Transcription
Okay, so as I have already discussed. If all of you look at the video here, maybe two or three weeks ago, as I predicted, the Rupiah has already touched 17,500 and now it has risen again to an all-time high of 17,600. So, what is actually happening and how is our survival strategy, so to speak? Because we know that the price, or rather, the IDR strengthening against the dollar can lead to several things. Foreign investors' perception, if we look at it, towards our capital market also decreases. We can see capital outflow as of today, and who are the most affected? Is it foreign investors? No. The most affected are the people. Why? Because many pharmaceutical raw materials are still imported, textiles are also definitely affected, automotive, basically industries whose raw materials are largely imported. And when these businesses decline, the first thing that happens is definitely a wave of layoffs. When a wave of layoffs occurs, people's purchasing power will decrease. And the prices we see around us, for example, spare parts that used to cost a certain amount, will all increase when, so to speak, the dollar strengthens too much against the Rupiah. Perhaps geopolitically, we have discussed a lot in several videos before; you all understand what is happening in the Middle East, what is happening in the world, why oil prices have risen so much.
But what I want to discuss today is actually more interesting. This is history, everyone. So what I want to discuss is the history of the Rupiah itself so that we can reflect on the past. In my opinion, a wise person is someone who can look at the past to see that sometimes everything has happened before. And we, as humans, we look at what the pattern is, what pattern recognition happened in the past. Is it possible that this is happening again now? So it is important for us to learn history. But the history I share here you rarely find in school. These are words I really like: "History doesn't repeat itself but it often rhymes" from Mark Twain. So what does it mean? History sometimes doesn't repeat exactly, but it rhymes. Yes, so it rhymes. There are similarities that we can find. I even like to study history, not just in Indonesia, but abroad, for thousands of years empires rose, empires fell.
Indonesia, if we want to study why the Rupiah is where it is now and where it will go, it is good for us to study what the Rupiah was like in the past. Now, this is the history of devaluation, so to speak, and the depreciation of the Rupiah since Indonesia's independence. So before the Rupiah, the first money was called ORI. ORI now refers to Indonesian bonds, but ORI was formerly called Oeang Republik Indonesia from 1945 to 1949. Indonesia at that time was not yet using the Rupiah, and this was the currency used, and I have calculated it; I will show you the chart later, roughly how much the Rupiah has eroded over 77 years and what it looks like. At that time, during this ORI period, Indonesia's monetary system was largely not recognized by the international financial world. And at that time, as a result of our recent independence, because the money was used for several wars, used for several campaigns, the state treasury was almost empty at that time. So what they had to do was they had to devalue the Rupiah. So that was the first time the Rupiah was devalued, even before its name was Rupiah. So if we can see the exact date, it was March 7, 1946. The first devaluation of ORI. The government had already carried out the first devaluation of ORI, its value dropping by 29.12% from originally 1.88 per US dollar to 2.65. This was the first time we experienced this devaluation. Even at that time, as I said, ORI, we were not yet recognized by the international world, we had already carried out our own devaluation.
What happened at that time, in the Old Order era, so to speak, was that we had a chronic budget deficit, and the state treasury was small. The ORI had already been devalued. What happened next? The first Indonesian money was issued at that time. So it looked like this. And in March 1950, so this was only 5 years after independence, there was something called Gunting Syafruddin (Syafruddin Scissors). Now, some of you might have heard of this in school, but you don't understand what it was. So it was divided like this. The left part was valid but only half its value, while the right part was exchanged for bonds. This was for bonds, this was half, this was one-half. So the money was literally cut. The era of Gunting Syafruddin was one of the most chaotic eras in the regulation of the Rupiah's monetary system. So from ORI, which was devalued by 29% and so on, the Rupiah was issued, this Rp5 was immediately cut in half, right? The right side could buy bonds, the left side's value was only half. Although this was a policy called "sunring" in the economic world, at that time it was very much unappreciated by the public, and what was the result? Hyperinflation occurred.
In August 1959, the government carried out a massive devaluation. This was to suppress inflation. 500 was reduced to 50. So imagine, this had already been cut in 1950, nine years later, 500 was reduced to 50, and 1,000 became 100. So if you originally had 1,000, now you only had 100, only 1/10 of the money left. And 550, 1000 to 100, and the official exchange rate, which was originally Rp1.40 per USD, changed to 45 per USD in August 1959. So you can see the inflation was already extreme from the beginning of independence, from ORI, Gunting Syafruddin, until 1959, it was already a long way. So the common people were the most affected; it was like their money became 1/1000, so to speak. The common people were truly affected in August 1959. So if you ask, currency devaluation, currency redenomination, these are not new things. For example, people say, "Oh, we want to cut three zeros." Why can I say that this will be done in the future? Yes, it hasn't been done yet, but it will definitely be done in the future. Why? Because it has happened throughout history. So, it is important for us to learn history.
And the critical point was December 1965. This was a critical turning point for the Rupiah during the Old Order era. Amidst hyperinflation reaching 600%. The new government, as I just said, redenominated. So, originally 1000 became one. Many people suffered. If you originally had 1,000, it became one. So, cutting zeros has happened before. So we have already reached 1,000, it has been from 1,000 like this, our paper became one. That's why it's important for us to truly understand what this FIAT system actually is, and in emerging countries like ours, it's necessary for us to know if its history has been smooth, if devaluation has actually happened.
Now, this is the New Order era, which at that time many Indonesian people actually liked this era because they considered it an era of stabilization and growth, that was its tagline. And at that time, the Indonesian government promised not to devalue the currency. Now, this is important, the promise is important. August 1971, after the end of the exchange rate system. We know that at that time, the world's system was Bretton Woods, where one dollar had gold behind it. But exactly in 1971, the world changed, it changed to a petrodollar system. Because originally the USD always had gold, but they needed to finance the Vietnam War at that time. Richard Nixon finally abandoned the Bretton Woods system. Indonesia devalued the Rupiah when this happened, from 378 to 415 per USD. What was the purpose? To maintain competitiveness and adjust the Rupiah to the new global economic conditions. Later, I will show you the pattern of what happened abroad, what happened internally, and what happened to our currency. So you can read the map. Many are confused, how could I predict 17,500 so accurately within two weeks? Because my life is about studying things like this.
When this was done, when it was devalued from 378 to 415, the government promised that we would not devalue again. But we can see in 1978, not long after, this was from '71 to '78, at that time we had abundant foreign exchange reserves, there was an oil boom. So the government actually devalued during the oil boom, from 415 to 625. This was to anticipate a future decline in oil prices and encourage exports, especially non-oil and gas exports. It was devalued again in March 1983, at that time world oil prices, if you look at the chart from 1983, dropped drastically to 20 per barrel. As a result of the decline in world oil prices, the exchange rate was devalued again from 702 to 970. Okay, let's pay attention: 378 to 415, 415 to 625, 720 to 970, and in September, one time, two times, three times, four times, in September 1986, devaluation happened again, from 1134 to 1640, reportedly to restore export competitiveness when oil fell to its lowest level. So notice, when they promised, 1, 2, 3, 4, it was devalued again in 1983. In these two eras, we had a lot of debt, our debt was in what format? Many were in Japanese Yen, and at that time we were squeezed by this Japanese Yen debt. So, this was the time, if you pay attention. From '83 to '86, in 3 years, we were devalued by 49%, and then devalued again by another 50% in just 3 years. Purchasing power weakened immediately. In March 1983, they wanted to curb import spending, because at that time we had about 7 billion USD. So they felt they had to devalue the Rupiah. But what happened 3 years later, not long after, it was devalued by another half. This was about 47-something percent, roughly 50%. Twice 50%.
And from what you learned in history, what you probably remember most is '97 to '98. And I know many mentors who experienced the biggest monetary crisis of their lives during this period. In June '97, the Rupiah, if you count from earlier, its increase had already doubled again, actually, from the 14,400 earlier, it had already doubled again. In January, it was already 11,000, and by July, the climax was already 14,000, so from 2,380 to 14,150. If you look at it like this, who would be ruined when something like this happens? These are the importing companies. Companies that have a lot of debt in what format? Their debt format is USD because they have to pay their debt, right? When they borrowed in USD, while the exchange rate went from 2,380 to 14,150. Many banks collapsed simultaneously. All these banks were destroyed, and at that time, many, even very large ones, that were about to collapse had to be intervened by the government. And it happened around May to June, this monetary crisis, reaching 16,000, 16,800 first. The Asian financial crisis occurred. High private foreign debt. This is what I just mentioned. So many companies had foreign debt. Within a month, hundreds of companies went bankrupt and tens of thousands of employees were laid off. The exchange rate system was released to become free float. So at that time, we finally decided, okay, we release it, meaning we say it becomes free float, what does that mean? Floating in the market. So what values the Rupiah is the market and political instability, so to speak, domestically. Our total foreign debt was 138 billion. Meanwhile, this is important for you to know. So, the debt was 138 billion US dollars, while foreign exchange reserves were only 14.44 billion. Now, when this happens, this is a recipe. This is a bad recipe, so to speak. So many companies went bankrupt, there were riots, and 70% of companies in the Indonesian capital market were, so to speak, insolvent. Someone had to try to intervene to save them. And many of my seniors in the capital market experienced this. One example is Mr. Sandiaga Uno. He recounted at that time that when he held debt in USD format, he truly lost everything. His assets were completely gone in '98; he had to build everything from scratch again. That's why after this happened, Indonesia had difficulty restoring people's trust in using its banking system. So if you know older people who went through this, many wanted to save gold and Rupiah at home. They didn't want to put it in the bank anymore. Why? Because they were afraid the bank would close. That's why the government at that time created a system called LPS (Deposit Insurance Agency). It was LPS that made people trust again. But back then, people completely distrusted our financial system.
So if you study this, it's a result of a strengthening dollar, budget deficit, ballooning foreign debt. Four, thin foreign exchange reserves, and five, rising food prices. So as a result, you have to pay attention to the pattern: when a crisis occurs, its engine is a strengthening dollar, a budget deficit, ballooning foreign debt, thin foreign exchange reserves, and always rising food prices—this is a crisis. So if you want to ask when Indonesia will experience a crisis, it's when these five conditions are met, because this is, so to speak, a picture from our past; it's always the same. So the dollar strengthens, this is usually due to international problems, oil prices dropped to 20 a barrel earlier. Now, if oil prices rise, there's a deficit, so to speak, in the budget, foreign debt is ballooning. The format now is different from the past when I told you earlier, during the New Order era, we had a lot of debt in Japanese Yen, and our foreign exchange reserves were thin. Thin means like '98: foreign debt ballooned to 138, foreign exchange reserves were 14—this just doesn't add up. What was the result? The Rupiah soared, food prices were expensive, a crisis occurred.
And now, if we look at the Rupiah's journey up to now, there are important phases. This was the tapering era in 2013. So if you know, abroad, the Federal Reserve was tapering, and the dollar index (DXY) experienced its biggest strengthening in history. The US-China trade war. So China was flooding the world with its imports. Why is it difficult for those of you who work in textiles in Indonesia to compete with Chinese people? Why? Because entrepreneurs there receive incentives; they receive incentives to dominate markets in Southeast Asia. So in the Philippines, in Vietnam, in Thailand, in Indonesia. So they receive subsidies from the government to sell cheap clothes. That's why if you, perhaps guys or girls, buy clothes on Shopee, they are very cheap; that's a result of China. This trade war happened. And what's interesting is what? Our parents, if you look, boomers and older than boomers, used property to maintain their exchange rate, so to speak. But what was the result? With older people investing in property, young people could not buy property, and that has been visible since 2013. So if you pay attention, the property market, property entrepreneurs, there used to be many before this year. But after 2013 until now, property prices have stagnated and gone nowhere. Yes, pay attention, property from 2013 until now has gone nowhere. You might go to Menteng now, to Pondok Indah, a house that was originally sold for 90M is now sold for 50M. So property became an investment asset at that time because people were tired of the Rupiah constantly being devalued, so they kept buying land. So they bought not for primary residence, but for investment. What was the result? Young people whose salaries are not much compared to inflation cannot buy houses anymore. Finally, prices stagnated. So they hoarded their own properties. Now, property prices are going nowhere, and no one can buy them. So that's the housing condition in Indonesia.
And we saw the COVID-19 pandemic, the world stopped. The Rupiah almost hit a record at 16,000 during COVID. This reached its worst record since '98, so to speak, and this was a very, very large intervention from Bank Indonesia, and many foreign investors fled. March 2020, global lockdown, the government poured trillions of Rupiah in stimulus. And I was very much into this period because when I was still actively creating content, I said that when this happened, many were scared, right? When inflation, what should I buy? I had already said that during inflation like COVID, because I believe this disease was created for the world to print money—that's my belief. This is a fabricated disease for the world to, so to speak, let's print money together. When the world printed money together, I used to study Ray Dalio's book from 1971. He thought that during inflation, stocks would all fall, everything would be destroyed. But I knew it was the opposite. Why? Because the money needs to flow. So during COVID, many of you might know my story. I bought many banking stocks in Indonesia very cheaply. I even bought them on margin. I bought all cheap stocks with 3x margin. I bought all of them, like BBRI at 2100, all of them during COVID in 2020. Why? Because I knew that when the government poured trillions of money for this intervention, everything would go up. But now, in my opinion, this market is different.
And this May, this is another new record, weakening for 7 weeks. There's geopolitics, as I said, oil prices are rising. The Fed still doesn't want to cut interest rates; it doesn't want to cut interest rates, it shows no signs of being dovish. Capital outflow is strong. If we look at our IHSG, the capital market has strong capital outflow. So the burden is heavy, there's debt, and dependence on the dollar. So this is the map of what is happening. This is the accurate reality map that you are seeing with your own eyes. So we have several situations that, in my opinion, are happening. Young people cannot buy houses, inflation is very high. Now our salaries are not increasing, and they cannot buy anything.
And if you look, this is what I said earlier, I will illustrate it until the end, the journey and our initial exchange rate. We don't even need to talk about ORI. If from ORI, it's too far. Let's say from Rupiah 3.80 to now 17,600, its value has disappeared by 99.9978%. So if you only bought Rupiah from the past, from the initial exchange rate when you were born in this year, your value has disappeared by 99.9978%. Basically, everything is gone. So if people say saving is the key to wealth, that's wrong; saving is the key to poverty. You must be able to buy assets, you must be able to invest, you must understand that this paper money is just a game of the world. Yes, paper money is fleeting. Why? Because its value has disappeared by 99.9978%. Would you want to hold something whose value disappears by 99.9978% in 77 years? The answer is definitely no. So I'm happy to see things like this happen. Why? Because I can share it, I can show you what is happening in the world.
And now, people who might be skeptical, 3 years ago many laughed at me perhaps about Bitcoin, right? "Oh, is it true to buy Bitcoin or buy gold?" Right? "Is it true there's inflation, is it true it's just printed?" You can now see with your own eyes, and everything is happening openly, transparently in front of all of you. So, I buy Bitcoin not because I'm biased, but because I see this, and is this something I want to hold? The answer is, I'm an investor. I just see opportunities. When its value is eroded by 99.9978%, I have never shared this. You will never find this lesson in school, it will never be taught, because I feel this knowledge must be shared with you. Your eyes must be opened and you must be sharp in seeing the economic map. Poor people, so to speak, they only save money; they save their money, they save money, as a result, they become poorer and poorer, and it becomes structural poverty because the game is rigged, your money disappears this much. We can see from the past, 1949, 3.80, 4625, 970, 1350, 2650. This peaked in '98, 9,000 again during Habibi's time. So to speak, 12,000, right? He tried at that time, Habibi tried to stabilize it at 12,000, 16,600, now 17,600, this will go up again, the trend is like this, everyone. So don't be surprised if one day, by 2030, our money is already Rp20,000 plus. Because its trajectory is indeed like this. We are seeing a pattern, a recurring pattern. I am not a psychic, I am not someone who can see the future. I just learn to see the future using history that has already happened, right? Early economic pressure, right? The Asian monetary crisis, gradual recovery, right? And this is the challenge, the era of new global challenges, and now we are on the brink, many people say, of World War III, right? Now, this is what makes people wonder. How far will this economic weakening go? You work hard every day, you earn money, you sweat, you must be able to ensure that its value is safe. Don't work hard and not make its value safe. Because one decision, so to speak, that you make today to learn to invest, to open your mind, is to save your family 10 years from now, it's to save your parents. Whereas if you just work and just save, save, save, save, save, that will definitely lead to poverty. That's what I teach.
So as Indonesian citizens, we must be open-minded. Don't be easily skeptical. When I talk about a new monetary system, when I talk about a new asset, or that gold can have properties like this. You must be open. Because it's not about how much money you can earn; you can earn all the money, and it will all disappear. You could have had so much money at that time, and it all disappeared, but it's about how much money you can retain. And from ancient times, older people used land and property. So the key is what is scarce and desirable, rare and desired by people richer than you. Why did property prices rise in the past? Because people wanted houses in Menteng. Because people wanted houses in Pondok Indah. Yes, because people wanted to have a house in Senayan, you must buy something that people richer than you will want to buy from you in the future. That is the concept of investment. So, many ask me, "How do I invest?" I hope that the assets I buy in the future, there will be richer people, more interested in the assets I own, to buy my assets at a higher price. Yes, it's simple.
And what is the solution? What is the solution to this? I only give two. Let's not make it complicated. Because we are young. If I put property here, you can't buy it either. The two things you can most likely buy are: Gold, for 5,000 years, it has never become zero. It cannot be printed by the government. Low volatility. Kingdoms, empires, collapsed; currencies perished, but gold always remained, holding its value. Unlike the Rupiah, which can be issued anytime, can be intervened anytime; we have to focus on the policies of people whose minds we don't understand. And Bitcoin, this is my personal favorite, a digital asset that has properties similar to gold. Because why? Its supply is capped at 21 million. Now, skeptics, when it's 17,600, are starting to ask, "How do I learn about Bitcoin?" Many who were skeptical 3 years ago are now asking, because why? If you look at Bitcoin to IDR, it's still rising now, because that's the secret used by people in Turkey, in Argentina, in Venezuela when their countries experience very high inflation. So its supply is mathematically locked at a maximum of 21 million forever, it cannot be frozen. And it has the highest historical returns in the last 15 years. This is the best asset over the last 15 to 16 years; this is literally the best asset on the face of this earth. And this is what governments in Abu Dhabi buy. This is what people in Dubai buy. You go to Hong Kong, you go to Switzerland, many people already believe. Not just believe, but they put their money here. Whereas Indonesians call this gambling. They want to save paper money. Something like this is not right. They are afraid of gold speculation, they say, seeing prices go up and down. But for 5,000 years, gold has never become zero. That's a fact. Whereas earlier, I didn't want to buy something that loses 99.99%. Huh? I don't want to buy this, I don't want to have it in my portfolio. That's why I said, during a crisis, don't keep cash. You saw my video at that time, right? Don't keep cash. It happened, I'm not a psychic. Because my aspiration here is always to be your teacher. I want the next generation, those of you watching this, to perhaps lead the people here later. And I want these young generations to be aware, to be aware of technology, aware of the financial world, aware of the world. So they don't become people who just, so to speak, listen to the left and right, only get knowledge from, so to speak, their parents as it is, and you feel skeptical about everything. Yes, as humans, we must have the humility to be open. Okay, there are other alternatives. It's not just what I know, and I'm the smartest. I believe that with smarter generations, this country will be better in the future. Yeah.