South Africas economy will not recover, agricultural economist Fanie Brink warned on Friday. This is contrary to the opinion of the medias favourite politically correct economists. One does not need to be an economist to realise that the SA economy is dying and never to be raised from the dead. Communist ANC policies. Eskom is collapsing, SA Post Office is collapsing. The SA National Defence Force is collapsing. SA Airways is collapsing. Telkom is a disaster. Health services have collapsed. The government is a disaster. Government corruption is an out-of-control runaway train. The SA Police is turning into a shambles. South Africas water supply cannot meet the demand of a hundred million people more than the quoted 53 million population. Foreign companies are no longer interested in investing in this communist ruled dump. Companies are withdrawing from South Africa never to return. South Africas mining industry is shrinking and collapsing at the same time, while automation will leave hundreds of thousands without work. The ruling party, controlled by the SA Communist Party, employing its corrupt cadres in all top positions has stolen this country bankrupt. Our banks are on the verge of collapse, because they can no longer continue putting up this show. South Africas economy is fake, it is an artificial bubble created by rolling money. Everything is collapsing. The economic cake has been sliced into thousands of smaller slices, while no new cakes have been baked since this corrupt gang was handed control of the country. Everything about South Africa, including its leaders, since 1994 is a lie, fake, artificial. The economy is fake, the qualifications of people in high places are fake, South Africa has the lowest educational standards in the whole world, which means that even those who work hard and pass matric should reconsider those certificates. People are being passed through the education system based on their colour to make the figures look good, but their qualifications are not worth the paper it is printed on. Those people with those worthless qualifications are appointed in top, strategically critical positions, which is a recipe for disaster. Post-1994 South Africa is the perfect recipe for disaster and everything a country should never be. An area without borders is not a country, it is just a place. We are merely living in a place with lots of space. Here is what agricultural economist Fanie Brink had to say: The biggest problem in the economy is the fact that the SA Reserve Bank (Sarb) and these economist believe that the primary objective of monetary policy in South Africa - to achieve and maintain price stability - is in the interest of sustainable and balanced economic development and growth, said Brink. According to Sarb price stability reduces uncertainty in the economy and, therefore, provides a favourable environment for growth and employment creation. In Brinks view these beliefs are simply not true, neither possible, as there are only two drivers of economic growth in his view, namely demand and supply. If you don’t have a healthy demand and supply, you don’t have an ‘economy’, never mind economic growth or even a favourable environment for growth and employment creation, warned Brink. The biggest problem with price stabilisation is that any government or institution that regulates or mandates price stability does not want to understand that prices have a specific basic function to restore the equilibrium between supply and demand in the economy. This leads to the fact being ignored that prices will increase and should be allowed to increase if the demand for products and services are higher than the supply. At the same time it ignores that prices will decrease and should be allowed to decrease if the supply is higher than the demand and that economic growth will be created in the process, explained Brink. They then also don’t accept and acknowledge the fact that the market forces of demand for and supply of products and services are the only creators and drivers of economic growth and wealth. Interest rate According to Brink the big problem with the application of the interest rate policy by Sarb is the fact that interest rates are often increased on the basis of sharp international price increases. A higher inflation rate leads the Sarb to increase interest rates to punish the local consumer for these price increases, which he is not responsible for at all. At the same time the higher interest rates have absolutely no influence on the international market forces responsible for the international or local price increases, said Brink. In his view Sarbs interest rate policy cannot stabilise prices and almost all price decrease are the results of other developments such as the destruction of the demand in the economy. For example, when the crude oil price and the price of maize - to Brink one of the best indicators of food prices - reached all-time record highs in 2007, the local interest rates were increased sharply to curb the higher inflation. This higher inflation rate had nothing to do with higher private consumer expenditure. When the inflation rate declined after 2007 Sarb and all the economists in the country believed it happened because of the higher interest rates, said Brink. The fact is that the inflation rate declined for the same reasons it increased when the international crude oil price fell from around $150 a barrel to below $50 a barrel and the international maize price declined from $480 per tonne to $160 per tonne: The demand in the economy was totally destroyed in this process and many consumers and business entities are still suffering financially today because of the higher interest rates. Inflation targets Sarb has introduced specific targets to stabilise the inflation rate - as measured by the consumer price index (CPI) - between 3% and 6%. This policy totally deprives the prices of products and services of their very important function to bring the supply and demand into market equilibrium, said Brink. Prices should be allowed to send the right signals to the producers to produce more or less and to the consumer to spend more or less on a product or service. The big danger exists, in Brinks view, that Sarb might be willing to get involved in the market to the extent that it would take any measures for the wrong reasons and at the wrong time just to pin down the interest rates within the targets without realising or taking into account the serious implications that it might have for the economy. This possible implication alone is perhaps a more than good enough reason for the abolishment of the inflation targets, said Brink. More problems are created in the economy today by many governments in the world, who believe they can control the prices, supply and demand of products and services, while they actually create more problems for the consumption and production sides of the economy with the application of their monetary policy. In May 2008 some of the top central bankers from the Group of Seven who were joined by policy makers from developing nations in Switzerland came to the conclusion that food price inflation might be one of the most serious problems facing the world, but it is one that monetary policy had little power to tackle. Food price pressure is a global problem,… but we cannot use monetary policy tools to manage this problem, the central bankers concluded. Economical phenomena such as inflation, exchange rates and interest rates are nothing else than economic indicators which originate from the economic growth process. Monetary policy authorities believe they have a choice between inflation an economic growth – while they don’t. The main priority of economic policy can only be economic growth, Brink concluded.
Posted on: Fri, 17 Oct 2014 22:39:27 +0000
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