Disclaimer: This blog post is about economy and -- like most economic reading -- it is boring. Beware, you have been warned.
First of all, allow me to apologize if this writing sucks. My
major is Mathematics and while it is not the furthest major away from
economics, I'm pretty sure it's quite far. So for all the finance/economy major
out there, please stop reading and go read your Bloomberg week or something
else.
As you might know or might not care, I have been trading stocks
for the past two or three months. And like most traders, some days I win and
some days I lose. But this post is not about my trading history and how I managed
to fuck up all my transactions. This post is about something else.
When I was 10 year old, my parents decided that it was time for me
to learn how to ride a bicycle. And like most kids, I started with a tricycle.
After a few days of fiddling with my tricycle, my parents thought that it was
time for me to remove the third wheel and start trying a bicycle. I fell
several times and managed to scrape both my knee and elbow. I hated them for
forcing me to learn how to ride this stupid two-wheeled thing. I thought that I
would be fine for the rest of my life with a tricycle.
Ever since I started trading three months ago, I started reading
everything that could help me trade better; stuff that I wouldn't have even
glanced twice had I not been trading. It was then that an article caught my
eye. It's about the Fed chairman - Ben Bernanke - and USA's policy about
Quantitative Easing.
For those of you who are not familiar with economics and are too
lazy to open Wikipedia, QE basically is a policy exerted by USA to stimulate
economy. I'm definitely not the best economist out there, but if I were to put
it into my own words, I think it's a lot like pass-go in Monopoly. The monopoly
bank (that bearded guy) gives each player $200 every time they pass-go with the
sole reason of giving the players money to keep doing whatever it is they are
doing.
Now, the world is not a wish-granting factory, and instead of the
central bank giving free money to everyone, they buy bonds from other banks in
order to increase the reserve of money in other banks, so citizens could still
borrow money (thus, increasing job openings). The amount the Fed (USA's central
bank) spent to buy bonds from other banks is a whopping USD 85 billion per
month. Ouch.
It's obvious that the central bank won't be able to purchase the
bonds routinely with the amount of money they had. So, it was necessary that
they create money in order to keep this QE thing going; in order to stimulate
USA's economy.
I'm sure by now you guys would much rather watch a Youtube video
buffering rather than continue reading. But from here on is what I think is
disturbing.
So this guy - Ben Bernanke - just held a meeting and a press
conference yesterday about Quantitative Easing. He told people things that they
already knew but wished they didn't. For Monopoly players who managed to play
the game for at least four hours without tearing the board down and ruining
your friendship forever, we know that much like the bearded guy won't be able
to issue the $200 for every time we pass-go, the QE can't go on forever. This
Bernanke guy foresaw that US's economy is turning better with unemployment rate
turning lower, and ultimately that he would stop QE by the end of 2013.
How did people react to this? They sneered at Bernanke as if he
just brought a plague to them. It's ridiculous how stupid people can be.
Bernanke did the right thing (or at least what I deemed to be the proper action
to take). What Bernanke did is exactly what my parents did when I was learning
how to ride a bicycle. At first I hated them for removing the third wheel, but
now I'm thankful. Had I insisted to not learn to ride a bicycle, I woul have been laughed at by other people now.
This is exactly the same with what Indonesia is facing: subsidized
fuel. People keep on protesting about how the government should NOT stop
subsidizing fuel. These idiots need to realize that these subsidies are not
free and they came from Indonesia's debt. They need to see how stupid riding a
tricycle looks, and how people all around them are laughing at tricycles.
Just as other people would laugh at you if you ride a tricycle,
other nations are laughing at Indonesia because we keep piling our debts. There
is no such thing as a Santa Claus and sometimes, the only way for us to be able
to ride a bicycle is by removing the third wheel, riding our bicycle, falling
several times and scraping our knees.
Same with
Indonesia, the only way for us to be able to develop as a nation is by removing
subsidized fuels, putting the subsidies into more important things, such as:
infrastructure, education, and/or healthcare. While this might lead to higher
inflation rate; one day we would look back to this and said "I'm glad we
did that."
There comes a day that we have to remove the third wheel, a day
that we graduate from a tricycle and step on to a bicycle. For Indonesia, now
is that day.
