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Tuesday, 3 June 2008

CA´s can prevent a destruction spiral in the real economy.

Tito Mboweni: “A weaker exchange rate is usually a sign of high inflation, and unless the inflation problem is addressed, it can set in motion an exchange rate and inflation spiral.”

South Africa will have 0% inflation in the real economy when Chartered Accountants abandon the stable measuring unit assumption while an inflation spiral in the monetary economy will still be possible as Mboweni stated.

A destruction spiral in the real economy is what destroyed the Zimbabwe economy over the last 14 years of hyperinflation in that country.

Abandoning the stable measuring unit assumption will make this impossible in South Africa.