Friday, 18 July 2014

South African Inflation


South African Reserve Bank raises interest rates half a percent in the past year to 5.75%. That's a 9.5% increase in interest!

Perhaps someone can explain something to me? As more and more of the economy is in the hands of government and as our taxes rocket, for example via electricity, water, rates, fuel, e-tolls, carbon taxes and many more new taxes in the pipeline, and the government mismanages large scale projects like the Eskom build which has cost the taxpayer at least R100 billion extra already, and whilst private expenditure is already on the way down and car sales are down, and the government is taking parts of existing land and business for itself, and people have less money to spend on more expensive food, how then can the government increase interest rates, when it is the government which is the cause of most of our inflation?

I guess that government needs even more tax and a way to get it is to raise interest rates which banks have to pay to government?

The Chinese example of removing excess from an economy is to raise the bank's reserve margin. In my opinion, this is a much better way to manage inflation, as it doesn't effect existing borrowers.

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