Repost of an Old Letter Re: Hyperinflation in Indonesia

Back in the late 1990s, I corresponded via e-mail with a gentleman from Indonesia who had read the short “Triple Ought” draft edition of my novel Patriots. One of his letters in particular (from October of 1998) had some interesting insights and a valuable perspective on what it is like to live through a period of hyperinflation. (This was back during the time of wholesale inflation of the Indonesian Rupiah.) He started his letter by responding to my request for a sample of the Indonesian paper currency for my collection. To explain: I collect fiat paper currencies that have been destroyed by inflation. The collection was started because of my fascination with economics, and partly as an educational tool for my young sons. The centerpiece of my collection is a 100,000,000 Deutsche mark note from Weimar Germany in the early 1920s. Dear James: [Some personal chatter snipped] … As for you James, I collected a whole range of the local currencies starting from the smallest denomination all the way to the largest one. The smallest one is a coin worth Rp 25. The largest bill is Rp 50,000. Rp 50,000 is currently equal to US$7. Prior to July of 1997, 1 US$ = Rp 2500. Now it is 1 US = Rp 8000. During the riots, the Rupiah plunged to a low of 18,000 to the dollar. Yes, that’s how worthless our currency were. Due to the sharp drop in the value of the Rupiah, hundreds of companies which owed foreign banks U.S. dollars were technically bankrupt. They were forced to shut their operations down and to lay off their workers. Thousands of workers were laid off daily. Unhealthy banks were forced into liquidation due to bad loans and unlucky depositors were left with nothing. We don’t have FDIC like your country. Other depositors made a run for the banks and changed their savings to U.S. dollars. This of course created a devil’s circle. As more people rushed to dump their Rupiah to buy U.S. Dollars, the value of Rupiah plunged even more causing more panic dumping. To say that we are living in TEOTWAWKI is not an exaggeration. The financial crisis has devastated our economy. Close to 20 million are jobless. The government defines unemployment as ” not working more than 1 hour a week”. So the real figure is a lot higher. Half of the population of 200 million Indonesians are below the poverty line. As many as 80 million people face starvation and can only afford a single meal a day. Babies and children are getting sick and dying of malnutrition. Inflation is expected to exceed 100% soon. Food items like rice and cooking oil has gone up an average of 300%-400%. Gasoline has gone up more than 75% last May and was one of the cause for the bloody riots. It has since than been lowered to about 45%. With the crisis’s end nowhere in sight there have been anti government demonstrations everyday. Crime is skyrocketing. Violent robberies and killings are common place. The past three months there have been numerous mysterious killings of suspected sorcerers or witchcraft practitioners in East Java. It had since then spread to include Muslims teachers. The killings were done by so called ‘ninja’ killers who were dressed in black. The mostly uneducated and superstitious villagers are now arming themselves and lynching whomever is suspected of being a sorcerer. In response to the killings of muslim teachers, vigilante groups are stopping and killing strangers found wandering after dark and anyone suspected of being ‘ninjas’. During the riots last May, more than 1,200 lives were lost. As many as 168 Chinese women were gang raped. Hundreds of malls and thousands of shophouses and homes were burnt down. The ethic Chinese bore the brunt of the violence and destruction. Ethic Chinese make up of only 3% of the population but they are dominant in the Indonesian economy. This makes them especially vulnerable to racial attacks during hard times. The military is suspected to play an active role in the riots and the recent mysterious killings. This is a very plausible theory as they are doing everything they can to maintain the status quo. Many ethnic Chinese, myself included fled the country during the riots. A many as 100,000 Chinese fled to nearby countries like Singapore, Hong Kong or Australia. Others like me fled to faraway countries like the U.S. or Europe. I lived in [eastern U.S. city name deleted] for a number of years and before the riots happened I was already making plans to visit my brother who was in Boston. It just happened that the riots occurred just as I was about to leave the country. Many have since returned. But the economy is dead. I’m living in [name deleted] Island which is close to Singapore. There are no demonstrations and things are relatively peaceful here. It was only recently that I read your novel and was struck by the realism of the story. Like your story, the situation in Indonesia deteriorated rapidly following the currency devaluation and banking collapse. For 30 years, Indonesia’s economy used to post 8% annual growth and no one in their wildest imaginations dreamed that this could happen. I had just returned from Boston to help in my families’ business on October of 1997. I had been warning my parents of the dangers in Indonesia. Of course they did not listen to me. Like yourself I love to read and my interest in economics and history made me aware that Indonesia is particularly vulnerable to social disintegration. The warning signs were there for anyone who bothered to look. The problem was nobody wanted to look. Well, I hope my story was interesting. Take care and Be Prepared. I was a Boy Scout and I have always lived by that motto. Goodbye for now. Yours Sincerely, [Name deleted]