Foreign exchange

Foreign exchange

A local daily recently reported a prominent economist as
saying that the government cajole private enterprise or
individuals who keep their money abroad in the form of time
deposits to withdraw it and transfer it back to Indonesia.

According to the economist, if hundreds of billions of U.S.
dollars enter Indonesia, the supply of dollars would be so
abundant and the exchange value of the rupiah so strong again
that the normal pre-July rate of Rp 2,500 to the dollar would not
be impossible.

After all, the basic principle of economics is the supply and
demand factor. If the equilibrium is effected, chaos will be the
result. If the feeling of patriotism can be achieved or restored
to those affluent people with foreign deposits, then I believe
that the present monetary crisis can be overcome.

In an era of free foreign exchange, the wealthy keep some of
their money abroad as a reserve for a rainy day.

However, about half a century ago when the possession of forex
was prohibited, a black market of forex appeared out of nowhere.
This was despite the fact those found guilty of involvement in
the restricted forex system could expect to spend a few years in
jail as punishment. When inflation was uncontrollable, I remember
there was a bank willing to pay 10 percent interest per month on
time deposits. In such a case, speculators and opportunists have
a good time.

A. DJUANA

Jakarta