Pages

Monday, 30 June 2008

The real value of Mboweni´s job


Money supply (M3) as per the South African Reserve Bank at May 2008: R 1 808.971 billion

Real value destroyed annually in the SA monetary economy by inflation at:

3%

R54.2 Billion

6%

R108.5 Billion

11.7% (May 08 inflation)

R211.6 Billion (May 08 Actual annual real value destroyed)


The cost to SA of inflation above 3%

a) R211.6 Billion - R54.2 Billion = R157.4 Billion in the monetary economy.

Plus

b) R31.903 x 8.7/11.7 = R23.7 Billion in the real economy as represented in the increase in real value unknowingly destroyed by Chartered Accountants in the Retained Earnings values of 120 JSE listed companies as a result of their implementation of the stable measuring unit assumption.

Plus

c) A further estimated R111.5 Billion in the real economy as represented in the increase in real value unknowingly destroyed by Chartered Accountants in the rest of the real economy as a result of their implementation of the stable measuring unit assumption.


Scrap inflation targeting and the stable measuring unit assumption. SA inflation should not exceed 2% at a cost of R36.1 Bilion real value destroyed in monetary items.


Cost to SA of a 1% rise in inflation:

1) R18 Billion in real value destroyed in the monetary economy.

Plus

2) Estimated R15 Billion in real value unknowinlgy destroyed by Chartered Accountants in the real economy.


Gain to the SA economy of a 1% decrease in inflation:



A) R18 Billion in real value maintained in the monetary economy.

Plus

B) Estimated R15 Billion in real value unknowingly to be maintained by Chartered Accountants in the real economy.


Annual gain to SA of a reduction of inflation to 3%:


i) R157.4 Billion in real value maintained in the monetary economy.

Plus

ii) Estimated R111.5 Billion in real value unknowingly to be maintained by Chartered Accountants in the real economy.


Estimated annual gain to SA when Chartered Accountants abandon the stable measuring unit assumption: R150 Billion

[Real Value date: May 2008 CPI 158.4 All above values to be updated in terms of future changes in the CPI.]