On Printing More Money : New 7 Rupiah Notes & 4 Coins

Stunned by these colorful pieces of notes and also coins, I was surprised when the teller officer in Bank gave me new Rupiahs -of the highest domination- by the time I withdrawed my savings this morning.

Aside of being happy as I could bring new collection, I was taking this new money with the highest attention and put them into my wallet carefully as well. Next of it, there were also some pieces of old-rupiahs left. I picked one of each to compare, and It was fair to say that The old money was really replaceable since the condition was no longer adequate. I saw fold, crumple, ink, and unnecessary signature on the old Rupiahs. There were also a painting on hero’s face, it was so awful. Meanwhile the new Rupiahs are just soo flawless as if they just were printed from machine. No folds, no marks, no holes, no inks, no spot, no fingerprint. I am quiet happy!

I really really knew that the Central Bank just launched on Monday seven new banknotes and four coins of Rupiahs. Bravo to the Central Bank to keep the commitment to preserve Indonesian Rupiah’s quality!. This new Rupiahs depict a series of interesting Indonesia’s most popular tourism destination picture; eye-catching design with eight heroes featured on it such as TB Simatupang,  Mohammad Hoesni Thamrin, Tjut Meutia, I Gusti Ketut Pudja, Tjiptomangunkusumo and Herman Johannes, Frans Kaisepo, and Idham Chalid.

However, some questions  popped in my head upon the released of this Rupiahs. While waiting for the lift, I am questioning on what is actually the purpose behind the move? Also Can I still use the old rupiahs in exchange for goods/service rendered? Is there Any expiry time?

 

  1. Printing More Money

If the answer is yes that Indonesian still can use the old notes, it means that the Government is currently printing more and more money to the society. So What happen if the supply of money is increasing?

Let us see this example : Suppose that there are Rp100 million circulation of money in society with 10 pcs of goods produced. It means that one can buy 1 pcs of goods by Rp 10 million. Now if money is increasing two times but the number of production remain the same, then People will have tendency to spend more, and the price of 1 pcs of goods is now Rp 20 Million. The purchasing power will be escalating when people have more money, rather than hoarshing or saving it. When the demand increase, the prices of goods will therefore rise thus will lead to the inflation.

Second problem the society has to face is those who bougt Government Debt- the value of bonds would fall and become worthless.

So printing more money doesn’t increase economic output in any way, rather it merely cause inflation.

 

2. Print or not to print?

What makes even more interesting that turn my eyes is the policy of printing money was taken when Indonesia has actually achieved growth at 6.7% of GDP by the end of 2016, this has been good level among other developing countries like Singapore at 2%, and Malaysia at 3% – According to Indonesia Statistic Bureau

Printing more money during normal economic circumstances definitely will cause higher inflation in long term. Printing money might be useful during the recession period. This is what happened in United States in 2008 when the Fed applied a quantitative easing policy to add more Bank liquidity and lowering interest rates so the Government bonds can be decreased. During the recession, people are hoarding cash and not using it for something not important thus the velocity of circulation is decreasing and the inflation will likely stable.

 

3. Lesson from the U.S

The government plans therefore have to be clear in mapping the timeline of ‘New Money’ distribution program which includes the old-rupiah usage period, transition period, and new period.

The success story came from United states when the Authority in U.S showed A serious commitment in transition of using new money. For example In 2003, United States only accept payment of new notes whose serial number starting with ‘D’ and ‘F’. All of the U.S Dollar with ‘C’ serial number were all refused and could not be used. Simultaneously in 2006, the United States launched new notes with ‘H’ serial number, proceeding money with ‘D’ serial number. Nowadays, they (again) published new dollar with 3-D hologram on it and it is now becoming the most preferred dollar to use especially with ‘L’ serial number.

To my knowledge, until this writing was posted, None of the regulation regarding transition period has been released by Government. And I believe setting up the timeline is important to avoid excess circulation of money in society.

 

4. Changing old-habits

If you are holding U.S. Dollar with even a little fold on the corner of it, you can definitely not use it, there won’t be store accepting it. I was experiencing this when I was about to convert my Dollars to Rupiahs last months in the nearest money changer. They also will use x-ray to detect whether the U.S. is just original. U.S Dollar was treated so premium to keep the high quality of the dollar.

And Why can’t Indonesian to do that the same?

If the Government print new money with intend to improve the decent’ condition of Rupiahs without preparing society readiness, it will be just worthless. Indonesian people are not ready yet. The people will not always care and they can never change a habit in treating our beloved Indonesian Rupiahs.

New Money distribution should come along with the perfect infrastructure as well as human resources management. These factors play important role in developing and maintaining quality of Rupiahs.

The authority should also launch a set of proactive education program which cover issues regarding new money regulation so people can understand and be wiser in treating it all. The usage of social media and internet can also be effective tool to spreading socialization to the greater society. Inserting money curriculum in school and varsity can also build the people’s awareness to taking care money carefully.

I hope that the Government would be more proactive in developing standard and raising the people’s awareness so that Rupiah’s quality will always high. So that no one would add ‘other design’ on money.

 

5. Lack of Innovation

The last thing that wondered me is the material of new rupiah it self. So, the Government is using the same raw material in producing money which is PAPER. In the era of ” Paper-less Society “, Singapore already use plastic to make their Dollar becomes stronger, because paper is more likely fragile when it is wet for example. We might learn from Singapore but we are lack of innovation.

“Can we not use paper anymore ?”

The answer is depend on how many times would the Government want to change and re-designed our Rupiahs over and over again.

-P.A..

 

 

 

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