Happy 60th Birthday Rand

[GROOVIE COINS 18]

Good day,

The Rand recently celebrated it's 60th birthday. Here's a look at a few prices back in 1961 and the inflation it experienced since.

regards Robert

https://mybroadband.co.za/news/business/386480-the-rand-is-60-years-old-today-here-is-how-much-south-africans-paid-for-coffee-bread-and-beer-in-1961.html

[Pierre_Henri 92]

Incredible.

But if one looks at the current looting and pilferage of the last of our countries resources by a totally corrupt government, it would be interesting to see where we stand in a few years time - probably striped bare to the bone with nothing left.

The ANC has totally destroyed this country.

There is actually nothing in the coffers left to steal. 

[Cold Sea 6]

On 2/15/2021 at 10:06 AM, GROOVIE COINS said:

Here's a look at a few prices back in 1961 and the inflation it experienced since.

But look on the bright side. Bathabili Dlamini said if the Rand falls, the government will just pick it up. Politics and an amateur government aside, I read somewhere yesterday that in the past 12 months the USA has "printed" an extra 20% = $3.4 Trillion of all types of the US Dollar in circulation. It is a staggering amount of money. I cannot begin to understand economics, but the news tells you if you print money (read Zimbabwe), inflation will be rampant. Nothing of the sort is happening to the dollar. Before the fiat system of money supply was introduced, everyone knew what the value of money was. It was a certain weight of gold or silver. Today it boils down to sovereign trust and productivity (fiat). Very little of this exists in South Africa today.

Edited February 18 by Cold Sea

[jwither 17]

On 2/18/2021 at 11:09 AM, Cold Sea said:

Politics and an amateur government aside, I read somewhere yesterday that in the past 12 months the USA has "printed" an extra 20% = $3.4 Trillion of all types of the US Dollar in circulation. It is a staggering amount of money. I cannot begin to understand economics, but the news tells you if you print money (read Zimbabwe), inflation will be rampant. Nothing of the sort is happening to the dollar. 

It's a different type of "printing" in the USA versus Zimbabwe.  Not familiar with South Africa but in the USA, currency in circulation has increased noticeably since the 2008 crisis but most of the "money supply" increase is actually debt and the bigger risk is a deflationary credit crash.

The distinction between now and 2008 isn't printing but the "stimulus" which is giving "free" money to those who qualify.  Last year it was up to $1200 the first time and up to $600 the second time.  Right now, up to an additional $1400 is in the pipeline.  I received somewhat less than  $500 for the first installment but do not qualify for the last two.

Unlike prior "printing" which overwhelmingly ends up inflating financial assets and real estate, this "money for the people" does create inflationary pressure, especially in the things people need most to survive.  Now that it has started, this precedent is going to ultimately lead to a form of Universal Basic Income in the upcoming greater depression since the politicians and the Federal Reserve won't have many options.

The worst part of it will come much later though, as those who own most of the wealth aren't about to destroy their own until they have to to save their own necks.  Before that happens, it's overwhelmingly probable that asset prices will crash first and then consumer inflation will noticeably worsen with the policy response.

As for the Rand, my recollection is that it was worth $1.50 USD when I arrived in July, 1972 and $1.15 USD when I left in November, 1974.  But I was very young then, so I might not remember correctly.  Today, it is worth 6c?  7c?

Edited February 20 by jwither

[GROOVIE COINS 18]

On 2/18/2021 at 6:09 PM, Cold Sea said:

But look on the bright side. Bathabili Dlamini said if the Rand falls, the government will just pick it up. Politics and an amateur government aside, I read somewhere yesterday that in the past 12 months the USA has "printed" an extra 20% = $3.4 Trillion of all types of the US Dollar in circulation. It is a staggering amount of money. I cannot begin to understand economics, but the news tells you if you print money (read Zimbabwe), inflation will be rampant. Nothing of the sort is happening to the dollar. Before the fiat system of money supply was introduced, everyone knew what the value of money was. It was a certain weight of gold or silver. Today it boils down to sovereign trust and productivity (fiat). Very little of this exists in South Africa today.

The big difference between the Rand and US dollar is that the dollar is a global reserve currency backed by oil. People tend to forget when the dollar went off the gold standard it wasn't left entirely unbacked.

As long as oil has a global demand, the dollar will have a global demand, which will keep inflation at bay for a little longer.

Regards Robert

[GROOVIE COINS 18]

On 2/20/2021 at 2:53 AM, jwither said:

It's a different type of "printing" in the USA versus Zimbabwe.  Not familiar with South Africa but in the USA, currency in circulation has increased noticeably since the 2008 crisis but most of the "money supply" increase is actually debt and the bigger risk is a deflationary credit crash.

The distinction between now and 2008 isn't printing but the "stimulus" which is giving "free" money to those who qualify.  Last year it was up to $1200 the first time and up to $600 the second time.  Right now, up to an additional $1400 is in the pipeline.  I received somewhat less than  $500 for the first installment but do not qualify for the last two.

Unlike prior "printing" which overwhelmingly ends up inflating financial assets and real estate, this "money for the people" does create inflationary pressure, especially in the things people need most to survive.  Now that it has started, this precedent is going to ultimately lead to a form of Universal Basic Income in the upcoming greater depression since the politicians and the Federal Reserve won't have many options.

The worst part of it will come much later though, as those who own most of the wealth aren't about to destroy their own until they have to to save their own necks.  Before that happens, it's overwhelmingly probable that asset prices will crash first and then consumer inflation will noticeably worsen with the policy response.

As for the Rand, my recollection is that it was worth $1.50 USD when I arrived in July, 1972 and $1.15 USD when I left in November, 1974.  But I was very young then, so I might not remember correctly.  Today, it is worth 6c?  7c?

It will be interesting to see how far this stimulus goes in pushing up US inflation. Inflation primarily is caused by much cash chasing few goods, but how does it behave when the supply of goods aren't limited? As long as global production can keep up with US demand, I don't see US inflation spiraling out of control. 

The true question is how long before inflation of the US dollar outside US? Will countries like Saudi Arabia ever have too much USD?

regards Robert

[jwither 17]

7 hours ago, GROOVIE COINS said:

The big difference between the Rand and US dollar is that the dollar is a global reserve currency backed by oil. People tend to forget when the dollar went off the gold standard it wasn't left entirely unbacked.

As long as oil has a global demand, the dollar will have a global demand, which will keep inflation at bay for a little longer.

Regards Robert

The biggest difference with the USD is not oil.  The price of oil (and other commodities) are denominated in USD but this doesn't mean that a seller (such as Saudia Arabia) wouldn't accept an equivalent amount of Euro or GBP as payment.  But whether they (or anyone else) do or don't, it does not change what I write below.  (Yes, I am also aware of claims where the US supposedly forces producers to only use it but I am not getting into that.)

First, demand from interest and principal repayment.  Most of the world's debt is denominated in USD, so as long as the current international order continues where most debtors are required or expected to repay, this will continue.

Second, US citizens and residents are required to pay taxes in USD.  This is multiple trillions per year.

Third, the US government through fiscal policy spends multiple trillions and anyone who wants to do business with it must also accept USD as payment.

The combination of payment and fiscal flows dwarfs any demand from any other source.

It's also my understanding through US legal tender laws that private businesses and individuals within the US are legally required to accept USD as payment, but I don't know if this has ever been tested.  Maybe it will be at some point but it's irrelevant now and won't negate the above three any time soon.

What I described also applies to other currencies but demand for commodity payments alone isn't even close to being sufficient to maintain the USD's current role.

[jwither 17]

10 hours ago, GROOVIE COINS said:

It will be interesting to see how far this stimulus goes in pushing up US inflation. Inflation primarily is caused by much cash chasing few goods, but how does it behave when the supply of goods aren't limited? As long as global production can keep up with US demand, I don't see US inflation spiraling out of control. 

The true question is how long before inflation of the US dollar outside US? Will countries like Saudi Arabia ever have too much USD?

regards Robert

Two questions here:

First, as long as the US continues to run a a balance of payments deficit, the trading partner will be forced to accept USD.  Or they can refuse to trade with the US and attempt to make up the export volume somewhere else.  It's as simple as that.  Individually, one country can exchange their USD for something else but collectively, this isn't possible.  It's basic math.

Second, as for domestic US inflation, you are correct that it's been substantially exported elsewhere through trade deficits.  There has been plenty of inflation in the US, but it's mostly in (financial) assets and a low number of big ticket items like healthcare, "education" and housing.

Healthcare, aka "sickcare", consumes about 20% of US GDP.  It's bankrupting the country.  But in the bizarre world of economic statistics, the more Americans pay for health care, the more economic "growth" there is as measured by GDP, since all it is measuring is the financial value of economic transactions and not actual economic prosperity or quality of life.  It's similar to the "logic" where economic imbeciles think the US should be flooded with immigrants to create growth.

No different for university tuition and housing.  My two degrees cost me $10,000 to $15,000 USD in the 1980's.  A much younger colleague at work paid about $45,000 at the same place for an 18-month "executive" MBA program slightly over five years ago.  Housing which is actually in a bubble (or mania depending upon the local market) is only "affordable" due to artificially cheap credit and absurdly lax credit standards which many here actually consider "strict".  What a complete farce.

The problem with stimulus is that once it starts, it's practically impossible to end it.  Last year, many received more in benefits than they did working, a lot more.  It's going to happen again starting next month, but just at a lower level.  Of course, there is also no fraud since these recipients would never ever simultaneously collect and work a sideline job.  Both within the ignorant electorate and their economically illiterate populist demagogue representatives, many of these people almost certainly believe it's "free" since there are no visible consequences. 

Due to cheap credit and lax borrowing conditions, the US (and much of the world) economy is actually simultaneously in a booming economy and an economic depression.  The country is awash in "free" money even as most people are actually broke and heading for a future crash landing in their living standards.

Edited Monday at 07:46 PM by jwither

[jwither 17]

Here is an article on the "free" money insanity.

How some families could get more than $14,000 in new Covid relief (cnbc.com)