The Crucial Distinction Between Special-Purpose Money and General-Purpose Money

Let me start this article with simple question, what exactly is money? What does it do for us and to us? We are struggle to answer this question. We're playing the game in a less intense and visible manner, but we've been playing and being played for many years, in countless ways. 

Most of us think about money a lot of the time, how much we have, how much we need, how to get more, how to keep what we have and how much our colleagues, our boss, make, spend and save. Money touches every part of modern life, from single budget, family budgets to national politic. As the financial world becomes more advanced, as we get more complex loans, insurance and mortgage, more complex financial options and greater financial challenges.

When we get older, we realize how money could work for us and how money could paralyze our mind, for example we can do something criminal and anything else for money. In politic, i can get you a clear example. Do you know e-KTP or the electronic identity card mega corruption case? Yes, this is a clear example how money could paralyze our mind, and for some people it's clear that nothing in the world is more important than money. By the way let me explain about the e-ktp mega corruption case. The "electronic identity" card or e-KTP procurement project is massive and highly-structured. It's suspected that the project itself was planned in such a way that the corrupt practices become feasible. 

This e-ktp mega project started during the tenure of former President of Indonesia, President Susilo Bambang Yudhoyono. Yes the President with his trademark "Saya prihatin". He used his trademark by the way when he gave speech about some intolerant groups attacked Church. How come, a President say "Saya prihatin" when he saw a disgrace, when he saw some intolerant groups attacked Church. How come he put a shit sentence like that. That was the first time in my life that a President who had a power but didn't have the ball to put some intolerant people in jail. 

Dear Mr President, are you a man? Okee, let me continue about the e-ktp mega corruption case, those project was initially planned to cost Rp 6.9 trillion. The ministry of interior (Kementrian Dalam Negeri -- Kemendagri) set a budget of Rp 6 trillion. Once the project tendered, the e-ktp budget became Rp 5.9 trillion. If i'm not wrong, 5 corporations won the tender. This e-ktp procurement comprises of 2 aspects, the first is about the procurement of electronic ID card, system and hardware, and the second is about population database. 

The Corruption Eradication Commission (Komisi Pemberantasan Korupsi or KPK) states that the state has endured a loss of more than Rp 2.3 trillion in e-ktp procurement. Yes, 2.3 trillion! This is a clear example how money could drive each one of us. Well, such intense publicity of the case, which involves a number of high profile figures. I may say this is ironic, why? Because we're about to hold legislative elections and Presidential elections in 2019. 

Demographic database is a crucial matter, as it shows the politicians who their elector bases are. It's reference of the list of voters in the 2019 elections. In this mega corruption case, 8 people are suspected as the masterminds and tens more are under suspicion as having benefited from receipt of illicit funds.

In a large scale, i will tell you how money plays the important role in our life when it becomes into regulation. Let me remind you something. Couple weeks ago, Perry Warjiyo, the Governor elect of Bank Indonesia seems set to continue the plan to redenominate the rupiah, subject to Government approval. Before i go too far, i love to mention that i think it's good that Bank Indonesia have the new leader from their internal. 

Perry Warjiyo replaces Agus Marto (Governor of Bank Indonesia, and before He led Bank Indonesia, he was as the CEO of Bank Mandiri). As the regulator, i'm sure that Central Bank or Bank Indonesia should be led by their own internal (who understand micro and macro economy). Okee i will continue my argument about redenomination. 

The idea of rupiah redenomination has been launched for quite some time, but apparently the ministry of finance still has its doubts. Some country failed and some succeed. Some who succeed to run redenomination are Turkey, Poland and Israel (some may say in Indonesia language "zionis", even i don't understand what's the meaning, Haha), and some who failed to run redenomination are Russia, Argentine and Zimbabwe, according to the detik.com. Redenomination is not easy as it looks. Some may think "it's so easy to simplify rupiah number (three zeros deleted)", but let me tell you something, it's not easy as it seems. When we fail, money that we have right now, will have no value.

SPECIAL-PURPOSE MONEY AND GENERAL-PURPOSE MONEY

We can distinguish the special purpose and general purpose from how we improve financial decision making. As usual, from my experience, some people that i know, that they are or i may say people are demonstrably worse at all kinds of problem solving when they have money problems on their mind. However, some society believe that credit card is the only one solution when they have money problem in their life. I have to say that credit card is one of the evil geniuses. Why? I will tell you a logic sense. Because we think, that when we plan to pay in the future, it hurts less than when we pay the same amount now. 

Credit card capitalizes on our desire to avoid the pain of paying. And that has given em the power to shift the way we perceive value. With easier, less salient payment and the shifting of time between payment and consumption, credit card minimizes the pain of paying we feel at the moment we buy something. Credit card creates a detachment that makes us more willing to spend. 

As from my experience, people are more willing to pay when they use credit card, but also that they make larger purchases, leave larger tips are more likely to underestimate or forget how much they spent, and make spending decisions more quickly.

A simple swipe of a card is easier than getting out our wallet, observing how much money we have, grabbing some bills, counting and waiting for change. When we use we cash, we actually think about, notice, touch,grab, remove, sort and count the money we're spending. In the process, we feel the loss. With a credit card, that loss is not as vivid and visceral. Credit card also make payment easier and less painful by consolidating month's purchases into one simple bill. Credit card is hardly the only financial instrument that embraces the pain-reducing.

The pain of paying should get us to stop making painful spending decisions. But instead of ending the pain, we-of course with the help of financial "services" like credit card, devise ways to lessen the pain. I had told how credit card works in our daily life. Now i want to tell you about how money works in education. Ivy league universities re becoming in the eyes of the new Asian upper class the ultimate status luxury good. Harvard is like vuitton bag if i have to mention. Harvard in United States is like University Of Indonesia or University of Gadjah Mada in Indonesia. 

Well it's a huge drag on the middle class, who have been plowing an increased share of their savings into educational institutio ns,t transferring their money to bureaucrats. In a way, it's no different from racketeer ing, one needs a decent University "NAME" (sorry for the capslock by the way, haha) to get ahead in life. But i have the evidence that , collectively society doesn't advance with organized education, rather the reverse, the level of (formal) education in a country is the result of wealth. The heuristic would be to use education in reverse: hire, conditional on an equal set of skills, the person with the least label-oriented education. 

It means that the person had to succeed in spite of the credentialization of his competitors and overcome more serious hurdles. Things appear maximally sophisticated and scientific but remember that what looks scientific is usually scientism, not science. As with label universities, you pay quite a bit of money to join. Economics is based on the notion of "revealed preferences". 

What people "think" is not relevant. People's "explanations" for what they do are just words, stories they tell themselves, not the business of proper science. What they do, on the other hand, is tangible and measurable and that's what we should focus on. Revelation of preferences is best understood by the betrothed: a diamond, particularly when it's onerous to the buyer, is vastly more convincing a commitment (and much less reversible) than a verbal promise.

Okee back to the plan of redenomination that i already mention in the previous paragraph. The purpose of the redenomination is to increase our value of money or Rupiah. By the way, public has gotten used to practicing Rupiah redenomination in their daily lives, even before the Government and BI launched it. When we go to JCO or Starbuck for example, the prices are shown with the three zeroes deleted for reasons of economy and neatness, but customers perfectly understand. 

Let's say when an item prices Rp 65.000, will be tagged as Rp 65K or 65.0 (in JCO) and even saying that it's worth "65" is enough to make customer understand that they must pay using Rp 65.000 bank note. By the way, various publications and reports that write in Rupiah in numbers, it's practically certain that the numbers will be simplified with the addition of the words "in thousand", "in millions" or "in billions". Take a look in financial report of any company published in any local newspaper -- the rupiah number will be simplified. 

If the value of a country's currency is so low that is too far from the value of other countries currencies, there is an impression that there's something wrong with the economic management of that country. 

The low currency value also gives us an impression the goods and services in that country are expensive,again strenghtening the impression of "economic mess". It would be hard to build trust in a low value currency or a currency that frequently falls in value. I expect people will quickly understand and get used to this within a year if BI is able to provide new money to replace the old currency. If this redenomination success, this is which will make Rupiah more dignified and prestigious.

Now, i want to discuss about trader. What is traders? They are traders, investors or a gambler? When i say that i'm a trader, people always judge me as a gambler. Because the stock market is like a casino. Some may say like that and i understand because they don't understand. Trader who's not enough money but want to increase their saving by investing their money in stock market, they calculate, take risk and learn the financial report and statistic. 

The investor who have a lot of money, but didn't expert to invest their money. And gambler, who have money and want to be rich and richer without thinking too much, calculating data and anything else. So, what's the point trader with the title, special purpose money and general purpose money? Yes, the milenials didn't want to take the risk. Some didn't invest their money. They're too scare. They spend money to buy clothes, watch, etc. General purpose money! And trader? Special purpose money! They spend and invest! Some may say trader is like a gambler in casino! It's ok. It's your opinion. But let me explain you about the risk taking. The logic sense. Consider the following thought experiment. Here we go, let's say one hundred people go to casino (let's say to Genting Highland, Malaysia) to gamble a certain set amount each over a set period of time, and have complimentary gin and tonic. 

I have ever seen casino first time in my life in Genting. So, it's casino. I see how people go crazy, spend their saving, spend their money, all in, and drink whiskey, tequilla, etc. This casino didn't allow local people come in. Well, it's casino. They're gambler. Some may lose, some may win and we can infer at the end of the day what the "edge" is, that is, calculate the returns simply by counting money left in the wallets of the people who return. We can thus figure out if the casino is properly pricing the odds. Now assume that gambler number 25 goes bust. 

Will gambler number 26 be affected? NO! You can safely calculate, from your sample , that about 1 percent of the gamblers will go bust. And if you keep playing and playing and playing, expecting to win something, you will be expected to have about the same ratio, 1% of gamblers going bust, on average, over the same window. You get my point? No matter how good you are, you can safely calculate that you have 100 percent probability of eventually going bust. The point is all about probability. If you lack of knowledge, then investment go like a casino, even in casino, when you play poker or anything else, you can calculate something, you can calculate your probability as long as you push aside your emotion on that table. 

I love number by the way and statistic. That's why i'm curious about anything else in life. I do believe that everything can be calculated by statistic. Now, when you read material by finance professors, or banker making recommendation based on the long term returns, beware. Even if the forecasts were true (they aren't), no individual get the same returns as the market unless he has infinite pockets. To take a stock, a situation is deemed non-ergodic when observed past probabilities don't apply to future processes. The problem is that if there is a possibility of ruin, cost benefit analyses are no longer possible. To be a trader, something force us to lose some money more than we plan to lose.

We may lose some money when we became a trader, investor or gambler, but how, when it comes to a company? The so-called deficit. Yes, some company show that their financial report is deficit. I give you a clear example. BPJS. We all know that the purpose of the company is to make profit. The budget they have made, is a special purpose money. They spend, to make profit. 

The way the health care scheme works, a person seeking medical assistance would first go to a public health unit (puskesmas) which, unless it can handle the case, will send the patient to the hospital for further treatment, free of charge. BPJS will then reimburse the hospital for any charge incurred in curing the patient. A good and a simple system that especially benefited low income people. BPJS was designed for self sufficient, with its operational costs covered by dues from both unemployed and employed individuals, as well as employers. But no sooner had the scheme become operational than BPJS began to face financial problems. Besides the usual government inefficiency and poor transparency, one reason for BPJS deficit is said to be late payment of member's dues. Some members paid dues only after they needed medical treatment. I have to say that they fail to use the special purpose money.

This is my very short article I spend one hour 40 minutes to finish this article. This is all about the distinction of special purpose money and general purpose money. The first, how the e ktp mega corruption case, the budget and the money shoul.d be used to build system, as general purpose money. But in fact, some asshole make that project to be a special purpose money. 

Corruption! When we give em stage, they always shout like a hero "atas nama rakyat", "ini untuk rakyat". Same old same shit different people. And the second story is about redenomination, the special purpose money to increase the value of Rupiah and to make rupiah more prestigious. And another story in this article is relevant to the title. Well, we should know that money is the top reason of divorce (maybe. Based on my logic sense) and the number one of cause stress. 

Money, too, makes people likely to steal from the office. Self control is a matter that deserves special attention when we address how we think about money. Even if we manage to clear the many internal and external hurdles between us and rational financial decision,a lack of self control can trip us before we reach the finish line. We might be able to determine the correct value of our options but our inability to control ourselves will end up nudging us to make the wrong choice.

About money, i remember what Bible had told people in Hebrews 13:15 "Your Conduct must be free from the love of money and you must be content with what you have , for he has said "I will never leave you & I will never abandon you"".