Government may fix the Rand

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boramk

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Cape Town - Ebrahim Patel, Minister of Economic Development, is preparing to propose "radical" economic policy adjustments after the considerable strengthening of his support base in the past 48 hours.

These include a controversial proposal to freeze South Africa's currency at a predetermined exchange rate, so that the economy can benefit from the stability of the rand, which is coupled to an external standard.
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I think it's a terrible idea

What you guys think?

http://www.fin24.com/articles/defau...icleId=1518-25_2558062&IsColumnistStory=False
 
Sure they can freeze it: at R1/1$. Being completely selfish, I'd like the Rand to strengthen a bit so that importing is cheaper.
 
I don't know what effect this will have.
I do know that I can budget easier on exports.
I think that imports will be a matter of: How on earth do I get my hands on some Dollahs?
 
Umm ... so who's going to force the USA to pay $1 for each R1 we offer them?
No matter what we freeze the rate at, real-world economics will pull that rate out of kilter with actual parity.

This type of thing only leads to black-market currency trading, which consequently further undermine the "official" currency, which leads to galloping inflation.

No-one benefits from a high inflation rate!
 
I think it will be closer to R10=$1. They want to get maximum money from exports.

If they really want to do this, they should rather go for the Euro.
 
Strange. The moment I read this a tune popped into my head.

It goes like this - 'Zim, Zim, Zim .. Zim .. Zim .. Zim ....... ZIM!!!
 
Are you people serious? 1:1? And our exports? We already have a trade deficit. We will have spiralling debt! Whose going to finance the excess demand for supply? We don't have the foreign currency for that... And come the next recession, SA will be fu kd... Shift to the left indeed
 
fix the exchange rate may be the good idea, but .....

1) do SA has enough reserves to maintain the exchange rate? If not, the story will like Thailand in 1997 - 1998, all companies bankrupt!
2) which country currency rand will bond with? USD? EU? or zim$? that is a tricky question.
3) what is the level of the exchange rate? If too high, bad for export; if too low, bad for import. To find out the exchange level which is suitable to both will be very difficult.

Hope that ANC government have the knowledge for that, if not, just a suicide. ;)
 
This is bound to be opposed by those who benefit from fluctuations.

As for economists they can't come to any agreement on what works, what doesn't, what's coming, why what just occurred happened; they might as well be using tea leaves and throwing the bones.

I'd say pegging your currency like most things has pros and cons. It's certainly not all con as the mere two commentators in the article would have us believe. At the same time I don't trust the ANC circus to have evaluated this properly. Their problem is that they don't have an actual strategy, just a bunch of random quick fixes which ultimately result in a mess because they're incoherent.
 
How can one fix the exchange rate? Isn't currency almost a willing buyer, willing sellfe method? I'll sell my rands @ such a amount of dollars or I'll accept so many rands for a dollar etc?

Eco guru's, explain please.
 
Kosmik said:
How can one fix the exchange rate? Isn't currency almost a willing buyer, willing sellfe method? I'll sell my rands @ such a amount of dollars or I'll accept so many rands for a dollar etc?

Eco guru's, explain please.
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That would be the floating exchange rate. What we and most of the world uses. The value of our currency is governed by the laws demand and supply ie willing buyer willing seller. Fixing an exchange rate involves setting it at a price and keeping it there artificially by selling excess stock and buying excess supply. We need large reserves to do this. SA don't have large reserves, we already in deficit. Only a country like China will be able to pull this off, and they are
 
That's the problem with rate-fixing - it's like trying to put brakes on a ship in the middle of a storm. The rest of the world isn't similarly fixed or willing to recognize your rate. I don't even see why it's necessary - the Rand is an excellent and stable currency.
 
cerebus said:
That's the problem with rate-fixing - it's like trying to put brakes on a ship in the middle of a storm. The rest of the world isn't similarly fixed or willing to recognize your rate. I don't even see why it's necessary - the Rand is an excellent and stable currency.
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I agree, we've been pretty stable for a while now.
 
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