Rupiah verliest drie nullen Wie dit jaar in augustus of later naar Indonesië op vakantie gaat, zal vreemd opkijken van de nieuwe bankbiljetten. Je krijgt dan opeens een briefje van 20 of 50 Rupiah uit de pinautomaat. Vanaf 17 augustus verdwijnen namelijk de drie laatste nullen van alle bankbiljetten, dus dan wordt 50.000 Rp plotseling 50 rph. Tot 2019 behouden de bankbiljetten het oude ontwerp. Het jaar erop, dus in 2020 komen er nieuw ontworpen Rupiah-biljetten in omloop. The rupiah loses 3 zeros in august: Outside the capital city of Jakarta, Indonesians aren’t so sure about the central bank’s currency revaluation plans for the rupiah Most people are surprised to learn that Indonesia is home to a quarter of a billion people, making it the fourth most populous country on the world’s most populous continent. However, only ten million of those people live in the capital city of Jakarta. And many farmers and other rural residents still don’t entirely understand how this change will effect them. There have been reports that some are even frantically running around trying to find ways to stop their money from losing so much value. They’re terrified that their own government is going to wipe them out. While their position may come from a simple misunderstanding, you can’t exactly blame them. Indonesia’s exchange rate is less than half what is was when the country gained independence in 1949. The central bank governor did not make things better when he said “We have to do a socialisation when the economy is in a good condition so that citizens will more easily accept the changes”. Basically, scare your people half to death and screw them when times are good in order to minimize political blow-back. Lovely. The finance minister is on the record as saying that, while banknotes won’t be changed right away, the education process for the change will likely take up to ten years to sink in around the developing country. What many outside the western world don’t understand is just how developing parts of countries in this region are. It’s not as simple as putting a message out on the evening news and alerting the whole country. And the bankers here should know that. It’s not, however, like this has not happened before. The Indonesian currency has already been revalued twice, both decades ago. If it were not for those currency revaluations, the rupiah would be denominated 1,000 times higher than where it is today. This in a country where rupiah-denominated banking assets already stretch into the quadrillions. Meanwhile, Indonesia is currency an $8400000000 billion current account deficit (that’s US dollars, not rupiah), and Bank Indonesia hiked interest rates nearly two full percentage points recently. The reason Bank Indonesia did that is simple: they’re desperate to prop up their Indonesian currency. While experts suggested rate hikes of fifty basis points might have been worthwhile, the central bank’s plan to cover their tracks will almost undoubtedly cause problems for the Indonesian economy down the road. But who needs economic growth or jobs when you have got a flailing fiat currency to save? For one thing, investors are not amused. Indonesian ETFs have come to a screeching halt on fears of just how desperate the government is. The situation in Indonesia only goes to prove a point: the government will do whatever it can to keep its own party going, no matter how much pain that inflicts on the population. Here in Jakarta, the bankers are willing to through their own frail emerging nation – and their citizens’ jobs – under the bus for their own benefit. And when their own citizens think they’ll go bankrupt because the runaway currency has to have a few zeroes chopped off – all to make things look better to the international community – that’s just icing on the cake. I saw a post on Facebook the other day that showed a US dollar bill and said: “This is worth something because you believe it’s worth something”. Unfortunately for Indonesia, the government here does not get to run world economic policy by virtue of having the world’s reserve currency. With no Federal Reserve to play smoke and mirrors here, currency manipulation actually hurts. (“Threats” of the Fed tapering its QE are partly to blame for the rupiah’s near-20% drop this year.) I do believe that the largely managed currencies of Asia have some growth potential based on a regional play with further growth in the Chinese yuan. As increased consumption in China leads to reduced dollar reserves and more yuan invested abroad, Chinese officials will have more motivation to ease up on their artificially low currency. History has shown that gains in the yuan are capable of reverberating throughout the region. However, the Indonesia rupiah is plagued with issues and not a currency I’d be adding to my basket for any reason. Despite its atrocious traffic, Jakarta is a nicer and more green city than I imagined. However, it also serves as a lesson not to trust the fiat currency masters. I’m all for making trading currencies to take advantage of certain imbalances, but there are some currencies I would not touch. Unfortunately for Americans, they don’t realize that their government has a unique ability to prop up its debt-ridden, fundamentally declining currency. Indonesia does not have that ability, and the penalties for its central bank toying with rates and wreaking havoc will ultimately effect the country’s ability to grow. Imagine what will happen when the bloom falls off the US rose… nomadcapitalist/2013/11/22/indonesian-currency-revaluation-how-not-to-profit-from-central-banks/
Posted on: Sat, 19 Jul 2014 12:46:47 +0000
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