It is difficult to agree with the Monetary Policy Committee’s
apparent view that the economic situation has remained unchanged in the past 10
months. Or that not much is likely to happen in the next two months either.
This presumably was the reason why they left the price of the money they lend
to the banks (the repo rate) unchanged at 5.5%. Nevertheless, the recent
attraction of SA assets to foreigners evaporated overnight and they sold plenty
of their holdings of bonds, shares and currency. The runt is now lower against
most major currencies than at any time in the past two years but this might
cheer up the exporters.
This week’s bear market has been blamed in part on certain
influential people overseas cagily admitting that perhaps things are not
getting better as quickly as they intended and that maybe it will help if their
previously ineffective remedies for the mess are reintroduced with another
name. Operation Twist is QE3 seen from a different angle. It will still result
in new dollars being printed and lent to the US government to spend. Slowly the
causes of the crisis are being admitted. Far too many entitlements and desires
have been provided and fulfilled using too much debt granted or assumed by
entities which are unable and now increasingly unwilling to repay it. But
rectifying this situation by curtailing entitlements, denying desires and
letting imprudent lenders take the consequences of their decisions would cut
short the careers of politicians and bureaucrats who know nothing else except
how to spend other people’s money. So it just won’t happen soon.
There must be some public employees who are competent, honest, not
on a year’s sick leave or about to move on to a better job. These are the folk
to whom we must be really grateful that some services and systems are delivered
and do work. The rest are dreadful. Take the clowns who think that more
regulation is needed to reduce the appalling death toll on the country’s roads.
Already in place are laws that specify excellent standards for drivers,
vehicles, roads and critically, the traffic police. But compliance is minimal,
enforcement is patchy and almost any incident can be ameliorated with a bribe.
The irony and tragedy of a Minister begging for help from the experienced professionals
that her government were eager to ease into early retirement a decade ago is
heartbreaking. The meaningless waffle about what will happen in the future instead
of present action is infuriating. One clueless bureaucrat has produced some
sums that purport to demonstrate that the ruinously unaffordable National
Health Initiative will actually save the country money by making everyone well and
able to work. Indeed.
One of the few economic statistics that may be reasonably reliable
and possibly accurate is the daily announcement by the Reserve Bank of how much
money in the form of notes and coins are in circulation. This amount varies monthly
and annually in a fairly regular and explicable manner, and the current value
of cash in circulation is around R82billion. This includes the coins that have
slipped down the back of the couch and are lost forever. To compensate for this
attrition as well as to cater for growth and inflation, the total amount in
circulation is allowed to increase slowly over time. In the first half of this
year the rate at which fresh notes and coins were being issued into circulation
was an average of R33m a day. However in the past three months that rate has
accelerated sharply to an average about R60m a day. What is happening? Why the
sudden need for so much more cash? Would it be naïve and malicious to suggest
that corrupt “leakage” of government money is more useful when converted into
untraceable folding money and there has been a big increase in this kind of
flow.
Can you imagine the dismay and panic in the Wallaby camp now that it
almost inevitable that they will have to meet the ‘bokke in the quarter finals?
And to make matters even worse, SA
Breweries has just bought an Aussie beer company. When they get home they will
have to drink Castle.
James Greener
23rd September 2011. Vernal
Equinox
