Friday, 18 July 2014


The biscuits in the meeting room at SARB must have totally run out. Governor Marcus was in no hurry to blurt out the news that the repo rate would be going up 25 basis points and dash back for another lemon cream. All over the world central banks and similar authorities control the price of the most artificial commodity of all – money. They deliver grave speeches citing reams of history and forecasts that were used to arrive at their conclusions. Unquestionably, however, the price at which the commercial banks can obtain emergency funding from the central bank should be set by market forces and not at the whim of wise men and women. This, however, is unlikely to happen since central bankers as a breed seem to get ever more certain of their own infallibility. The US Fed. Governor has been offering investment advice!
Conveniently, the Sixth BRICS summit was held just two days after the Soccer World Cup final in Rio. The venue was a city which is about 3 hours flying time north of Rio. Our president would therefore have enjoyed ample opportunity to read the more than 8000 words of the Fortaleza Declaration. This is the document that he signed on behalf of our nation at that summit. Amongst the many obsequious, bizarre, meaningless and terrifying notions contained in this perfect example of bureaucratic claptrap are the clauses that ratify the founding of the New Development Bank (NDB) This bank will have a Board of Governors chaired by a Russian, a Board of Directors chaired by a Brazilian, an Indian President and will occupy headquarters in China. Our share of the spoils is that we may open a branch to service Africa. And, oh yes, as a founding member, South Africa will be expected to make an equal one fifth contribution to the initial capital of $50bn. On second thoughts, perhaps JZ did not read the Declaration. This was not a good trade! And it also cost us taxpayers a flight to Brazil and a ticket for the final for Number 1
Apparently a reason why it has been decided to found the NDB is that the International Monetary Fund is failing to pay enough attention to the needs and aspirations of the BRICS and their friends. Now the IMF itself exists because it was felt many years ago that “private international capital markets function imperfectly”. This phrase is really a complaint that people with money prefer to lend it only to others who can be relied upon to pay it back, and  with interest. The IMF therefore diligently smoothes out this perceived imperfection using public (i.e. taxpayer’s) money. As an entity designed to accommodate those whom even the IMF consider dodgy, it suggests that the NDB may soon be a champion at pouring money into bottomless pits. Or does JZ believe that SA will get back more than it puts in?
Once again government is getting worried about the private security industry. They could shrink that problem in an instant if they were to get the police to do the job we already all pay for. Everyone would be delighted to cancel their pricey armed response and street patrol services if they could rely on the state to catch and lock up the bad guys.
Sadly the state prefers to meddle in things for which they have no competency. Some buffoon has proposed that our government needs to declare something called “a developmental price” for most extracted commodities. Without even reading the whole bizarre report one can guess that this is a price which undervalues the true cost of a real economic activity and transfers the difference to parties who choose to look to the state for a handout. Presumably the BRICS Sherpas and Sous-Sherpas[1] are available if large piles of cash need to be transported.
The Brazilians are looking about in a daze wondering what became of that FIFA fellow who they now suspect mugged them comprehensively. Welcome to the club chaps, and I can tell you the market in used soccer stadia is well offered. With no buyers.
James Greener
18th July 2014

[1] The Forteleza Declaration proudly reports that people with these titles have been meeting successfully. Who they are and what they do is left unexplained. Presumably lavish catering and travel is involved.