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Thursday, 11 February 2010

The Mandela factor

Hi,

I was still in South Africa when Nelson Mandela walked free. Not being very interested in politics, I was not very much aware of his release and its implications for South Africa at the time. Today I realize it was because of National Party disinformation. I also did not know at that time that most of Steve Biko´s friends hanged themselves all by their lonesome selves in their cells.

Today I am very much aware of the Mandela factor, after watching the Mugabe factor in Zimbabwe on a day to day basis over the last two years. South Africa has Mandela, Zimbabwe has Mugabe: see the difference.

Milton Friedman stated that inflation is always and everywhere a monetary phenomenon. It is a statement with very important implications which are not easily grasped.

I state that the value of fiat money depends on all the underlying value systems in an economy. It seems to be correct: the Mugabe factor resulted in there being no Zimbabwe Dollar today in Zimbabwe. The Mandela factor is one of the many reasons why the Rand has a relatively strong foreign exchange value with an internal real value subject to 6% inflation or 6% annual real value destruction in the Rand. SA suffers from 3% inertial or built-in unnecessary inflation. In my opinion inflation should be lowered to 3% with a equal 3% drop in all interest rates in SA.

Long live Nelson Mandela!

Kindest regards,

Nicolaas Smith

Copyright © 2010 Nicolaas J Smith