Over in the workshops at the
European Central Bank the financial engineers are standing back, wiping their
hands on an oily rag and discussing where to go for a beer. They have this week
completed their latest session of tinkering with the economic engine. Their handiwork
is intended to make that engine run swifter and smoother. Only properly trained
economists understand precisely what the engineers have done, but simply and
crudely they have made it even cheaper to borrow money. Alarmingly the
cumulative adjustments of the last few years have pushed certain interest rates
to below zero and into negative territory. This means that the lender pays
interest to the borrower – a phenomenon that has spawned a blizzard of academic
research.
Based on track records, the
likelihood that these alterations will have the desired effect is low. What
those desired effects might be, is rich material for cynics. Furthering and
rewarding the careers of politicians and bureaucrats is the unspoken one.
Stimulating growth and reducing unemployment is the headline reason.
Again, crudely, what they appear
to want is first and foremost a bit of inflation Not too much mind you, but
enough to erode the real value of outstanding debt. There is absolutely no chance
that the capital amount of all the debt in the world will ever be paid off
(nor, some would argue, is there any need to) so the idea of letting it shrivel
by eating away at the value of the currency is popular. Especially amongst
debtors. Zimbabwe is a recent example, however, of letting this method run
amok. Lenders (savers) were obliterated.
The hot topic of the moment is “state
capture”. This catchy phrase is a tad obscure but apparently refers to the
phenomenon of private sector elements getting themselves into a position to
exert significant influence on government decisions. In other places it is
called lobbying. Many analysts believe that there is ample evidence to suggest
that the Gupta family and their associates (which include at least one of Jacob
Zuma’s relatives) are calling the shots in a number of critical areas. As
always the simple technique of “following the money” suggests that the mining
ministry is completely captured. The brief but noisy spell of musical chairs at
National Treasury earlier this year was probably a capture attempt that was
(for the time being) repulsed. Less visible but just as damaging infiltrations
are taking place into the state owned enterprises. Hence the unhappiness and
high staff turnovers. The attackers enjoy a massive advantage by having the name
of the president on their team sheets. It can be noted that some senior party
officials are starting to get very edgy about this development.
The recently founded New
Development Bank (Brics Bank, to its friends) is supposed to open its doors
with starting capital of $50 bn. Our one fifth share of this is around R150bn.
So far, we have sent off just R2bn. In the meantime, the bank has announced
plans to lend R30bn which shows that at least some of the other four have been
rather more generous with their EFTs. Presumably the reason Number 1 said he
would send poor old ex-finance minister Nene off to a corner office in this
establishment is that he has to ensure that we claim a decent chunk of this
loan (at least R2bn) or else it doesn’t make any sense. So far, however, Nene’s
letter of appointment seems to have gone missing in the post.
It is hard to say this but those
Aussie T20 players all seem to be able to grasp strategy and do sums in their
head. Unlike some of our lads who don’t seem to appreciate just what it means
to give away 19 runs in an over or play stylish shots for a single when the desired
run rate looms large. The Proteas will need to up their arithmetic and planning
skills if they are to bring home any silverware from India. The opening matches
of that tournament have introduced some very unexpected country names, but it
would be both interesting and sad if all the players and officials lined up in
groups of country of birth. I reckon there might be enough South Africans there
to field at least three teams.
James
Greener
Friday 11th
March 2016
