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Friday, 30 May 2008

Nicolaas Smith on 2008/05/29 09:28:26 PM - Re: Viparo

Nicolaas Smith on 2008/05/29 09:28:26 PM - Re: Viparo

Finweek

Viparo, For example: cars are variable items - their prices vary in the car market: there is a market for cars. Their prices depend on demand and supply. But, salaries and wages are constant items: there is no market for salaries. You cannot sell your salary in a market. Or you cannot buy someone else´s salary in a market. They are constant items.

The value of your salary - a constant real value - is paid over to you in Rands. But, cash inflation destroys the real value of the Rand. So the Rand is always worth less. So, your constant value salary must be updated at the monthly inflation rate to maintain its constant value. It is not done anywhere.

The company accountant ignores the fact that the Rand is losing value every month. The company accountant assumes that there is no inflation in the Rand as far as your salary is concerned. So the company accountant pays you out in Rands that are always worth less. So, your salary should be increased every month that inflation increases. Now at about the rate of 1.2% per month. This is not done. So the real value of your salary is being destroyed by the accountant at 1.2% per month. This is easy to change.

The company accountant can update your salary and all other constant items in the company every month. All accountants in SA are assuming that there is no inflation in the Rand for this purpose. So they are destroying billions of Rand in real value every year in SA. The real vlaue of your salary and all salaries, all taxes, all retained income, all companies´ capital etc.

We can stop this. This will increase economic growth in SA and create more jobs.