I support Greta Steyn

Hi,

Greta Steyn recently stated that she would be happy if the government controlled all the shares in the South African Reserve Bank.

In simple terms, abandoning monetary prudence at the SARB can only destroy the SA monetary economy – period. Example: Zimbabwe. Inflation is only a monetary phenomenon and can only destroy the real value of the Rand and other monetary items – nothing else. Inflation has no effect on the real value of non-monetary items. SA accountants would destroy the SA constant real value non-monetary economy (like Zimbabwean accountants did) with their very destructive stable measuring unit assumption – even during hyperinflation – if hyperinflation was ever created by the SARB in SA.

SA accountants currently destroy the real value of SA banks´ and companies´ capital and profits never maintained with sufficient revaluable fixed assets under the HCA model at the rate of 6.2% per annum amounting to about R200 billion each and every year. PricewaterhouseCoopers state very clearly in their publication Understanding IAS 29: “Inflation adjusted financial statements are an extension to and not a departure from historic cost accounting.” Accountants – unbelievably supported by PricewaterhouseCoopers – still apply the stable measuring unit assumption during hyperinflation and then only restate the year-end Historical Cost financial statements of their hyper-destroyed businesses at the year end CPI rate – after they have hyper-destroyed all constant real value non-monetary items never maintained or never updated during the financial year with their stable measuring unit assumption – during hyperinflation.

This is prevented with either financial capital maintenance in units of constant purchasing power during low inflation as authorized by the IASB in the Framework, Par 104 (a) twenty one years ago or with indexation – which is in principle the same process – as Brazil did for 30 years from 1964 to 1994.

Destroying SA´s economy like it happened in Zimbabwe is a political act. The SARB having some private shareholders who have no influence will not stop a Zimbabwe style destruction of the SA monetary economy. Either SA has the right political leaders or not.

Contrary to what some people state and believe, the government already owns the majority of shares in the SARB. It is not privately controlled. It has some private shareholders - a minority. The Bank´s independence from government interference in monetary policy is stated in the constitution.

I support Greta’s position.

Obviously, for the government to hold all the shares in the SARB is not the same as nationalizing the mining industry or banks or the economy as a whole as Malema wants.

Kindest regards

Nicolaas Smith

Copyright © 2010 Nicolaas J Smith