Reserve Bank governor Tito Mboweni recently hiked interest rates, despite real concern over the impact this will have on sustainable economic growth.
SA Chartered Accountants unintentionally destroy real value in the real economy on a huge scale with their assumption that the Rand is perfectly stable only for the purpose of accounting constant value items. This has an as yet unmeasured negative impact on Gross Domestic Product and sustainable economic growth.
There is an option that would make this destruction of the SA real economy by our Chartered Accountants impossible – if they so choose. They can also be ordered by their superiors in business and government to stop their very destructive assumption if they now knowingly carry on with this destruction.
Inflation results in the destruction of real value in monetary items and constant items over time.
Inflation has two components: a monetary component: monetary inflation and a non-monetary component: Historical Cost Accounting inflation. Chartered Accountants can stop the second component completely which will stop the destruction of real value in the real economy completely.
What causes monetary inflation is a very complex economic process which should be dominated by Tito Mboweni and the SARB as it is dominated by the Federal Reserve Bank, the European Central Bank and the Bank of England, for example.
Historical Cost Accounting inflation is caused by the combination of 10.6% (Mar 08) inflation and SA Chartered Accountants´ implementation of the stable measuring unit assumption (an Historical Cost Accounting practice) throughout the whole of the SA economy.
Monetary inflation will destroy 10.6% of the real value of all current (Mar 08) monetary items in SA over the next year - all else being equal.
Historical Cost Accounting inflation will result in the destruction by SA accountants during the next 12 months - all else being equal - as they did in previous years at the average rate of inflation, of:
(a) 10.6% of the real value of all listed and unlisted SA companies´ retained income, share premium, capital reserves and other [excluding (b)] constant real value non-monetary items never updated; plus
(b) 10.6% of the real value of the issued share capital of all SA companies with no well located and well maintained land and/or buildings or other variable real value non-monetary items able to be revalued at least equal to the original real value of each contribution of issued share capital; plus
(c) a further unknown amount (less than 10.6%) in the real value of constant real value non-monetary items not fully updated, e.g., salaries, wages, rents, fees, royalties, retainers, income taxes, company taxes, value added taxes and all other constant items not fully updated.
This will result in a reduction in GDP and the economic rate of growth in SA as it always did in the past and as it always will in the future as long as SA Chartered Accountants apply the stable measuring unit assumption only for this purpose.
The destruction of real value in the real economy by SA Chartered Accountants will stop when they stop their assumption that the Rand is perfectly stable only for the purpose of accounting constant items never or not fully updated.
We will still have 10.6% (Mar 08) cash inflation in the monetary economy – all else being equal – but we will have 0% inflation in the real economy with an (as for now unknown) increase in GDP and sustainable economic growth in SA when our CA´s stop the stable measuring unit assumption.
Inflation would then only have a monetary component, namely, monetary inflation.
Historical Cost Accounting inflation would be impossible since there would be no Historical Cost Accounting. All constant real value non-monetary items would automatically be updated every time the Consumer Price Index (CPI) changes.
SA Chartered Accountants would automatically maintain tens (probably even hundreds) of billions of Rands annually in real value in retained income and other constant value items when they update them monthly - instead of destroying real value on a massive scale in the SA real economy as they are currently doing and as they have always done in the past and as they will continue doing in the future if they do not stop that assumption.
No-one stops us from revoking the stable measuring unit assumption. The Historical Cost Accounting model is not required by SA law or by SA Generally Accepted Accounting Practice or by the International Accounting Standards Board or by International Financial Reporting Standards or by International Accounting Standards.
Tuesday, 29 April 2008
Monday, 28 April 2008
This is not the Historical Cost Debate
Real Value Accounting is something completely different from the very old Historical Cost Debate. That debate was about the valuing of mainly variable items. Real Value Accounting is only about the valuing of constant items.
It is not really unknown since it is similar to IAS 29 with monthly updating in terms of the Consumer Price Index in non-hyperinflationary economies and daily updating in terms of a daily index or the parallel rate in hyperinflationary economies like Zimbabwe. Very similar to the very successful Unidade Real de Valor in Brazil.
It is not a complex method once you forget historical costs and start thinking only in real values: only update all constant items. The rest is SA GAAP excluding the stable measuring unit assumption. Obviously all items have to be brought up to date to today´s real value. Brazil did it for 30 years from 1964 to 1994.
I want the average Joe to realize that SA Chartered Accountants are killing the real economy in SA with their silly assumption that the Rand is PERFECTLY stable ONLY for the purpose of valuing CONSTANT items NEVER or not fully updated, e.g. retained income. Retain income does not really concern the average Joe.
What does concern the average Joe/Jane in SA is that under Real Value Accounting his/her salary will automatically be updated monthly every time the new CPI value is published. Salaries will thus automatically be maintained at their real values thus maintaining internal demand in SA. So too personal, company and value added taxes thus maintaining the real value of government´s tax base. And so forth with all constant items in the SA economy.
This will increase SA GDP, increase the economic rate of growth and result in 0% inflation ONLY in the real economy. Tito Mboweni and the other wise people at the SARB will still have to lower cash inflation from its current very high 10.6% level keeping in mind that the total of all underlying values systems in SA determine the internal and external value of the Rand.
It is not really unknown since it is similar to IAS 29 with monthly updating in terms of the Consumer Price Index in non-hyperinflationary economies and daily updating in terms of a daily index or the parallel rate in hyperinflationary economies like Zimbabwe. Very similar to the very successful Unidade Real de Valor in Brazil.
It is not a complex method once you forget historical costs and start thinking only in real values: only update all constant items. The rest is SA GAAP excluding the stable measuring unit assumption. Obviously all items have to be brought up to date to today´s real value. Brazil did it for 30 years from 1964 to 1994.
I want the average Joe to realize that SA Chartered Accountants are killing the real economy in SA with their silly assumption that the Rand is PERFECTLY stable ONLY for the purpose of valuing CONSTANT items NEVER or not fully updated, e.g. retained income. Retain income does not really concern the average Joe.
What does concern the average Joe/Jane in SA is that under Real Value Accounting his/her salary will automatically be updated monthly every time the new CPI value is published. Salaries will thus automatically be maintained at their real values thus maintaining internal demand in SA. So too personal, company and value added taxes thus maintaining the real value of government´s tax base. And so forth with all constant items in the SA economy.
This will increase SA GDP, increase the economic rate of growth and result in 0% inflation ONLY in the real economy. Tito Mboweni and the other wise people at the SARB will still have to lower cash inflation from its current very high 10.6% level keeping in mind that the total of all underlying values systems in SA determine the internal and external value of the Rand.
Saturday, 26 April 2008
SA Chartered Accountants´s silly assumption
All underlying value systems determine the value of the Rand. It is not so easy to fix all of them at the same time.
Sometimes we do not even know how our actions are effecting the economy.
Like Chartered Accountants killing the real economy with their silly assumption that the Rand is perfectly stable (no inflation - can you believe that!!) ONLY for the purpose of accounting/valuing constant real value items like retained income. They destroy maybe hundreds of billions of Rand in retained income real value each and every year. AND, they do not even know they are doing it. Hardly anyone knows.
Stopping their silly assumption that the Rand is perfectly stable (no inflation) ONLY for that one purpose will pump maybe hundreds of billions of Rand into the SA economy - by maintaing the real value of retained income and other constant items instead of destroying them. It is simple maths.
Sometimes we do not even know how our actions are effecting the economy.
Like Chartered Accountants killing the real economy with their silly assumption that the Rand is perfectly stable (no inflation - can you believe that!!) ONLY for the purpose of accounting/valuing constant real value items like retained income. They destroy maybe hundreds of billions of Rand in retained income real value each and every year. AND, they do not even know they are doing it. Hardly anyone knows.
Stopping their silly assumption that the Rand is perfectly stable (no inflation) ONLY for that one purpose will pump maybe hundreds of billions of Rand into the SA economy - by maintaing the real value of retained income and other constant items instead of destroying them. It is simple maths.
Wednesday, 23 April 2008
A foreign currency is not money in South Africa
A foreign currency is not money in South Africa since it is not the generally accepted national unit of account.
Money has three functions:
1. Medium of exchange
2. Store of value
3. Unit of account
A foreign currency like the US Dollar or the Euro is a medium of exchange in South Africa. Some businesses and individuals will accept US Dollars or Euros as a means of payment, that is, as a medium of exchange because they can easily sell the foreign currency amounts at their local banks for Rands.
A "hard currency" is also a store of value in South Africa. The US Dollar and the Euro are “hard currencies” with daily changing market values. They are generally accepted world wide as a store of value. People know that there are daily small changes in their exchange values.
US Dollars or Euros are, however, not the generally accepted and legal national unit of account. They are thus not money in South Africa since they do not fulfil all three functions of money.
Foreign currencies are variable real value non-monetary items in South Africa.
The US Dollar is only money outside the United States of America in countries like Ecuador and Panama that have dollarized their economies. They use the US Dollar as their functional currency. They do not have their own national currencies. The US Dollar is both foreign exchange and functional currency only in countries that have dollarized their economies. That is not the case in South Africa.
Cabo Verde is planning to use the Euro as its national functional currency.
It appears very strange to state that the US Dollar or the Euro is not money. Technically speaking that is correct because an economic item can only be money if it fulfils all three functions of money. The Euro is only money in the European Monetary Union and the US Dollar is only money in the US and in countries that have dollarized their economies, e.g., Panama and Ecuador.
Money has three functions:
1. Medium of exchange
2. Store of value
3. Unit of account
A foreign currency like the US Dollar or the Euro is a medium of exchange in South Africa. Some businesses and individuals will accept US Dollars or Euros as a means of payment, that is, as a medium of exchange because they can easily sell the foreign currency amounts at their local banks for Rands.
A "hard currency" is also a store of value in South Africa. The US Dollar and the Euro are “hard currencies” with daily changing market values. They are generally accepted world wide as a store of value. People know that there are daily small changes in their exchange values.
US Dollars or Euros are, however, not the generally accepted and legal national unit of account. They are thus not money in South Africa since they do not fulfil all three functions of money.
Foreign currencies are variable real value non-monetary items in South Africa.
The US Dollar is only money outside the United States of America in countries like Ecuador and Panama that have dollarized their economies. They use the US Dollar as their functional currency. They do not have their own national currencies. The US Dollar is both foreign exchange and functional currency only in countries that have dollarized their economies. That is not the case in South Africa.
Cabo Verde is planning to use the Euro as its national functional currency.
It appears very strange to state that the US Dollar or the Euro is not money. Technically speaking that is correct because an economic item can only be money if it fulfils all three functions of money. The Euro is only money in the European Monetary Union and the US Dollar is only money in the US and in countries that have dollarized their economies, e.g., Panama and Ecuador.
Sunday, 20 April 2008
Inflation destroys R168 billion of real value in M3 and SA accountants some unknown value in the real economy.
SA can prevent the destruction of real value by non-monetary inflation in the real economy by banning the stable measuring unit assumption. Stated in another way: ban SA accountants´ silly assumption that money is perfectly stable only for the purpose of valuing constant real value non-monetary items never updated, eg. retained income, or not fully updated, eg. salaries, wages, taxes, etc.
The accounted part of the R168 billion destroyed in M3 would be taken to the profit and loss account as a net monetary loss. It is not presently done like that.
SA accountants currently destroy hundreds of billions of Rand in retained income real value and in all other constant values never of not fully updated each and every year. They are killing that part of the real economy. This is an unknown percentage lower than 10% per annum of the real economy. This destruction of real value only happens in constant real value non-monetary items never or not fully updated. Salaries and wages are not always fully updated, for example. The full 10% destruction only takes place in constant values never updated, eg. retained income.
That is one of SA´s structural problems. Another is the 3 to 6% inflation target. It should be targeted at an upper limit of 2% like in Europe and the US.
South Africa can maintain more than 98% of real value in the economy by limiting inflation to a maximum of 2%. That is how the major part of the world economy maintains more than 97% of real value at the moment.
Money has three functions:
1. Medium of exchange
2. Store of value
3. Unit of account
A central bank can maintian more than 98% of all real value by keeping inflation at 2%. This is the result of money´s third function.
At expected 10% inflation the SARB is maintaining more than 90% of real value in the real economy. How much more is not known. 10% of M3 or R168 billion is definitely being destroyed in the monetary economy. None of this real loss is accounted in SA at the moment.
SA accountants destroy an unknow value running into the hundreds of billions of Rand in all constant real value non-monetary items never or not fully updated, eg. retained income.
The accounted part of the R168 billion destroyed in M3 would be taken to the profit and loss account as a net monetary loss. It is not presently done like that.
SA accountants currently destroy hundreds of billions of Rand in retained income real value and in all other constant values never of not fully updated each and every year. They are killing that part of the real economy. This is an unknown percentage lower than 10% per annum of the real economy. This destruction of real value only happens in constant real value non-monetary items never or not fully updated. Salaries and wages are not always fully updated, for example. The full 10% destruction only takes place in constant values never updated, eg. retained income.
That is one of SA´s structural problems. Another is the 3 to 6% inflation target. It should be targeted at an upper limit of 2% like in Europe and the US.
South Africa can maintain more than 98% of real value in the economy by limiting inflation to a maximum of 2%. That is how the major part of the world economy maintains more than 97% of real value at the moment.
Money has three functions:
1. Medium of exchange
2. Store of value
3. Unit of account
A central bank can maintian more than 98% of all real value by keeping inflation at 2%. This is the result of money´s third function.
At expected 10% inflation the SARB is maintaining more than 90% of real value in the real economy. How much more is not known. 10% of M3 or R168 billion is definitely being destroyed in the monetary economy. None of this real loss is accounted in SA at the moment.
SA accountants destroy an unknow value running into the hundreds of billions of Rand in all constant real value non-monetary items never or not fully updated, eg. retained income.
Three distinct economic items
There are three distinct economic items in the economy:
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1. Variable real value non-monetary items
2. Monetary items
3. Constant real value non-monetary items
They are valued in distinctly different ways.
Monetary items are money held and monetary values pertaining only to money.
Non-monetary items are all items that are not monetary items.
Non-monetary items are sub-divided into variable real value non-monetary items and constant real value non-monetary items. Constant real value non-monetary items only came about with the introduction of the double entry accounting model.
The first economies
The first economies functioned without money. They were barter economies. People bartered economic items they produced or possessed for other economic items they wanted.
Those economic items had variable values. A baker baking bread bartered her extra rolls of bread for rabbits that a hunter would barter. When the hunter had many rabbits to barter he would accept a certain number of bread rolls for a rabbit. When he had few rabbits to barter and he was the only hunter in that area, then he would trade the rabbits for more rolls of bread per rabbit.
Both the rabbits and the bread rolls thus had variable values depending on demand and supply. This applied to all economic items in those barter economies.
Neither money nor the double entry accounting model was invented yet. There was no inflation. There was no medium of exchange. There was no monetary unit of account. There were no financial reports: no profit and loss account and no balance sheet.
There were no monetary items and no constant real value non-monetary items. Only variable real value non-monetary items.
The first economic item was thus a variable real value non-monetary item.
People in barter economies used a primitive system of demand and supply at a specific location where the barter transaction took place.
Money
Money was then invented over a long period of time. Eventually money came to fulfil three functions:
a. Medium of exchange
b. Unit of account
c. Store of value
At that stage there were two distinct economic items in the economy: variable real value non-monetary items and monetary items. The double entry accounting model was not perfected yet
The second distinct economic item was a monetary item. Inflation appeared soon after money was invented.
Double Entry Accounting
Finally the double entry accounting model was invented. This resulted in the creation of the third distinct economic item: a constant real value non-monetary item.
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Buy the ebook for $2.99 or £1.53 or €2.68
1. Variable real value non-monetary items
2. Monetary items
3. Constant real value non-monetary items
They are valued in distinctly different ways.
Monetary items are money held and monetary values pertaining only to money.
Non-monetary items are all items that are not monetary items.
Non-monetary items are sub-divided into variable real value non-monetary items and constant real value non-monetary items. Constant real value non-monetary items only came about with the introduction of the double entry accounting model.
The first economies
The first economies functioned without money. They were barter economies. People bartered economic items they produced or possessed for other economic items they wanted.
Those economic items had variable values. A baker baking bread bartered her extra rolls of bread for rabbits that a hunter would barter. When the hunter had many rabbits to barter he would accept a certain number of bread rolls for a rabbit. When he had few rabbits to barter and he was the only hunter in that area, then he would trade the rabbits for more rolls of bread per rabbit.
Both the rabbits and the bread rolls thus had variable values depending on demand and supply. This applied to all economic items in those barter economies.
Neither money nor the double entry accounting model was invented yet. There was no inflation. There was no medium of exchange. There was no monetary unit of account. There were no financial reports: no profit and loss account and no balance sheet.
There were no monetary items and no constant real value non-monetary items. Only variable real value non-monetary items.
The first economic item was thus a variable real value non-monetary item.
People in barter economies used a primitive system of demand and supply at a specific location where the barter transaction took place.
Money
Money was then invented over a long period of time. Eventually money came to fulfil three functions:
a. Medium of exchange
b. Unit of account
c. Store of value
At that stage there were two distinct economic items in the economy: variable real value non-monetary items and monetary items. The double entry accounting model was not perfected yet
The second distinct economic item was a monetary item. Inflation appeared soon after money was invented.
Double Entry Accounting
Finally the double entry accounting model was invented. This resulted in the creation of the third distinct economic item: a constant real value non-monetary item.
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Equilibrium for Zimbabwe
Equilibrium for Zimbabwe will come about when Zimbabwe copies Brazil and implements a Zim non-monetary index unit or Zim Real Value Unit based on the proven and very successful Brazilian Unidade Real de Valor that allowed Brazil to have a stable and growing economy in non-monetary items which gave them time to sort out how to kill cash hyperinflation in their money.
This is not a theory. It is an historic fact. It was a proven and very successful practice implemented in the 180 million people Brazilian economy.
What is required in Zimbabwe are two elements: a stable non-monetary index unit and a daily rate between the ZimDollar and this stable Real Value Unit.
The Zim Real Value Unit already exists. It is the USDollar.
The USD is a monetary item and the Zim Real Value Unit has to be a non-monetary index. That is correct. It is also true that the USD is 2% away from being a 100% stable index unit. 2% is nothing in the current hyperinflationary chaos in Zimbabwe.
The USD is the Zim Real Value Unit. Every non-monetary item in Zim is given a USD price. That is done by dividing the current ZimDollar purchase price or valuation of any Zim non-monetary item by the current Real Value Unit rate. Or it is simply given a USD price.
Now a a single daily Zim Real Value Unit rate is needed.
That also exists. It is called the Old Mutual Implied Rate. There are many parallel rates in Zimbabwe every day. Everybody haggles to get his or her best rate for his or her deal. So there are many, many USD parallel rates. There is no single USD rate for the whole country because the ZimDollar is not yet floated by the Reserve Bank of Zimbabwe.
The Old Mutual Implied Rate is calculated by dividing the Zimbabwe Stock Exchange price of the Old Mutual share by the London Stock Exchange Price for the same share. The answer is the Old Mutual Implied Rate for the Pound. Then a cross rate calculation is done for the USD rate.
That is the Old Mutual Implied Rate for the USD in Zimbabwe. A single rate is calculated by using the daily closing prices.That can be used as the single Real Value Unit Rate for the whole of Zimbabwe. There is no doubt about the daily closing rate when closing prices are used.
That is the equilibrium solution for Zimbabwe.
How will the OMIR be used for salaries. The worker and employer determine the salary in USD. Say USD 100 or USD 1000 or whatever the USD salary is. It will not change for a whole year in USD value.
Every time the salary is paid it is paid at that day´s OMIR. As prices go up the OMIR will go up and so will the salary. A worker will always receive the same salary in USD equivalent value.This way salaries and prices are linked.
This way all non-monetary items in the whole Zim economy are linked, just like with the Brazilian Unidade Real de Valor.
The Zim economy will return to being a stable economy in non-monetary items. Cash inflation will still depend on the strenght or weakness of the many underlying value systems in the Zim economy, namely the monetary system, economic system, banking system, government, justice system, education system, defence system, industrial policies and systems, etc, etc.
The Zim Real Value Unit will kill non-monetary inflation in all non-monetary items since they will all be valued at exactly the same Zim Real Value Unit rate.
The Zim economy will stabilise and the government and monetary authorities can work on the problems to kill cash hyperinflation in the ZimDollar.
This is not a theory. It is an historic fact. It was a proven and very successful practice implemented in the 180 million people Brazilian economy.
What is required in Zimbabwe are two elements: a stable non-monetary index unit and a daily rate between the ZimDollar and this stable Real Value Unit.
The Zim Real Value Unit already exists. It is the USDollar.
The USD is a monetary item and the Zim Real Value Unit has to be a non-monetary index. That is correct. It is also true that the USD is 2% away from being a 100% stable index unit. 2% is nothing in the current hyperinflationary chaos in Zimbabwe.
The USD is the Zim Real Value Unit. Every non-monetary item in Zim is given a USD price. That is done by dividing the current ZimDollar purchase price or valuation of any Zim non-monetary item by the current Real Value Unit rate. Or it is simply given a USD price.
Now a a single daily Zim Real Value Unit rate is needed.
That also exists. It is called the Old Mutual Implied Rate. There are many parallel rates in Zimbabwe every day. Everybody haggles to get his or her best rate for his or her deal. So there are many, many USD parallel rates. There is no single USD rate for the whole country because the ZimDollar is not yet floated by the Reserve Bank of Zimbabwe.
The Old Mutual Implied Rate is calculated by dividing the Zimbabwe Stock Exchange price of the Old Mutual share by the London Stock Exchange Price for the same share. The answer is the Old Mutual Implied Rate for the Pound. Then a cross rate calculation is done for the USD rate.
That is the Old Mutual Implied Rate for the USD in Zimbabwe. A single rate is calculated by using the daily closing prices.That can be used as the single Real Value Unit Rate for the whole of Zimbabwe. There is no doubt about the daily closing rate when closing prices are used.
That is the equilibrium solution for Zimbabwe.
How will the OMIR be used for salaries. The worker and employer determine the salary in USD. Say USD 100 or USD 1000 or whatever the USD salary is. It will not change for a whole year in USD value.
Every time the salary is paid it is paid at that day´s OMIR. As prices go up the OMIR will go up and so will the salary. A worker will always receive the same salary in USD equivalent value.This way salaries and prices are linked.
This way all non-monetary items in the whole Zim economy are linked, just like with the Brazilian Unidade Real de Valor.
The Zim economy will return to being a stable economy in non-monetary items. Cash inflation will still depend on the strenght or weakness of the many underlying value systems in the Zim economy, namely the monetary system, economic system, banking system, government, justice system, education system, defence system, industrial policies and systems, etc, etc.
The Zim Real Value Unit will kill non-monetary inflation in all non-monetary items since they will all be valued at exactly the same Zim Real Value Unit rate.
The Zim economy will stabilise and the government and monetary authorities can work on the problems to kill cash hyperinflation in the ZimDollar.
Saturday, 19 April 2008
A 2% month on month rise in inflation will lead to hyperinflation in SA in 3 yrs time.
The expected month on month rise in CPIX in South Africa is 1.2% for March, 2008.
A 2% month on month rise in inflation will lead to hyperinflation in SA in 3 years time.
Hyperinflation is defined by the International Accounting Standards Board as: "the cumulative inflation rate over three years is approaching, or exceeds, 100%."
Continuous 2% month on month inflation equals 26% inflation after 1 year and 100% cumulative inflation over three years.
Scary isn´t it?
Get SA accountants to stop the stable measuring unit assumption and high or hyperinflation will never be able to destroy the SA economy.
A 2% month on month rise in inflation will lead to hyperinflation in SA in 3 years time.
Hyperinflation is defined by the International Accounting Standards Board as: "the cumulative inflation rate over three years is approaching, or exceeds, 100%."
Continuous 2% month on month inflation equals 26% inflation after 1 year and 100% cumulative inflation over three years.
Scary isn´t it?
Get SA accountants to stop the stable measuring unit assumption and high or hyperinflation will never be able to destroy the SA economy.
Make the Zim experience impossible in SA
Make the destruction of the economy by high and hyperinflation impossible by banning SA accountants from assuming that money is PERFECTLY stable ONLY for the purpose of valuing CONSTANT value historical cost items, eg. retained income.
They will do it under hyperinflation because they are told to do that by the IASB.
They refuse to do it under non-hyperinflationary conditions because they are not told by the IASB to stop that silly assumption.
They will do it under hyperinflation because they are told to do that by the IASB.
They refuse to do it under non-hyperinflationary conditions because they are not told by the IASB to stop that silly assumption.
Killing the real economy
What SA needs is an inflation upper limit of 2% like the Euro. The inflation target of 3 to 6% is one of the main culprits of the current problems. Another is the 21% increase in money supply.
Young South Africans studying accounting at university are being taught to assume that there is no inflation as far as constant real value non-monetary items, eg. retained income, is concerned. As accounting students they will be taught that they have to assume that money is perfectly stable only for the purpose of valuing constant real value non-monetary items. When they become company accountants and do their companys´ accounts like that, they will be destroying their companys´ retained income as well as all other constant real value non-monetary items never updated at 9.8% per annum.
Since all accountants in SA are doing that they will be destroying hundreds of billions of Rand in retained income real value each and every year. They will be killing the real economy in SA as they are doing at present.
When they stop the stable measuring unit assumption they will be maintaining hundreds of billions of Rand of real value in the SA economy.
No-one can stop them from stopping the stable measuring unit assumption and maintaining the real economy instead of killing it.
Young South Africans studying accounting at university are being taught to assume that there is no inflation as far as constant real value non-monetary items, eg. retained income, is concerned. As accounting students they will be taught that they have to assume that money is perfectly stable only for the purpose of valuing constant real value non-monetary items. When they become company accountants and do their companys´ accounts like that, they will be destroying their companys´ retained income as well as all other constant real value non-monetary items never updated at 9.8% per annum.
Since all accountants in SA are doing that they will be destroying hundreds of billions of Rand in retained income real value each and every year. They will be killing the real economy in SA as they are doing at present.
When they stop the stable measuring unit assumption they will be maintaining hundreds of billions of Rand of real value in the SA economy.
No-one can stop them from stopping the stable measuring unit assumption and maintaining the real economy instead of killing it.
2% anchor for inflation
The SARB regards its primary goal in the South African economic system as " the achievement and maintenance of price stability".
Price stability is a year-on-year increase in the CPI of 0%.
A high degree of price stability is a year-on-year increase in the CPI of 2%.
The SARB has to change its primary goal in the South African economic system to be " the achievement and maintenance of a high degree of price stability of 2%".
Price stability is a year-on-year increase in the CPI of 0%.
A high degree of price stability is a year-on-year increase in the CPI of 2%.
The SARB has to change its primary goal in the South African economic system to be " the achievement and maintenance of a high degree of price stability of 2%".
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