By TAN SAI SIONG
EARLIER this month, attempts by international money buccaneers to crush the Thai baht were roundly rebuffed by the Bank of Thailand with help from the Monetary Authority of Singapore.
While some regional currencies became a bit wobbly in the wake of the turbulence, in Singapore, few outside the financial sector spared a thought for any possibility of a similarly speculative attack on the Sing dollar.
Singaporeans' quiet confidence in their currency comes from the fact that not only is the note in our hand worth exactly as the note in our pocket, but it is now also worth a lot more against several currencies since the time we were kids.
For example, the Sing dollar and the Malaysian ringgit were at par in August 1966, when the two countries decided to issue separate currencies. Today, the Sing dollar is worth some 70 per cent more.
Our parents and grandparents were not always so lucky with the money they held. They had bitter lessons from the years between February 1942 - when Singapore fell to the Japanese - and September 1945 - when the British recaptured the island.
Solid As A Rock, the OCBC Bank's history of its first 40 years, recorded that banks were closed for about 2 1/2 months after the British surrendered and only re-opened on April 29.
"Like the other banks, OCBC started lending out to the people in Japanese notes - nicknamed 'coconuts' and 'banana notes' - which were supplied by the Japanese banks."
The Japanese Occupation forces printed banknotes with pictures of bananas and other tropical fruit.Thus was planted the seed for a huge problem in future, as in the months that followed, the Japanese occupiers merrily printed more money, without a thought for its fundamental worth. At the same time, Straits Settlements and Malayan dollars had virtually disappeared. Some were hoarded by the people, although the Japanese imposed cruel penalties for those caught.
Most of the money, however, went into Japanese bank vaults, as the conquerors squeezed a $50-million "gift" in pre-war money from the Chinese community. Outright confiscation was another method.
At the end of the Occupation, banana notes in circulation rose to about $4 billion from about $200 million in Straits dollars before the war. Not surprisingly, inflation raged to an extent unimaginable to anyone not old enough to have lived through it.
But worse came immediately after the British Military Administration took temporary control at the end of the war and declared that Malayan and Straits currency notes and coins would be legal tender.
That proclamation, on Friday, Sept 7, 1945, was innocuous enough but when the Malayan Times, the BMA's official newsletter, explained that it meant Japanese banana currency was worthless, it threw the population into a panic.By then, most residents possessed only banana money. As a result, food prices escalated crazily. Beef or pork, sold at $150 Japanese dollars a kati (605 g), shot up to $1,000 the next day. In Theresa Ee-Chooi's biography of her father Ee Peng Liang, she noted that an egg went for $100.
During the Japanese Occupation, $100 buys you one eggLee Chin Gee, son of Lee Choon Seng, a former chairman of OCBC, told the bank's biographers that he sold his wife's gold chain for $3,500. Yet that money was not enough to buy even two big fishes, so he settled for a medium-size fish and two bananas.
By Sunday, Japanese currency, even at swiftly depreciating values, found no takers. Those left with the banana notes were literally holding worthless paper. The following day, The Straits Times helped to restore some calm with an editorial that reassured readers that the BMA had a carefully planned policy, and urged the administration to announce how and where the new currency could be obtained.
And new currency notes were indeed on their way to the colony. A Sutherlands flying boat had taken off from Celyon (now Sri Lanka) with a cache of new notes, three representatives from the British banks and the sole representative from the local banks - OCBC's then managing director Tan Chin Tuan - to kickstart the financial system.
But the woes of the population were not over yet as the changeover from British to Japanese, and then back again, left enormous problems in the banking system. With the banana notes worthless, what did that mean for deposits made before the war and withdrawn in Japanese currency? What about deposits made in banana notes or debts repaid in the same money?
It was a tangle that had to be resolved by the Debtor and Creditor (Occupation Period) Ordinance which, though initiated in 1948, did not come into effect till 1949, after much heated debate and amendment.
Broadly, debts that were settled before time and without demand from the lenders were not considered closed. This was to prevent canny borrowers who sought to square pre-Occupation loans with banana notes from benefiting from the demonetisation.
There was a scale against which banana notes and British pre-war dollars were measured, to establish their respective values. That way, the value of debts, deposits and repayments made or incurred at various stages during the Occupation could be determined.
As expected, it was a law which did not please everybody, with some calling it "notorious", others controversial.
Equitable or not, it was an experience that no Singaporean who went through it would want to taste again, while those who have only heard about it would shudder at the very idea. Still, there is no reason why Singaporeans would ever need to go bananas over their money again, with a sovereign government which continues to maintain fiscally-sound policies.
First published in The Straits Times, May 30, 1997
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