Tuesday, July 24, 2007

A whopping 50% devaluation of Rupiah in 1970s

Don was my coursemate, and my buddy, during my student days at Monash University in Australia. Coming from a well-to-do family in Indonesia, Don was unreservedly straightforward and friendly.

We chatted a lot, and occasionally he would amuse me by chipping in with some interesting, but little known, past events in Indonesia.

One day after our lecture on macroeconomics at Rotunda, I went with Don to buy lunch at Student Union Building. We joined in a long queue for chicken and chips.

Suddenly, Don nudged me and uttered with low voice, "Tony, our lecturer just now was eloquent on currencies - but my story would be even more striking and exciting, also on currency."

That instantly turned me high-spirited and inquisitive. After we got our packed chicken and chips, we settled on a bench in the beautifully landscapped compound of Monash with lush greenery.

"You know, it happened in Indonesia in 1970s when Suharto was at the helm," Don started off.

"One year, the President planned to devalue Rupiah - wow, by a whopping 50%!" Don continued excitedly.

President Suharto divulged this top official secret to his close buddy, a Chinese tycoon W.

Seeing it as a windfall not to be missed, W grabbed it with little hesitation and wasted no time - he liquidized literally all his assets and deposited the whole proceeds in Singapore , in U.S. dollars. W then laid back and waited for the devaluation announcement.

"When the President devalued Rupiah by a stunning 50%, W laughed his way to the bank and switched his entire cash back to Rupiah - wow! wow! wow! his personal wealth simply doubled overnight!" Don finished off with a look of admiration.

For a while, I sank into a state of illusion, musing over the scandalous windfall.

"It was a game of wits and risks - and the winner took it all," I told Don.

Don nodded to me.

This story stays on in my mind as a constant reminder about international currencies - their risks, manipulation and all the wits you need to outdo them.

I lost Don's contact after Monash. He should be in Jakarta. Anyway, sincerely, I hope Don is doing well.

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