New Taiwan Dollar

Finally, it was the end of the year and I was so looking forward to my trip in Taiwan. We left Changi Airport Singapore early in the morning on Boxing Day and we were so looking forward to celebrate New Year at Taipei 101. When we were at Taiwan, I can't help but to notice that the currency that the locals were using was called the New Taiwan Dollar.

Think about it.. If you weren't a local Malaysian and you came to Malaysia and found out that Malaysians are using the New Malaysian Ringgit, wouldn't you be curious as well? So I started asking around, "Why a 'NEW' Taiwan Dollar?" Surprisingly, most of the local Taiwanese have no idea why it is 'new' not 'Old' Taiwan Dollar. Finally, my tour guide managed to give me a reasonable answer and I found out that the Old Taiwan Dollar is called the Taiwan Yen.

History of Old Taiwan Dollar

Long before we were born, Taiwan was under Japanese colonization and Taiwanese were using the Taiwan Yen during that period.

In Year 1945, Japan was defeated in World War 2 and Taiwan was returned to China, at that time ruled by the government of the Republic of China (ROC). Within a year, the Republic of China's government took over Bank of taiwan and started issuing Taiwan Nationalist Yuan (aka TWN) as a provisional replacement for the previous Japanese Tawan Yen at the rate of 1:1. This means that if you have 1 Japaneses Taiwan Yen, you can replace it for 1 Taiwan Nationalist Yuan. Sounds reasonable isn't it?

The Chinese Civil War

Taiwan suffered hyperinflation due to the Chinese Civil War in the late 1940s. In times of hyperinflation, the ROC government started issuing banknotes of higher and higher denominations, up to 1 million yuan to handle the inflation on the island. In times like this, savers who save lots of cash and put their money in the bank are the biggest losers! Why am I being so blunt? Because at June 15, 1949 the Old Taiwan Dollar was replaced with the New Taiwan Dollar at the rate of 1:40,000. This means that if you have saved a total of 40,000 Taiwan Yuan, you can exchange it for only 1 New Taiwan Dollar.

I've 2 questions for you...

Question 1: Imagine if you have saved really hard and got yourself RM40,000 and the government decides to revalue the currency and with the New Malaysian Ringgit (NMR), you have only NMR1. How would you feel?

Question 2: With the price of petrol and food increasing several times in Year 2010, will it stop in Year 2011? Chances are.. NO! In fact, I believe that the price of food and energy will increase tremendously in Year 2011 and beyond!

Lesson Learned: This is yet another prove that Fiat Currency can never rule the world. Ultimately, being a good saver alone is never enough. You need to be a smart one!

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