Monday, June 22, 2009

50,000-Won Bank Note Debuts in South Korea

50,000-won Banknotes Debut Today (6/22/09 Korea Times)

"South Koreans will not have to carry a fat wallet full of 10,000-won notes anymore, with a new 50,000 won, the highest denomination bill, going into circulation from today.This is the first issuance of high-valued notes in 36 years since 1973 when the 10,000 won note was first introduced. Until now, 10,000 won notes were the highest-denominated bills, followed by 5,000 won and 1,000 won."

50,000 won sounds like a lot of money, but it is about US$39. Bank of Korea shelved the plan to introduce 100,000-won bill for now. The highest denomination for the Japanese currency is 10,000 yen, about US$104.

Korea Times seems to think the bill with large denomination is a good thing.

"The 50,000-won banknote is expected to have a positive impact on the economy and people's daily lives. The higher-valued bills are expected to encourage private spending, stimulating the local economy. In addition, the notes may substitute for 100,000-won checks. Banks currently spend a total of 280 billion won a year to issue checks."

So their thinking is that South Koreans will feel rich holding a large bill and spend more. To their credit, they do mention inflation in their article:

"In contrast, there are concerns that the higher-valued notes may stoke inflationary pressure and make bribery easier."

Considering Korea's economic growth in the past 36 years, the introduction of the new note may be way overdue.

"The introduction of the 50,000-won notes came on growing demand for higher-valued notes to reduce unnecessary economic costs and minimize people’s inconvenience. The 10,000-won note has been the highest-denominated bill for the past 36 years. During that period, prices and national income jumped 12-fold and 150-fold, respectively."

I would worry inflation, when Bank of Korea decides to go ahead with 100,000-won bill.


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