The concept of Money and other types of currency are essentially based on communal trust towards the issuer and availability. Centuries ago, in the travel accounts of the Venetian traveler Marco Polo the reader becomes familiar with the fascinating world of paper money production. This money has been put into circulation during the Yuan period by the Mongol chief Kublai Khan (1214-1294) :
Initially, paper money is made there from the sapwood of the mulberry tree, whose leaves feed the silk worm. On each sheet which is to become a note, specially appointed officials write their name and affix their seal. When this work has been done in accordance with the rules, the chief impregnates his seal with pigment and affixes his vermillion mark at the top of the sheet. That makes the note authentic. This paper currency is circulated in every part of the Great Khan’s dominions, nor dares any person, at the peril of his life, refuse to accept it in payment.”
Marco Polo was amused at the thought that whereas the alchemists had struggled vainly for centuries to turn base metals into gold, the Chinese emperors had very simply turned paper into money. Once back home, Marco Polo amply reported about his experiences and adventures in the Chinese Empire but when he talked about paper money he only met disbelief. It is hardly surprising that it took a few more centuries before paper money was introduced in Europe.
In fact, if we keep to the concept of paper money as notes issued with a monetary reserve as a warranty, the first Chinese notes date from the 10th century. Which means a head start of no less than seven centuries on the West even on Indonesia!
The Indonesian government has expressed its support of Bank Indonesia’s (BI) proposal to revive plans to redenominate the rupiah but has yet to decide how many zeroes will be removed from the currency. On the other hand, as the public trust over the current government increase up to 80%, a member of the House of Representatives Commission XI overseeing financial affairs, Misbakhun, has called on fellow lawmakers to immediately add the rupiah redenomination bill to the National Legislation Program (Prolegnas) so that it could be immediately passed into law.
“With its inclusion into Prolegnas, the bill could be immediately deliberated,” said Misbakhun, a lawmaker from the Golkar Party, in Jakarta on Sunday as reported by kompas.com. He said the policy, which would result in the removal of three or four zeroes from the rupiah if passed into law, would affect payment systems but not the value of the currency. Therefore, close coordination between the government and Bank Indonesia was needed so that the process could take place smoothly, he said.
Indonesia ranks first for public trust in the government based on data released by the Organization for Economic Co-operation and Development (OECD) in its report Organization at a Glance 2017, published on July 17, 2017.
“It is true that Indonesia ranks first in terms of public trust and confidence in the government based on the Gallup data released by the OECD,” Finance Minister Sri Mulyani Indrawati noted in a written statement received by ANTARA here on Wednesday.
The achievement has been reported to President Joko Widodo. The report summarizes the various indicators of public sector achievement from OECD countries as well as several other nations, including Indonesia.
The redenomination was also needed because the rupiah exchange rate against the US dollar had reached Rp 13,000, a figure that did not reflect Indonesia’s standing as the 16th strongest economy in the world, Misbakhun said.
Previously, Bank Indonesia Governor Agus Martowardojo called on the House to immediately deliberate the redenomination bill, stressing that the economic conditions of the country were conducive to implementing the policy.
Coordinating Economic Minister Darmin Nasution also supported the idea, saying that the government would keep inflation between 3 and 4 percent to make the redenomination possible. He also added that the transition period for redenomination would be one to two years, while the entire process would take six to seven years to give business players enough time to make the necessary adjustments, such as changing their price tags.
“The price adjustment will also be mentioned in the law on redenomination,” he said, adding that during the transition period, new bills would be printed.
However, he stressed that such a move could only be implemented when the inflation rate was between 3 to 4 percent, as otherwise, the value of the rupiah could further weaken.