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Saturday, 19 April 2008

Killing the real economy

What SA needs is an inflation upper limit of 2% like the Euro. The inflation target of 3 to 6% is one of the main culprits of the current problems. Another is the 21% increase in money supply.

Young South Africans studying accounting at university are being taught to assume that there is no inflation as far as constant real value non-monetary items, eg. retained income, is concerned. As accounting students they will be taught that they have to assume that money is perfectly stable only for the purpose of valuing constant real value non-monetary items. When they become company accountants and do their companys´ accounts like that, they will be destroying their companys´ retained income as well as all other constant real value non-monetary items never updated at 9.8% per annum.

Since all accountants in SA are doing that they will be destroying hundreds of billions of Rand in retained income real value each and every year. They will be killing the real economy in SA as they are doing at present.

When they stop the stable measuring unit assumption they will be maintaining hundreds of billions of Rand of real value in the SA economy.

No-one can stop them from stopping the stable measuring unit assumption and maintaining the real economy instead of killing it.