Interesting move by NK to crack down on the burgeoning market activity in their country:

North Korea revalued its currency for the first time in 50 years and strictly limited how much old money could be traded for new, moves that appear designed to confiscate much of the cash people earned in market activities the country’s authoritarian government doesn’t like.

The action triggered chaos, according to news outlets in South Korea that specialize in obtaining information from the North, as people rushed to banks and offices of the ruling Workers Party to get information, make exchanges or trade existing North Korean won for euros and U.S. dollars.
...
Initial reports indicated the government would allow only 100,000 old won to be exchanged for new. That would potentially wipe out the holdings of people who have earned and saved in won from market activities for years. Those who have saved in foreign currencies—which, though not illegal, is difficult for ordinary North Koreans—would appear unaffected.

According to an account by NKNet, a Seoul-based Web service focused on North Korea, people in Pyongyang on Monday night pressed party officials to allow more money to be exchanged. In response, according to the report, the officials lifted the exchangeable amount to 150,000 won in cash and 300,000 won in savings accounts.

While the revaluation could simply be aimed at inflation – Vietnam recently devalued as well – the really low per-person limit seems all but certain to wipe out most private wealth. Because in Stalinist North Korea money spends you!

Just wanted to pass on this very salient point from Bloomberg columnist Jonathan Weil:

President Barack Obama did Americans a great service yesterday. He boiled down what’s wrong with his administration’s approach to the financial crisis into a single, symbolic statistic.

Striking a hopeful tone during a speech on the first anniversary of Lehman Brothers Holdings Inc.’s collapse, the president said banks have repaid more than $70 billion of taxpayer money that they had accepted from the government. “And in those cases where the government stakes have been sold completely,” he said, “taxpayers have actually earned a 17 percent return on their investment.”

This is the kind of math that helped get Lehman into so much trouble. It’s called cherry-picking.

Let’s be clear: Taxpayers have not earned a 17 percent return on their investment in companies that have accepted federal bailout money. Real-life investors don’t count only their winners. They count their losers, too, including investments that have declined in value and remain unsold.

A few minutes after that bit of bravado, the president identified the “simple principle” in which all his proposed reforms of the financial regulatory system are rooted: “We ought to set clear rules of the road that promote transparency and accountability.” He’s right. We should. A good place to start would be with the people who crunch numbers for the president’s speeches.

Courtesy investorglossary.com, we have another great-looking African currency – the Zambian kwacha!

ZMK is the three-character currency abbreviation for the Zambian Kwacha based on the ISO-4217 standard codes. ZMK is the official currency of the Republic of Zambia. The common usage symbol for the ZMK is ZK. The Bank of Zambia is the government agency that issues the ZMK. The ZMK divides into smaller units of known as Ngwee. One ZMK equals 100 Ngwee. The ZMK is not considered a major currency and is not actively traded in the international currency markets. The value of the ZMK “floats” against other currencies. That is, market forces determine the value of the ZMK. Therefore, the ZMK is convertible into other currencies.

A random woman flashes some kwacha. (Exchange rate: USD $1 = 5,175 ZMK, but relatively higher inflation means this won’t stay current for long)

Amazing: 471,567 households applied for their FREE MONEY from the Japanese government, but failed to fill out their addresses correctly!

Friday, July 3, 2009
471,000 Applications For Cash Handouts Sent Back With Wrong Addresses

TOKYO (Kyodo)—A total of 471,567 applications for the government’s pump-priming cash handout program have been sent back to municipalities as they were incorrectly addressed as of last Friday, the Internal Affairs and Communications Ministry said Friday.

The ministry said it will step up its publicity to call on households who have not received the cash benefits of up to 20,000 yen per person to file their applications as they are feared to fail to receive them.

Meanwhile, a survey showed 86.0 percent of households in 1,798 cities, towns and other municipalities across the country have received the cash handouts which have totaled 1,772.6 billion yen as of last Friday.

The municipalities began providing the cash benefits in March to cover about 54.8 million households under the government’s economic stimulus plan.

Of the applications sent back, 73,000 were sent to foreigners, who have often failed to provide moving notices to municipalities in urban and other areas.

The households will lose their right to receive the cash handouts unless they file applications in six months after the municipalities began to accept applications.

Since Japanese nationals only had to fill out one form per household (foreigners had to fill them out individually since they’re not listed on residence registries for now), each mistaken application might be for multiple people. If we assume the “average household size” of 2.56 people, and roughly assume that all of them were only eligible for the basic 12,000 yen, that means we could be talking about 14.5 billion yen up for grabs.

I wonder what happens if the households “lose their right to receive the cash”? The towns better not get to keep it. It’s about 115 yen apiece for the other 125 million people in Japan, or more than enough to build another of the controversial proposed national anime museum.

Citibank is feeling some FSA heat right now because it wasn’t strict enough in monitoring and reporting “suspicious transactions including money laundering.”

Organized crime relations are becoming a bigger and bigger deal in the world of Japanese financial regulation. Late last year, the FSA and the Japanese Bankers’ Association adopted some administrative guidelines concerning how banks should protect against yakuza, sokaiya and other rabblerousers, and many of those guidelines are being phased in this year by institutions across the country.

One measure being implemented is amending account agreements in order to allow banks to pull service from customers with criminal ties. Here is a translation of the JBA’s suggested language (original version here). It is pretty laughable even by legal Japanese standards; I wonder who had a hand in drafting it.

Article [__] (Exclusion of Anti-Social Forces)

(1) I hereby represent that I am currently not, and hereby agree that in the future I shall not become, any of the following.

1. A criminal organization (暴力団)
2. A member of a criminal organization
3. A quasi-constituent of a criminal organization
4. An enterprise related to a criminal organization
5. A sokaiya (総会屋), politically-branded racketeering organization (社会運動等標ぼうゴロ) or organized crime-related “specialist” (特殊知能暴力集団 - a police term for individuals or groups who are not yakuza themselves, but help fund yakuza activities)
6. Any other person pursuant to any of the above

(2) I hereby agree that I shall not engage in any of the following acts, whether personally or through a third party.

1. Violent demands
2. Improper demands in excess of legal responsibilities
3. Acts of violence or menacing statements in relation to a transaction
4. Spreading of rumors, use of falsified statistics or use of obstruction to harm the reputation of your bank, or to obstruct the business of your bank
5. Any other act pursuant to any of the above

(3) In the event it is determined that I correspond to any of the listed items in paragraph 1 above, commit any listed act in the preceding paragraph, or have made a falsified report with regard to the representations and covenants in paragraph 1 above, and it is improper to continue transactions with me, upon the demand of your bank, I will lose the benefit of term with regard to all liabilities I have to your bank, and will promptly perform those liabilities.

(4) In the event that I have received the discounting of notes, that it is determined that I correspond to any of the listed items in paragraph 1 above, commit any listed act in the preceding paragraph, or have made a falsified report with regard to the representations and covenants in paragraph 1 above, and that it is improper to continue transactions with me, upon the demand of your bank, I will owe a liability to repay the face amount of all notes, and will promptly perform it. Until such time as this liability is performed, your bank may exercise all of its rights as the holder of such notes.

(5) Once performance of the liabilities under the preceding two paragraphs has been completed, this agreement will lose validity. (Bizarre phrasing!)

This was some interesting news (via Bloomberg):

South Africa’s rand, the world’s best-performing major currency this year, may rally another 4 percent if it breaks through 8.23 per dollar and stays there, based on technical analysis by Barclays Plc-owned Absa Capital.

Candlestick charting shows the rand closed stronger than its opening levels everyday last week, suggesting it’s “fighting” to appreciate further, said Judy Padayachee, a technical analyst at Johannesburg-based Absa. Even so, it has yet to remain stronger than the so-called “resistance” level of 8.23 per dollar, according to Padayachee.

The notes were redesigned after the end of apartheid in 1994. Here is what the old notes looked like:

You can find out more about South Africa’s currency (with similarly intense drawings of lions and rhinos) here.

After reading the recent NYT Magazine Article What does your credit card company know about you? and listening to the Planet Money interview with the author, Adam and I were discussing our personal credit experiences a bit. We begun an exchange over email, but I’m going to move it to the blog. Here is the initial email I sent to him, after he asked what the interest rate on my credit cards is.

I have three credit cards, all from Chase Bank (now JP Morgan, originally Chase Manattan).

I’ve been intrigued lately by some good pieces on gaijin personal finance. First there’s the blog Frugalista Japan, which is all about saving money and has some interesting tips to share. Then came this great piece on budgeting for the inaka lifestyle by Deas at “Rocking in Hakata.” And, of course, our own Adamu wrote recently about borrowing his way out of debt.

This stuff is great. For those of you who don’t know, I work in structured finance at a bank in Tokyo, which is an inherently unstable job these days (lots of going-away parties lately). To make matters worse, although my salary is pretty decent, going through three years of grad school gave me several figures of student loan debt to pay off, and I have to wire money to the US on a regular basis to cover these bills. So money management has been in the forefront of my mind for a while.

I started out keeping track of my accounts manually, but this carried three significant drawbacks. One was that it took a hell of a lot of time. One was the ongoing annoyance of fluctuating exchange rates and wire transfer fees, which really add up if you are doing things on a paycheck-to-paycheck basis. The other was that I would sometimes miscalculate something, or overlook a pending payment, and end up overdrafting one of my accounts, which can be REALLY expensive.

If you are rich, you can get an account with HSBC Premier and avoid many of these headaches. I am not rich, though, and even if I were, I would not want to stick 100 grand of cash into an uninsured account. Not in this economy.

Fortunately, the right accounting solution was in front of my eyes the whole time. Structured finance—whether in the form of asset-backed securities or syndicated loans (i.e. loans extended by a big group of banks rather than a single bank)—often revolves around the concept of “waterfalls.” This is the notion that some constant flow of money (business revenues, mortgage payments, etc.) trickles into an account somewhere and then gets divided among a bunch of recipients in a predetermined order on a regular basis, much like a multi-level waterfall pours water in different directions. For instance: “Bank A gets paid interest on its share of the loan, then any remainder gets split evenly between Banks A, B, C, and D, then the company which took out the loan gets to keep the rest.”

This concept works pretty well when you are getting a regular paycheck and need to pay bills in two countries. I set up a spreadsheet using Google Docs, and now I have an idea of exactly what to do with my money each month. I’ll start with the Japan side.

                        4/19/09   5/19/09
JAPAN
Last Balance            xxxxxxx   xxxxxxx
Paycheck          19th  xxxxxxx   xxxxxxx
Other Income                       57,550
JAL Card          27th   11,800         0
View Suica         4th  207,431    60,000
E-Bank Deposit          158,000   183,000
Rent              Last   90,000    90,000
Extraordinary             8,000
Discretionary            90,000    93,000
Wire to US                        199,040
End JPY Bal             xxxxxxx   xxxxxxx

Each column represents the cash flows from one incoming paycheck (I get paid on the 19th) and any extra income, such as my commuting allowance or the upcoming teigaku kyuufukin bonanza. I pool my yen in the bank account where the paycheck comes in, and my two credit cards automatically pull payments from that account. (My utilities get billed to these cards as well; the April payment is high because I put a few sizable nomikai on my card for the points.)

Then I stick spending money in a separate account with eBank, which I use because of its awesome cash card (it works as a Visa card and can pull money for free from Yucho and 7/11 ATMs) and easy online banking interface. The “E-Bank Deposit” line gets automatically calculated based on how much I plan to spend in rent, extraordinary expenses and discretionary expenses.

The “discretionary” line is my pocket money, which I use for groceries, restaurants, booze, gadgets, hot dates or whatever else comes up during the week. I keep this budgeted at 3,000 yen per day/21,000 per week for simplicity’s sake: it varies in monthly amount because the months have slightly different lengths. Then there is a line for “extraordinary” payments: gifts, travel and other potentially big-ticket items which I know are coming up.

Finally, I have to send money to the US to pay student loans. The rather random-looking “wire to US” number comes from the bottom half of my spreadsheet, which looks like this.

                        4/19/09   5/19/09
USDJPY rate               99.56     97.52

US
Last Balance            xxxxxxx   xxxxxxx
Wire from JP                     2,000.00
Interest                   2.48      0.44
Wire Fee                            18.00
Chase SLS         Last   389.62    389.62
KHESLC            10th   456.00    456.00
Chase CC          15th   400.00  1,400.00
Other Spend              405.64
End USD Bal             xxxxxxx   xxxxxxx

It’s easiest to read this from the bottom. I have two student loan accounts, which draw from my US checking account automatically every month, as well as a US credit card which is still carrying the bill from my last trip to the States. I simply set up the spreadsheet to calculate the ending balance for each month based on the starting balance and the scheduled payments in between. Then, whenever the ending balance comes up negative, I drop in a big wire transfer to top it up.

The spreadsheet automatically updates the USD/JPY exchange rate based on Google Finance data (one of the advantages of using Google Docs for this purpose), and the formula for the outgoing transfer amount accounts for the transfer charge and the rate spread. So whenever I go to make a transfer, I overwrite the auto-updated exchange rate formula in the spreadsheet with whatever exchange rate was actually used (generally the same one if I am quick enough), and all the numbers line up perfectly.

The beauty of this system is that it makes it really hard to run out of cash or miss a payment on any of your accounts; you can simply tweak a couple of numbers (like wire transfer amounts or credit card payments) to keep everything in the black in any given pay period. Setting the spreadsheet to make negative numbers bold and red helps a lot. This also makes it easier to game exchange rate fluctuations, as you can move your transfers around based on your own estimates of when the rates will be good.

Just to be even more komakai, I also set up a running balance sheet for myself so that I can track how my net worth is doing. Although I started out doing this on a monthly basis, I switched to quarterly accounting recently after reading Nassim Taleb’s book Fooled by Randomness. Taleb makes many good points in this book, but one that stuck out in my mind is that keeping a very tight eye on financial indicators which are mainly relevant in the long term (stock prices, property values, etc.) is likely to cause more stress than the benefit of the additional information can justify. Personal net worth is one such indicator: it’s nice to know when you will pay off your debt, or how much dough you are set to hoard by retirement age, but you don’t need to know it on a monthly basis, as those months where you buy a plane ticket, give to charity or have a wild night in Roppongi are likely to turn you off to the whole idea of accounting for yourself.