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How refreshing to read Mamokete Lijane’s comments regarding setting a lower inflation target (“Lowering inflation target is the right thing to do”, September 4). A voice of reason in a choir of nonsense!
As she points out, the constitution states that “the primary object of the SA Reserve Bank is to protect the value of the currency”. It is difficult to see how any target above zero meets this objective.
While so many of our commentators think inflation just arrives at our shores uninvited, the reality is something known to holders of money for thousands of years — he who prints the coin will clip it.
As Richard Grant stated, “despite pretensions of independence, all central banks are creatures of government” and the “real source of inflation is the central bank” (“Making inflation transitory again”, September 1).
Should the Reserve Bank attempt to follow its constitutional mandate and target zero inflation, it would require government to sell bonds into a reduced market and interest rates would indeed be higher.
However, these would be nondistorted interest rates, absent the machinations of a central bank attempting to push or pull the economy in one direction or the other. Government expenditure and deficits would be more closely tied to taxpayer receipts instead of pouring more supply into the money pool.
Inflation is insidious and most hurts those who have least protection from inflation’s corruption. The only correct target for the Bank is its constitutionally mandated one, and that is an inflation rate of zero.
Neil Emerick Hout Bay
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: True inflation target
How refreshing to read Mamokete Lijane’s comments regarding setting a lower inflation target (“Lowering inflation target is the right thing to do”, September 4). A voice of reason in a choir of nonsense!
As she points out, the constitution states that “the primary object of the SA Reserve Bank is to protect the value of the currency”. It is difficult to see how any target above zero meets this objective.
While so many of our commentators think inflation just arrives at our shores uninvited, the reality is something known to holders of money for thousands of years — he who prints the coin will clip it.
As Richard Grant stated, “despite pretensions of independence, all central banks are creatures of government” and the “real source of inflation is the central bank” (“Making inflation transitory again”, September 1).
Should the Reserve Bank attempt to follow its constitutional mandate and target zero inflation, it would require government to sell bonds into a reduced market and interest rates would indeed be higher.
However, these would be nondistorted interest rates, absent the machinations of a central bank attempting to push or pull the economy in one direction or the other. Government expenditure and deficits would be more closely tied to taxpayer receipts instead of pouring more supply into the money pool.
Inflation is insidious and most hurts those who have least protection from inflation’s corruption. The only correct target for the Bank is its constitutionally mandated one, and that is an inflation rate of zero.
Neil Emerick
Hout Bay
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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