Name : Yulia Dwi Putri
Student ID : 211052007
History Of Money
From Bartering to Currency
Money has been part of human history for at least the past 5,000 years in some form
or another. Before that time, historians generally agree that a system of bartering was likely
used. Bartering is a direct trade of goods and services. A type of currency slowly developed
over the centuries that involved easily traded items like animal skins, salt, and weapons.
These traded goods served as the medium of exchange even though the value of each of
these items was still negotiable in many cases. This system of trading spread across the
world and still survives today in some parts of the globe.
First Official Currency Is Minted
Meanwhile, further west during this era, sixth-century BCE Greek poet Xenophanes,
quoted by the historian Herodotus, ascribed the invention of metal coinage to the Lydians. In
600 BCE, Lydia's King Alyattes minted what is believed to be the first official currency, the
Lydian stater. The coins were made from electrum, a mixture of silver and gold that occurs
naturally, and the coins were stamped with pictures that acted as denominations. In the
streets of Sardis, in approximately 600 BCE, a clay jar might cost you two owls and a snake.
Transition to Paper Currency
During 1260 CE, the Yuan dynasty of China moved from coins to paper
money.10 By the time Marco Polo, a Venetian merchant, explorer, and writer who traveled
through Asia along the Silk Road, visited China in approximately 1271 CE, the emperor of
China had a good handle on both the money supply and its various denominations
Parts of Europe still used metal coins as their sole form of currency until the 16th
century. Colonial acquisitions of new territories via European conquest provided new
sources of precious metals and enabled European nations to keep minting a greater quantity
of coins.
But banks eventually started using paper banknotes for depositors and borrowers to
carry around in place of metal coins. These notes could be taken to the bank at any time and
exchanged for their face value in metal, usually silver or gold, coins. This paper money
could be used to buy goods and services.
The first paper currency issued by European governments was actually issued by
their colonial governments in North America. Because shipments between Europe and the
North American colonies took a long time, colonies often ran out of cash. Instead of going
back to a barter system, the colonial governments issued IOUs that traded as currency. The
first instance was in Canada (then a French colony) in 1685 when soldiers were issued
playing cards denominated and signed by the governor to use as cash instead of coins from
France. The gold standard was established in the 1870s. Under this rule, currency printing
was permitted based on the amount of gold a country had in its reserves
The Emergence of Currency Wars
The shift to paper money in Europe increased the amount of international trade that
could occur. Banks and the ruling classes started buying currencies from other nations and
created the first currency market. The stability of a particular monarchy or government
affected the value of the country's currency, and thus, that country's ability to trade on an
increasingly international currency market. The competition between countries often led
to currency wars, where competing countries would try to change the value of the
competitor's currency by driving it up and making the enemy's goods too expensive, by
driving it down and reducing the enemy's buying power (and ability to pay for a war), or by
eliminating the currency completely.
Mobile Payments
The 21st century gave rise to a novel form of payment activated with the touch of
your finger. Mobile payments refer to money used to pay for goods and services. They can
also be used to transfer money to another individual, such as a family member or friend.
This can all be done using a portable electronic device, such as a smartphone or tablet
device.
This form of payment first came to prominence in Asia and Europe before moving
over to North America. From payments via text message, the technology evolved to
allow checks to be deposited using the camera app on smart devices. Mobile payment
services like Apple Pay and Google Pay are vying for retailers to accept their platforms for
point-of-sale payments. There are also apps dedicated to this method of payment,
including Venmo and PayPal.
Virtual Currency
Virtual currencies are only available in electronic form. As digital representations of
money, this type of currency is stored and traded using computer applications or specially
designated software. The appeal of virtual currency is that it offers the promise of lower
transaction fees than traditional online payment mechanisms do and is operated by
decentralized authorities, unlike government-issued currencies.
Bitcoin quickly became the standard for virtual currencies. It was released in 2009 by
the pseudonymous Satoshi Nakamoto,16 All of the world's Bitcoin was worth just over
$522.5 billion.Although Bitcoin remains the most popular and most expensive one, other
virtual currencies have hit the market. They include Ethereum, XRP, and Dogecoin.
Evolution of Payment System
1. Commodity money
2. Fiat money
3. Checks
4. Electronic payment
5. E money
Name : Yulia Dwi Putri
Student ID : 211052007
Macroeconomics Policy
1. Monetary Policy
monetary policy, measures employed by governments to influence economic activity,
specifically by manipulating the supplies of money and credit and by altering rates
of interest. The usual goals of monetary policy are to achieve or maintain full
employment, to achieve or maintain a high rate of economic growth, and to stabilize
prices and wages.
a. Expansionary Monetary Policy: The expansionary monetary policy is adopted
when the economy is in a recession, and the unemployment is the problem. The
expansion policy is undertaken with an aim to increase the aggregate demand by
cutting the interest rates and increasing the supply of money in the economy. The
money supply can be increased by buying the government bonds, lowering the
interest rates and the reserve ratio. By doing so, the consumer spending increases,
the private sector borrowings increases, unemployment reduces and the overall
economy grows.
Expansionary policy is also called as “easy monetary policy”.
Although the expansionary monetary policy is useful during the slow period in a
business cycle, it comes with several risks. Such as the economist must know
when the money supply should be expanded so as to avoid its side effects
like inflation. There is often a time lag between the time the policy is made and
the time it is implemented across the economy, so up-to-the-minute analysis of the
policy is quite difficult or impossible. Also, the central bank and legislators must
know when to stop the supply of money in the economy and apply a
Contractionary Policy.
b. Contractionary Monetary Policy: The Contractionary Monetary policy is applied
when the inflation is a problem and economy needs to be slow down by curtailing
the supply of money. The inflation is characterized by increased money supply
and increased consumer spending. Thus, the Contractionary policy is adopted with
an aim to decrease the money supply and the spendings in the economy. This is
primarily done by increasing the interest rates so that the borrowing becomes
expensive.
Thus, these are the monetary policies applied by the monetary authority to control the
inflationary or recessionary pressures in the economy.
Monetary Policy Tools
The central bank’s policy reforms majorly deal with economic recession and
expansion. The prominent tools used for this purpose involves:
Open Market Operations: The central bank purchases short-term government assets
such as the US Treasury bonds or Federal assets in the open market operations. If the
central bank is targeting recession, it will purchase the securities from a bank offering
them. This will increase the bank’s cash flow and reserve.
Doing this at the macro level will increase the money supply in the country. In
contrast, when it plans to reduce the cash flow, it sells the securities, reducing the
reserves and availability of cash.
Reserve Requirement: Changes in the central bank’s prescribed limit of reserves that
the commercial banks need to maintain from their customer deposits is an essential
tool. In the situation of economic expansion, the reserve requirement is increased to
decrease the money supply in the system. On the other hand, it is decreased as part of
the expansionary policy.
Discount Rate: Central bank changes an interest for short-term lending to the
commercial banks, which is referred to as a discount rate. The loan helps in meeting
reserve requirements and short-term cash flow. If the bank increases the discount rate,
it eventually permeates to other rates, including those on commercial loans.
As a result, increasing commercial loan rates will discourage people from borrowing,
thereby bringing down the money supply under inflation.
monetary policy examples from the real world. Amidst the coronavirus pandemic, the
US Federal Reserve lowered the benchmark interest rate close to zero per cent.
Although the benchmark indicates the rate of interbank short-term borrowing, it
affects the overall borrowing rate, including those for consumer loans.
As such, this was an example of expansionary monetary policy which was adopted to
avoid a money crunch. It also focussed on bringing down unemployment numbers and
economic slowdown.
2. Fiscal Policy
Fiscal policy refers to the use of government spending and tax policies to
influence economic conditions, especially macroeconomic conditions. These include
aggregate demand for goods and services, employment, inflation, and economic
growth.During a recession, the government may lower tax rates or increase spending
to encourage demand and spur economic activity. Conversely, to combat inflation, it
may raise rates or cut spending to cool down the economy. Fiscal policy is often
contrasted with monetary policy, which is enacted by central bankers and not elected
government officials.
Example of fiscal policy; During the Great Depression of the 1930s, U.S.
unemployment rose to 25% and millions stood in bread lines for food. The misery
seemed endless. President Franklin D. Roosevelt decided to put an expansionary
fiscal policy to work. He launched his New Deal soon after taking office. It created
new government agencies, the WPA jobs program, and the Social Security program,
which exists to this day. These spending efforts, combined with his continued
expansionary policy spending during World War II, pulled the country out of the
Depression
Types of Fiscal Policies
a. Expansionary Policy and Tools
To illustrate how the government can use fiscal policy to affect the economy,
consider an economy that's experiencing a recession. The government might
issue tax stimulus rebates to increase aggregate demand and fuel economic
growth.
The logic behind this approach is that when people pay lower taxes, they have
more money to spend or invest, which fuels higher demand. That demand leads
firms to hire more, decreasing unemployment, and causing fierce competition for
labor. In turn, this serves to raise wages and provide consumers with more
income to spend and invest. It's a virtuous cycle or positive feedback loop.
Alternately, rather than lowering taxes, the government may seek economic
expansion by increasing spending (without corresponding tax increases).
Building more highways, for example, could increase employment, pushing up
demand and growth.Expansionary fiscal policy is usually characterized by deficit
spending. Deficit spending occurs when government expenditures exceed
receipts from taxes and other sources. In practice, deficit spending tends to result
from a combination of tax cuts and higher spending.
b. Contractionary Policy and Tools
In the face of mounting inflation and other expansionary symptoms, a
government can pursue contractionary fiscal policy, perhaps even to the extent of
inducing a brief recession in order to restore balance to the economic cycle.The
government does this by increasing taxes, reducing public spending, and cutting
public sector pay or jobs.
Where expansionary fiscal policy involves spending deficits, contractionary
fiscal policy is characterized by budget surpluses. This policy is rarely used,
however, as it is hugely unpopular politically. Public policymakers thus face
differing incentives relating to whether to engage in expansionary or
contractionary fiscal policy. Therefore, the preferred tool for reining in
unsustainable growth is usually a contractionary monetary policy. Monetary
policy involves the Federal Reserve raising interest rates and restraining the
supply of money and credit in order to rein in inflation
Name : Yulia Dwi Putri
Student ID : 211052007
National Expenditure
National expenditure consists of routine expenditure and development expenditure.
Routine expenditures are all state expenditures to finance general government tasks and
operational activities of the central government, interest payments on domestic and foreign
debts, subsidy payments and other routine expenses. Development expenditure is all state
expenditure to finance development projects that is charged to the central government budget.
State expenditure is all state expenditure to finance central and local government spending.
Central government expenditure is all State expenditure to finance development expenditure.
If viewed according to its nature, these expenditures or expenditures can be divided into two
types, namely as follows:
1) Exusive spending, namely shopping to buy goods or services that are directly consumed or
can produce other goods. For example, the provision of vaccines for immunization (directly
consumed), the purchase of planes or airplanes (can generate income to obtain other goods).
2) Transfer spending, i.e. spending on unproductive social activities. For example, donations
for victims of natural disasters, subsidies, scholarships and others.
State government expenditure can be classified into three things:
a. According to its type, central expenditure consists of:
1. Employee expenditure :
a) Honorarium
b) Social contribution
c) Shopping goods
2. Shopping for goods :
a) Shopping for
goods b) Shopping for services
c) Shopping for maintenance
d) Shopping for travel
3. Capital expenditure
4. Debt interest payments
a) Domestic debt
b) Foreign debt
5. Subsidies:
a) State corporations and finance (financial institutions and non-financial institutions)
b) Companies
c) Tax subsidies
6. Grant spending
7. Social assistance:
a) Disaster management
b) Assistance provided by the center
8. Miscellaneous shopping
9. Additional central government spending b. According to its function,
central government spending consists of:
1) Public services
2) Defense
3) Order and security
4) Economy
5) Environment
6) Housing and public facilities
7) Health
8) Tourism and culture
9) Religion
10) Education
11)Social protection
c. According to the organization,
Central Government expenditure consists of expenditure for various projects or activities of
one hundred government ministries/agencies.
d. Regional expenditure consists of:
1. Equalization fund
a. Profit Sharing Fund
1) Taxation (income tax, land and building tax and land and
building rights acquisition duty)
2) Natural resources (petroleum, natural gas, general mining, forestry and fisheries)
b. General Allocation Fund
c. Special Allocation Fund
1) Reforestation fund
2) Non reforestation fund.
Special autonomy and adjustment fund
a. Special autonomy fund
b. Adjustment fund
Government Revenue
1. Tax Revenue
Tax revenues become a source of state funds and support the supply of state
coffers. The task or authority to collect this tax is delegated directly by the Ministry of
Finance to the Directorate General of Taxes (DJP) of Indonesia.
There are two types of taxes, namely central and regional taxes. For central tax, the
management is carried out by the central government through DGT. As for regional
taxes, the authority to collect them is given to the Regional Revenue Office or related
agencies.
The types of taxes categorized as central taxes, namely:
a. Income Tax (PPh)
Income tax is a tax borne by an individual or entity on income earned in a tax
year.
b. Value Added Tax (VAT)
This type of tax applies to the consumption of taxable goods or services within the
scope of customs.
c. Sales Tax on Luxury Goods (PPnBM)
PPnBM tax applies to goods that are not basic or tertiary needs, consumed by
certain communities or high-income people, goods that show one's status, or can
damage the health and morals of the community. This tax withdrawal applies to
the use of documents, such as notarial deeds, agreements, securities, payment
receipts, and securities that issue a nominal with a certain amount.
d. Land and Building Tax (PBB)
Taxes imposed on the ownership or utilization of a land or building. Although at
the center, almost all realization of UN revenues is handed over to the regions.
In addition, tax revenue is still added by customs and excise whose collection is mandated to
the Directorate General of Customs and Excise to collect import duties from imported goods.
Non-Tax State Revenue (PNBP)
Rules related to PNBP are contained in Law Number 9 of 2018 concerning Non-Tax State
Revenue. Based on this regulation, PNBP is a levy paid by certain individuals or entities by
obtaining direct or indirect benefits from services or resource utilization. The rights obtained
by the state become central government revenues outside of tax and grant revenues and are
managed through the APBN mechanism.
It can be concluded, this type of revenue source includes all central government revenues that
come not from tax revenues. Authority and responsibility related to PNBP collection are
delegated to the PNBP management agency consisting of ministries or institutions and
ministries that function as state general treasurers.
The PNBP objects are:
1. Natural Resources Revenue (SDA)
Natural resource revenue includes revenue for oil and gas (oil and gas) and non-oil
and gas resources. Segregated State Wealth The receipt of separated wealth comes
from profits recorded by State-Owned Enterprises (SOEs).
2. Public Service Agency (BLU) Revenue
3. This type of income is obtained from the provision of services in the form of
providing goods and services, to administrative services. Other PNBP Other PNBP is
also obtained by utilizing state property (BMN), such as land and building rent.
Grant
According to the Big Indonesian Dictionary (KBBI), grant means giving (voluntarily) by
transferring the right to something to someone else. Referring to the law, grants are referred
to as state revenues either foreign exchange or rupiah-denominated foreign exchange,
services or securities received from grantors, which do not need to be paid back nor are they
binding, either from within or outside the country.
A grant is given by sharing goals, including supporting the implementation of national
development programs, natural disaster management, to humanitarian assistance. For this
reason, grants received by the government are included in the State Budget.
As for the types of grants, they are:
1. Planned Grants
This type of grant is run through a planning mechanism and is recorded in the Grant
Activity Plan List (DRKH).
2. Direct Grants
This type of grant is also referred to as a non-DRKH grant, which is a grant that is
implemented without going through a planning mechanism.
3. Grants through KPPN
Grants through KPPN, for the withdrawal process, are carried out at the state General
Treasurer (BUN) or the State Treasury Service Office (KPPN). Grants without going
through KPPN As the name implies, the process of withdrawing this type of grant is
not carried out at BUN or KPPN.
4. Domestic Grants
These grants come from domestic financial and non-financial institutions, local
governments, foreign companies domiciled and operating in Indonesia, as well as
other institutions and individuals.
5. Overseas Grants
Grants provided by foreign countries, United Nations (UN) agencies, foreign financial
institutions, multilateral institutions, foreign non-financial institutions, financial
institutions domiciled and operating abroad, and individuals.
Name : Yulia Dwi Putri
Student ID : 211052007
The following is m0 m1 and m2 data in Indonesia from 2003 to 2022 :
TAHUN M0 M1 M2
2003 94,3 213,8 944,4
2004 109,1 245,9 1033,8
2005 123,9 271,1 1202,8
2006 150,7 347 1382,5
2007 182,9 450,1 16499,7
2008 209,7 456,8 1895,8
2009 226 515,8 2141,4
2010 260,2 605,4 2471,2
2011 307,8 722,9 2877,2
2012 361,9 841,7 3304,6
2013 399,6 399,6 3730,2
2014 419,3 942,2 4173,3
2015 469,5 1055,4 4548,8
2016 508,1 1237,6 5004,9
2017 586,6 1390,8 5419,2
2018 625,4 1457,2 5760,1
2019 654,7 1565,4 6136,6
2020 760 1855,6 6900,1
2021 831,2 2282,2 7870,5
2022 897,8 2608,8 8528
Chart Title
18000
16000
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10000
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0
2000 2005 2010 2015 2020 2025
M0 M1 M2
Name : Yulia Dwi Putri
Student ID : 211052007
History of Inflation in Indonesia
Old Order In the Old Order era under the leadership of President Soekarno, Indonesia
experienced three phases of the economy, namely post-independence economic structuring,
strengthening economic pillars, and crises that resulted in inflation. At the beginning of
independence, Indonesia's economic condition was indeed very bad. This was proven in
1950, when people's living costs increased by 100 percent.
Food also experienced price increases which then had an impact on the wages of
employees and laborers. The main cause of inflation at that time was the circulation of three
types of currencies that were not controlled in the market. The currencies in force at the
beginning of independence based on the Presidential Declaration of the Republic of Indonesia
on October 3, 1945 were: De Javasche Bank banknotes and metal banknotes owned by the
Dutch East Indies government that had been prepared by Japan, namely De Japansche
Regering Japanese banknotes, namely Dai Nippon issued in 1943 and Dai Nippon Teikoku
Seibu issued in 1943 Furthermore, In 1961, according to the measurement results of the
Central Statistics Agency, economic growth in Indonesia managed to reach 5.74 percent until
1962.
However, in 1963, Indonesia's economic growth declined to 2.24 percent. As a result, the
State Budget (APBN) deficit of Rp 1,565.6 billion. This then resulted in high inflation or
hyperinflation which reached 600 percent in 1965. Some of the policies implemented by
President Soekarno to deal with inflation at that time were: Lowering the rupiah exchange
rate against the US dollar from Rp 11.4 to Rp 45 / US dollar (1959). Freeze 90 percent of
current accounts and deposits above Rp 25,000 (1959). Redenomination or lowering the
value of the currency and issuing new money from Rp 1,000 to Rp 1 (1965). Sanering or
lowering the value of banknotes from Rp 500 to Rp 50 and Rp 1,000 to Rp 100 (1965).
Suharto's New Order was Indonesia's longest-serving president, 32 years from 1966 to 1998.
Unfortunately, when Suharto became president Indonesia's economic condition was not good.
In 1967, President Suharto then issued Law Number 1 of 1967, concerning Foreign
Investment. Through this law, Indonesia opens itself to foreign investors to invest their
capital in Indonesia. In the following year, Suharto also established a Five-Year Development
Plan (Repelita) program that encouraged self-sufficiency. This program also increased
Indonesia's economic growth to reach 10.92 percent in 1970. Gradually economic conditions
in Indonesia became more focused with the main target of advancing agriculture and
industry.
Until 1997, Indonesia's economic growth continued to move in a positive direction,
stable in the range of 6 percent to 7 percent. However, during Soeharto's rule, economic
activity was only centered on the government so that conditions were increasingly weakened.
During the turmoil in 1998, Indonesia's weakening economic structure was unable to sustain
the national economy. At that time, Bank Indonesia already existed, but only as a means of
covering the government deficit. When BI was unable to withstand monetary turmoil, the
crisis and inflation occurred up to 80 percent. Economic growth also became minus 13.3
percent.
BJ Habibie's reform When BJ Habibie came to power as president, he managed to restore
Indonesia's economic condition from minus 13.3 percent to 0.79 percent in 1999. The rupiah
also strengthened from Rp 16,650 per US dollar to Rp 7,000 per US dollar in November
1998. President Abdurrahman Wahid or Gus Dur continued Habibie's struggle to boost
Indonesia's economy after the 1998 crisis. Slowly, Wahid also managed to increase the
Indonesian economy which reached 4.92 percent in 2000. At that time, Wahid implemented a
policy of fiscal decentralization and regional autonomy, where the government evenly
distributed existing funds to the central and regional governments.
However, in 2001, Indonesia's economic growth began to decline again to 3.64
percent. Inflation also occurred in 2001, which was 1.62 percent.
Megawati Soekarnoputri served as president from 2001 to 2004. Under Megawati's
government, Indonesia experienced several times inflation. In October 2003, there was
inflation of 0.55 percent. Of the 43 cities, there are 39 cities experiencing inflation, while four
other cities experience deflation. The highest inflation occurred in Padang City, which was
1.82 percent. The lowest inflation occurred in Bengkulu, which was 0.02 percent. At this
time, inflation occurred due to price increases in all groups of goods and services, namely:
Groceries (1.78 percent). Finished food, beverages, cigarettes and tobacco (0.03 percent).
Housing (0.30 percent). Clothing (0.25 percent). Health (0.30 percent). Education, recreation,
and sports (0.13 percent). Transport and communication (0.03 percent).
Under the administration of President Susilo Bambang Yudhoyono (SBY), inflation
in Indonesia is around 2 percent. This is also supported by Indonesia's economic growth
conditions which tend to be stable even though they had declined. At the beginning of SBY's
administration in 2005, Indonesia's economic growth had reached 5.69 percent. In fact, in
2008, economic growth reached above 6 percent. However, in 2009, economic growth
slowed to 4.63 percent. The slowdown is the impact of the global financial crisis that is not
only felt by Indonesia, but also other countries. Even so, Indonesia can still maintain
economic growth even though it moves slowly. Remarkably, Indonesia's economic growth
also entered the top three in the world that year.
President Joko Widodo or Jokowi served for two terms, since 2014 until now. Under
his administration, Indonesia's economic growth condition had weakened to 4.88 percent.
The deficit is also widening because imports tend to rise and exports tend to fall. In 2017,
after three years in office, Indonesia experienced inflation of 3.61 percent. This was recorded
as the highest inflation during the administration of President Jokowi and Vice President
Jusuf Kalla. However, according to University of Indonesia (UI) economist Lana
Soelistianingsih, inflation of 3.61 percent is still considered moderate. Then, according to the
latest data from July 2022, inflation in Indonesia has increased, namely to 4.94 percent.
