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Indonesian Learns Value of Real Money

Indonesia has made it possible for individuals to save in real money by eliminating tax on gold and silver, offering another example of a nation using alternative forms of money outside of the global, dollar-based fiat currency system.

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WealthCycles Commentary

In this video an Indonesian man tells the story of how he chose to move his assets out of the central banking system and convert to gold and silver—in this case, traditional Islamic coins, the dinar and dirham. The Indonesian government has made it easier for individuals like this man to save in real money by eliminating the capital gains taxes on gold and silver. Indonesia offers just one more example of nations who are learning to use alternative forms of money outside of the global, dollar-based fiat currency system.

Although the official currency of Indonesia is still the rupiah, more and more the country is accepting dinars and dirham as money. And, unlike citizens of the US and many other countries, Indonesians who hold their wealth in gold and silver are not required to pay capital gains taxes on their money. After all, no one pays capital gains taxes on currency such as the dollar. Is it possible that Indonesia has learned a lesson that the U.S. is still struggling to understand?

Although the referenced video is not in English, text subtitles help tell the story. To whit, our young Indonesian man, we’ll call him Jakub for easy reference, decided to take his money to the bank to open an account. He did so expecting that he would find it easier and more convenient to conduct transactions with his money in a bank. By opening the account, Jakub had all of the usual banking system products, checks, ATM cards and credit cards. However, all did not go as planned. As the video explains,

I soon realized that the bank offered no advantages. That’s when I decided to close my account. That was in 2004. Because I noticed that I was losing more and more of my money. I had the same amount of money but less spending power. I decided to take all the money out of my account and exchange it for dinars and dirhams.

Since removing his wealth from the bank, Jakub explains, the country has experienced 20% price inflation—or a 20% loss of its currency’s purchasing power. Because Jakub’s wealth was instead stored in gold and silver coins, he has managed to retain that wealth. In fact, his wealth has increased in relation to the Indonesian rupiah. That, says Jakub, is how he has been able to save his money from the ravages of inflation and the central banking system.

When asked if he were angry at the banking system, Jakub explained that he was not angry because he was fine—he had removed the risk to his wealth by converting his money to gold and silver.

Dinar, Dirham Indonesian Silver and Gold

What Jakub did want to know, however, is why we relinquish our freedom by adhering to an official currency system.

Why do we allow others to run our lives like that? To me the dinar and dirham represent a moral movement of absolute individual freedom.

It seems Jakub has learned a lesson (from Warren Buffet's father) that many Americans have yet to learn.