Devaluation

The present economic situation reminds me of a bitter experience a long time ago. About four decades ago, I was approached by an insurance salesman, who cajoled me into signing a life insurance deal. At that time I was full of vitality, and it is, of course, advantageous for an insurance company to have young people as its clients.

At my present age of 72, no insurance company will accept me. At that time, the insurance salesman was my close friend's uncle, so I closed the life insurance deal with a little sense of comradeship with my friend.

The exchange rate of the rupiah against the U.S. dollar at that time was very advantageous. If my memory does not fail me, it was Rp 40 to US$1. So when I closed the insurance deal for Rp 780,000, it was quite an amount in U.S. dollars.

After faithfully paying my monthly installments for 15 years, suddenly the rupiah was drastically devalued in order to put a brake on the galloping inflation which had hit the economy. As a layman of economic science, I figure that banknotes were printed in overabundance.

In 1965, the rupiah was devalued from Rp 1,000 to become Rp 1. To put it more technical terms, the nominal value on the banknote was Rp 1,000 but the intrinsic value was Rp 1. The chaos that soon followed was not difficult to predict.

I will not dwell on the societal effects that followed, but in my case, if the insured amount became Rp 780 by the time my policy came due, instead of Rp 780,000, perhaps it would have been enough to buy me a meal of noodles.

So there was nothing left for me to do but to stop paying my monthly installments. I canceled my life insurance. I could only console myself with the thought that I was not alone in suffering from this devaluation. I gave way to wishful thinking such as: If only I had closed my life insurance in U.S. dollars...

A. DJUANA

Jakarta