Friday, November 05, 2010

US $ the reason for all that is wrong in SA?

I am at a loss for words when I read something like this.

Europe is South Africa’s biggest trading partner, and not the USA.

It is very obvious that the US economy has a big impact on the rest of the world. If it goes badly in the US, believe me, it goes worse elsewhere.

But back to the criticism by Pravin Gordhan. This sounds like an ideal excuse for the high Rand value now, does it not?

Why should the US care for South Africa, if the South African government and the “average” South African are trying their best to be as unproductive as possible?

At least this is forcing South Africa to reconsider its exchange control.

Now for another question that is in the back of my mind. What impact is this going to have on Zimbabwe that only uses the US $ ?

S.Africa joins chorus of criticism on US Fed policy
– Fri Nov 5, 11:59 am ET
JOHANNESBURG (AFP) – South Africa's finance minister on Friday criticised the latest US decision to pump more cash into the faltering US economy, joining China and Brazil in warning the move would hurt emerging markets.

"Developing countries, including South Africa, will bear the brunt of the US decision to open its flood gates without due consideration of the consequences for other nations," Finance Minister Pravin Gordhan said in a statement.

"The move by the USA will force developing nations to take more steps to mitigate the impact of the increased flows into their financial markets."

Gordhan said he was "disappointed" the US Federal Reserve had decided to inject another 600 billion dollars (422.5 billion euros) into the economy without waiting for next week's meeting of leaders of the Group of 20 nations in South Korea.

"The USA's decision undermines the spirit of multilateral cooperation that G20 leaders have fought so hard to maintain during the current crisis," he said.

"Most of the 600 billion dollars that the Federal Reserve will pump into the USA's economy will find its way into the financial markets of emerging market countries, where these dollar flows will have the effect of strengthening emerging market currencies."

South Africa has seen its rand rise 47 percent against the dollar since November 2008, as investors seeking higher returns in emerging economies have poured capital into its financial markets and driven demand for the local currency higher.

The country's export sector is pressuring government to take measures to weaken the rand, saying its strength is hurting the competitiveness of South African products.

Gordhan last week announced the country would ease its exchange control rules in a bid to rein in the rand.

3 Opinion(s):

kilimanjaro said...

On the other hand the theft of the R could just keep on at the current rate to the point where there is nothing left to steal. That should weaken the Rand considerably and be excellent for exports

Dachshund said...

South Africa is not at fault for what's happening in America. There is nothing we can do to stop the Americans printing money to try to stop their markets from crashing. But crash again they will, the odds are 75% that the US goes back into recession next year. The exchange rate prognosis is R5.50/$, and that'll continue for at least another two years. The problem in the US is that the fundamental causes of the recession have not been addressed. Most of Europe, with the exception of the dim witted French, has realised what needs to be done. So does the UK know what needs to be done. Even so, the odds of Europe going back into recession next year are around 50%. The next imminent recession in the US and Europe is not going to be good for SA, but we're not likely to be hit as bad as the first world. The developing world has a strong appetite for our resources.

Anonymous said...

In the Us they have a saying:

"If the democrats are in power we have more of the same and if the republicans are in power we have less of the same."

People have woken up to the illusionary myth of democracy, whereby the two representative parties are two arms belonging to the same body.

Quantitative easing does not work, as all it does is to increase the national debt. The privately owned, US federal reserve prints money - out of thin air - which it then lends, at interest, to the
United States government.

To print more money, means more debt, not less.

The tea party folks have begun to realise the implications of having a dept based economy and that the only way out of this system of enslavement would be for the US to default on its dept. Very, very painful, but very, very necessary.