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Wednesday, 14 May 2008

The man in the street

The man in the street´s salary or wage is a constant real value non-monetary item.

When SA Chartered Accountants stop their assumption that the Rand is PERFECTLY stable (can you believe that!!) ONLY for the purpose of accounting CONSTANT items NEVER or NOT FULLY updated, namely their stable measuring unit assumption, then salaries will be automatically updated every month when the new CPI value is announced.

Salaries will automatically be maintained at their real values, that is, they will currently be updated at about 1.2% per month, every month. The man in the street will thus have more money to pay the higher installments on his house and car and higher prices for fuel, food and electricity. In economic terms: total internal demand will be maintained in the economy.

At the same time taxes will be updated monthly too. In economic terms: government´s tax receipts will maintain their real value over time.

At the same time companies´ issued share capital and retained income balances will be updated monthly too. In economic terms: the capital and investment base in the country will be maintained at its real value all the time:

In overall economic terms: probably hundreds of billions of Rand in real value will be maintianed in the SA REAL economy - instead of being destroyed by Chartered Accountants each and every year.

Result: 0% inflation or 0% destruction of REAL value in the REAL economy.

We will still have 10.6% inflation in money (the Rand).

For the man in the street: the real value of his salary will be maintained month after month - no matter what the rate of cash inflation. Internal demand in the economy will be maintained - no matter what the rate of cash inflation.

Brazil did that for 30 years from 1964 to 1994 with a DAILY index under hyperinflation. Their economy grew UNDER HYPERINFLATION.

For the man in the street: it will be IMPOSSIBLE for the SA REAL economy to be destroyed under inflation or HYPERINFLATION (see Brazil) no matter what the rate of inflation or hyperinflation in the Rand.