Lonmin miners´ vote of no confidence in the SA Reserve Bank
During hyperinflation members of the public generally spontaneously start using the US Dollar as a relatively stable unit of account because their own local hyperinflationary currency loses real value at a very rapid rate. They start pricing everything in terms of the US Dollar.
SA has never been in hyperinflation in the past. It is not in hyperinflation at the moment (2012).
However, during the mine unrest at the Lonmin mine at Marikana near Rustenburg in South Africa, the miners stated on CNN that they wanted an increase to USD 1500 per month.
The SA Reserve Bank´s definition of price stability is stated in an inflation target of three to six per cent per annum. The SA Reserve Bank thus defines prices in South Africa increasing at six per cent per annum as being “stable”. The SARB would state that “price stability is being maintained” at inflation at six per cent per annum.
The miners are not economists, but they have a better sense of what is price stability in practice than the SARB.
Contrary to the SARB the miners obviously do not regard SA prices increasing at six per cent per annum as representing “price stability”. They use the US Dollar as a relatively stable unit of account, not the SA Rand. It is a clear vote of no confidence in the SA Reserve Bank´s monetary policies.
The SARB´s Monetary Policy Committee would now state as it stated in past: “The MPC remains fully committed to its mandate of achieving and maintaining price stability”. Six per cent annual inflation is actually “achieving and maintaining price stability” as far as the SARB is concerned. The miners clearly disagree with the SARB.
The Lonmin miners are good practical economists and I am sure they are good miners too.
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Nicolaas Smith Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.