well established in global finance.

(And it would keep us poor data entry schlubs from accidentally moving USD instead of JPY and getting customers very very angry at us....)
posted by happyturtle at 11:49 PM on December 1, 2007

It would be expensive to do, and the fact is that it doesn't bother people too much. The Romanians dropped four zeros from their currency a couple of years ago, but people still talk about things costing millions of lei, and the new currency looks pretty much like the old currency (except for a few changes and four fewer zeros.)
posted by Dee Xtrovert at 12:01 AM on December 2, 2007

When you revalue a currency, the public loses confidence in the value and stability of that currency. This can lead to inflation, which can lead to revalued currency, which, in the right economic environment, can lead to Zimbabwe.
posted by Jairus at 12:40 AM on December 2, 2007 [1 favorite]

Jairus, that seems a bit of a hasty generalization. Source? Specific examples?

I don't think Zimbabwe's hyperinflation had a root cause of revalued currency...
posted by disillusioned at 2:48 AM on December 2, 2007

I think countries do this quite often. I was in Romania a couple of years ago and they'd just recently knocked off three zeros.
I guess it's nearly as much of a hassle to completeky re-jig the system as it is to keep saying 'one thousand' instead of 'one'
posted by greytape at 3:21 AM on December 2, 2007

er, in korean, the word for "thousand" is one syllable. i doubt most koreans think it's worth the hassle to shift their entire currency system just to drop a couple of words off their sentences when naming their prices.

now, if their baseline for a single won started at 100,000 or 1,000,000, then one might have an argument for changing things around to make it easier on people.
posted by tastycracker at 4:19 AM on December 2, 2007

This paper argues that redenomination is a psychological and political maneuver done in part to "send a signal to citizens, as well as to the international community, that economic policy mistakes were in the past." (It is written specifically about developing nations, but I think the arguments would apply to any.)

Given that many governments of developing countries experience high levels of inflation and a deterioration in their currency’s value against other currencies, why do some elect to redenominate, while others do not? And why do some governments wait many years after a bout of hyperinflation, or after their currency is priced at 1000 or 5000 units to the dollar, to redenominate, while others do so relatively quickly? I suggest that the explanations rest in a combination of economic and political factors, including inflation, governments’ concerns about credibility, and the effect of currencies on national identity.

The SK government doesn't have such pressure on it, does it? When you're sitting on the 'Miracle on the Han River', you don't need to fiddle with the currency.
posted by pracowity at 4:30 AM on December 2, 2007

I agree with vacapinta. Mexico did it in the mid-90s and Venezuela is going to do it as of Jan. 1, 2008. So it is not impossible.

While it does simplify things, I have to agree with what pracowity posted about it being a psychological political maneuver.

There are a bunch of quirks associated to it, (for example, that stores and business take advantage of the "rounding up" of prices in their favor during the inevitable initial confusion) but it is frequently done.
posted by micayetoca at 5:18 AM on December 2, 2007

Pravit--

Regarding Japan, there's lots of stuff priced down to the last yen. Go grocery-shopping there, you'll see. Also, and perhaps more importantly, Japan has a 5% national consumption tax. If Japan lopped two zeros off the price of everything, then when you bought a stationery pad at the "Everything ¥1 Store" (previously known as the Everything ¥100 Store), how would you pay tax?

I lived in Japan right around the introduction of the (then 3%) consumption tax, and at that point, almost everything was priced to the nearest ¥10, and I think a proposal to lop one zero off the yen might have gotten some traction. After the introduction of the tax, some stores adjusted their prices so that everything at the cash register would ring up to a multiple of ¥10, because they regarded handling ¥1 and ¥5 coins as cheap-seeming.
posted by adamrice at 6:56 AM on December 2, 2007

Maybe you can think of the extra three zeros as our "cents". As pointed out in other replies, the language helps.

I am not so sure about the argument that revaluing a currency has a negative impact on inflation, or if, on its own, it has any. Maybe when things are going well it will have a destabilizing effect, but when thing are going badly, it is pretty insignificant compared to the overall economic policies.

Brazil revalued its currency in 1942, 1967, 1986, 1990, 1993, 1994. Each time, (at least) three zeros were dropped. Since then, inflation has been significantly lower -- but the fact that they managed to drop more than 3 zeros from 93 to 94 gives you an idea of what hyperinflation is like, and that revaluation really does nothing to stop it.

Wikipedia can tell you about the real, the cruzeiro real, the cruzerio and the cruzado. But check this gem out: "As a result of multiple currency reforms, the present real is equivalent to 2.75 x 10¹⁸ pre-1942 réis."

On the other hand, Weimar Germany did not revalued its currency during the period of hyperinflation after WWI, and ended up printing Papiermark note with 14 zeros. Then, in 1923 it was replaced briefly by the Rentenmark (dropping 12 zeros) and then in 1924 by the Reichsmark (with no revaluation, apparently).
posted by TheyCallItPeace at 7:52 AM on December 2, 2007

Also keep in mind that these same questions are under debate within the countries. Some people want revaluation, some people do not, so it ends up like any other political issue with pros and cons. Why doesn't the US have universal health care?
posted by smackfu at 8:56 AM on December 2, 2007

Maybe they want more people to be millionaires?
posted by spilon at 8:56 AM on December 2, 2007

Ignore my earlier comment about inflation, I was sleepy and confused redenomination (which can strengthen confidence) with revaluation (which can weaken it).
posted by Jairus at 9:00 AM on December 2, 2007

(To clarify, we're discussing redenomination, not revaluation.)
posted by Jairus at 9:02 AM on December 2, 2007

Just as an aside, in Iran the official currency is the Rial, but people always talk about things costing X Tomans... A toman is 10 Rial, so if something costs 1000 rial, it'd be 100 toman... but it's a little bit more complicated than that. Generally you know the order of magnitude in rial something is going to cost, so if I'm taking a taxi somewhere and they say '1 toman' they probably mean a thousand rial, whereas if you're buying silver in the bazaar and they say it's 1 toman, they probably mean a million rials.

(I'm getting the exact numbers wrong, it's been years since I've been to Iran, but that's the gist)
posted by BuddhaInABucket at 9:42 AM on December 2, 2007

(We do the same thing in the US, BuddhaInABucket. You've never heard someone say "a buck fifty" for $150?)
posted by nebulawindphone at 9:47 AM on December 2, 2007

Also, keep in mind that Korean counting systems are by the ten-thousands, so while a million is 1,000,000 in the US, it is 100,0000 in Korea. Both thousand and ten-thousand won are expressed as single bills. As a result, something that may be two hundred thousand won, in Korea, is 'twenty ten-thousand' won, which is really 20 bills, which is easy to grasp.

Think of it this way: In the US, there are dollar bills, and ten-dollar bills. Any amount of money is primarily thought of as a combination between the two: for example, $32 is 3 x ten-dollar bills, + 2 x one-dollar bills. Similarly, in Korea, there are 1000 won bills, and 10000 won bills, and money is also primarily thought of as a combination of both bills. You don't see people getting confused because a sandwich costs 6430 cents, right?
posted by suedehead at 10:12 AM on December 2, 2007

In Japan, the large denominations of yen currency seem extreme, until you remember that (as people have pointed out above) everything is in yen. There's no "dualistic currency" issue to worry about like Britain and the US, with sums expressed as a combination dollars/cents and pounds/pence. The Japanese equivalent of "cents," sen, hasn't been available as actual coinage for decades -- perhaps since WWII -- having disappeared after the rapid inflation of the yen. The sen only pops up on foreign exchange markets.

So the numbers are big in Japan, but you don't have to worry about counting in sen versus counting in yen. Everything is in yen, which simplifies things.

I doubt if this rationality prevents the Japanese government from devaluing the yen, but it may contribute indirectly. In any event, chopping off two zeros from the yen would be easy to do, because at current exchange rates, 100 yen are roughly equivalent to a single US dollar. A rate of $1 to approximately one yen would make for easy currency exchange for travelers. But the government resists the change, for multiple political reasons, I suppose.
posted by Gordion Knott at 10:35 AM on December 2, 2007

Mexico did the same thing about 10 years ago, and it seemed to have gone pretty smoothly.
posted by Mr_Crazyhorse at 10:36 AM on December 2, 2007

Good answers. I've never been to Japan, so if everything is valued down to the last yen as you say, I can understand why there's no real reason to redenominate the currency there.

In the case of Korea, they rarely have any use for the extra three zeros. I wasn't there for very long, but the smallest denomination coin I had was 500 won. Perhaps the new won could be subdivided into two half-wons if they really needed it. :D

I've found a couple stories on the net about Korea considering a 1000-for-1 currency redenomination, but others saying they've ruled it out, so I guess it's really kind of an arbitrary thing. At least they seem to be planning on issuing notes worth more than 10,000!
posted by pravit at 11:33 AM on December 2, 2007

Turkey did it about three years ago, as well, with the New Turkish Lira (YTL). I didn't notice any problems on the multiple occasions when I visited, and it didn't seem to be anything earth-shattering to any of my Turkish friends.
posted by diggerroo at 11:57 AM on December 2, 2007

er, in korean, the word for "thousand" is one syllable.

So is the word for 10, 10,000 and the one for 100,000,000. Red herring. 10=십='ship', 1000=천='chun' 10,000=만='man' 100,000,000=억='uhk'. So 100,000 is ship-man (10x10,000) and 1,000,000 is beg-man (100x10,000) and so on. It is this ingrained counting system that as much or more than anything else drags against the idea of revaluation.

It's more complicated, thanks to the dual counting system used for different nouns, but thankfully the two systems differ only between 1-99.

Revaluation would be a bitch, for some of the reasons outlined above by others. The most annoying thing is the lack of bills above 10,000 won (ie about $10), but they're finally issuing 50,000 and 100,000 bills next year, thank god.

I wasn't there for very long, but the smallest denomination coin I had was 500 won.

100 won coins are much more common than 500s. I'm extremely surprised you didn't see any. 10 and 5 won coins are common, and 1 won coins are in circulation. A large part of the country is still rural poor, and yes, people haggle down to the 1-5won level in the markets. Gordion Knot makes a good point, as well -- there are no equivalent to dollars and cents or pounds and pence here, there are only won, and though a ten-to-one revaluing to bring the won into order-of-magnitude line with the yen, say, might make sense, anything larger would require a new equivalent to 'cents', which wouldn't make much sense (haha no pun intended).

And a ten-to-one reval doesn't seem worth the effort.

One of the reasons I've heard used to explain why no larger bill than the 10,000 won has existed thus far is that, taking into account the hierarchy-sensitive neo-confucian structure of things, and the fact that King Sejong (the 15th century ruler who 'invented' (or sponsored the invention of) the Korean alphabet), there has been hesitation on whose picture to put on larger notes, which would imply that they are higher in status. Seriously.

This hesitancy has been overcome, though, and it is heartening that one of the people chosen for the upcoming larger bills is female -- a figure from the resistance against the Japanese during the occupation of the first half of the 20th century.

Another thing to consider is that at all levels of society that are above, again, the poor and the rural, Korea is almost entirely a cashless society. I go weeks without touching cash these days -- there isn't all that much impetus to redominate when that's the case, I don't think.
posted by stavrosthewonderchicken at 4:55 PM on December 2, 2007

I've found a couple stories on the net about Korea considering a 1000-for-1 currency redenomination

That simply wouldn't make any sense. If the smallest unit became 1 won and its value was (with a 1000-to-1 revalue) about a dollar, how would you be able to buy anything worth less than a dollar, or fractionally valued? Again, there is no unit smaller than 'won'. The biggest possible redenomination that might make sense would be a ten-to-one, bringing the won into line with the yen.
posted by stavrosthewonderchicken at 4:57 PM on December 2, 2007

>You don't see people getting confused because a sandwich costs 6430 cents, right?

I would be confused if I came across a sandwich which cost $64.30, for the record.
posted by AmbroseChapel at 5:11 PM on December 2, 2007

I would be confused if I came across a sandwich which cost $64.30, for the record.

I wouldn't feel so bad about ordering a five dollar shake to go with it, though.
posted by b1tr0t at 6:16 PM on December 2, 2007

100 won coins are much more common than 500s. I'm extremely surprised you didn't see any. 10 and 5 won coins are common, and 1 won coins are in circulation. A large part of the country is still rural poor, and yes, people haggle down to the 1-5won level in the markets.

Wow! Guess I haven't seen enough of Korea.

there has been hesitation on whose picture to put on larger notes, which would imply that they are higher in status. Seriously.

Hmm. Why don't they just put that admiral guy who defeated the Japanese back in the day? :D

That simply wouldn't make any sense. If the smallest unit became 1 won and its value was (with a 1000-to-1 revalue) about a dollar, how would you be able to buy anything worth less than a dollar, or fractionally valued?

You could just start issuing coins that were worth .5, .1, .01, .001 new won. Given that you would be reissuing all of your bills and coins anyway.
posted by pravit at 6:57 PM on December 2, 2007

Japanese yen makes sense to me. Why doesn't every else change and ditch all this dollars/pounds/euro cents/pence messy business?

Hey why don't we just use all the same currency all over the world?
posted by gomichild at 9:50 PM on December 2, 2007

The yen makes sense to me too, gomichild. What didn't make sense to me is having an arbitrary three zeros after every price. However, according to stavros, they actually do sometimes need those three zeros, so I guess it's justified.
posted by pravit at 10:43 PM on December 2, 2007

Damn, and here my major gripe with the Won is that there's no paper bill larger than 10,000won. It's annoying to pull a couple hundred USD out and have this HUGE stack of what are roughly 10$USD bills.
posted by SeanMac at 11:42 PM on December 2, 2007

I feel the same about the Chinese yuan, but even more so because you pay for everything in China with cash. The largest note is 100 yuan, which is about 13 dollars. It doesn't help that they have a bad counterfeiting problem as well.
posted by pravit at 11:45 PM on December 2, 2007

Who knows, over in South Korea they may just ask, "Instead of dealing with cents, why don't they just redenominate the currency in the United States?"

It's all about perspective, what may seem bizarre to those of us born and raised in our economy may be perfectly natural to someone used to another currency.

It's an argument no one can win. Sure, the U.S. might have the right idea. (Why deal with such large numbers?) But then again, maybe we're wrong. (If you have a certain unit of monetary value, why divide it further into hundredths?)

The U.S. denomination is completely arbitrary in itself, so in that sense it really has no advantage over anyone else.

Either way, what the real question is if you have a system that your citizens are used to, that makes perfect sense to you and the people of your country, why would you change it?
posted by mwang1028 at 11:59 PM on December 2, 2007

For the last time, this has nothing to do with perspective or which system is better than another. This is a question of arbitrary zeros that provide no meaning.

The point I've been trying to make is that it makes perfect sense if they actually have use for those zeros. For example, the yen. If everything is really valued down to the last yen, then for all purposes the yen is just like our cents. 183 yen or $1.83? It makes no difference. I agree. Then there is no point in redenominating the yen.

Now, let's talk about Turkey. Turkey recently did a 1,000,000 for 1 redenomination of their currency. This means before the redenomination that every price had 6 zeros after it. This isn't a matter of where you put the decimal point, like 183 or 1.83, its a matter of every price having an arbitrary six zeros that provide no meaning. In this case you'd be hard pressed to provide a valid reason for keeping those six zeros, unless it's really important for Turks to be able to value everything to 1 millionth of a dollar.

In the case of Korea, I thought their three zeros were arbitrary, and that they have no need to value things to 1/1000 of a dollar, since there is nothing that costs that little in Korea. However, as stavros points out, in rural areas people still have a need to value things to 1/100 of a dollar, so it makes two of those three zeros valid. There would still be no reason to keep the third zero around, but as others have pointed out it would be a costly undertaking just to get rid of one zero. In this case, it's not worth it. In the case of Turkey, it was definitely worth it.

If you read here, there has been discussion in Korea, by Koreans, about a 100-for-1 or 1000-for-1 redenomination of the won. It's even mentioned in the Wikipedia article. So this has nothing to do with me being some ignorant American who can't appreciate arbitrary differences.
posted by pravit at 12:06 PM on December 3, 2007

For the last time, this has nothing to do with perspective or which system is better than another. This is a question of arbitrary zeros that provide no meaning.

I answered your question. That may not have been the answer you wanted, but that's your problem, not the Koreans'.
posted by stavrosthewonderchicken at 12:50 PM on December 3, 2007

No, your answer was perfectly fine, as I mentioned in my reply. I was just irritated by some of the responses (not yours) which implied that it was entirely a perspective thing, as opposed to a having extra zeros thing.
posted by pravit at 10:19 AM on December 9, 2007