Repo rate cut by 50bps

NarrowBandFtw

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View attachment 844539
Selective quoting is very nice.
Yeah except you are the one doing it. The whole thing is a detailed explanation that specifically says the part you quote is the simple way and goes on to say the older definition is precisely what I have been saying all along it was and the newer definition is aligned with the "simple way"

i.e. the entire thing states what I have been saying, more than happy to quote it all if anyone cares to read it
 

rietrot

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fixed amount != fixed value

inflation in the sense of currencies of course always refers to the amount increasing (and the value decreasing as a consequence)

so when I say "can't be inflated" I'm referring to the inability to create more of it, not any limitation on the value of it, though the natural side effect would be an increase in value of time
How do you set the limit? What about population growth?
 

NarrowBandFtw

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How do you set the limit? What about population growth?
You don't set the limit and leave it to nature e.g. gold
Or you do set a limit e.g. crypto

What about population growth? As the value / purchasing power of the currency increases, smaller units of it become valuable. As long as it can be divided there is enough to go around to cater for new entrants to the market that provide enough value to justify getting paid.
 

netcruiser

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I tell you what, find me any economic textbook or published journal article that uses or defines the term inflation in any other context other than in reference to an increase in the general price level (and without an explicit reference to a different meaning).

Economists will talk of money supply growth, not money supply inflation.
Actually its common in the Austrian school of economics to refer to monetary inflation as inflation. But most people are Keynesians these days, so its not common yes.


"Some followers of Austrian School economics see monetary inflation as "inflation" and advocate either the return to free markets in money, called free banking, or a 100% gold standard and the abolition of central banks to control this problem. "
 

HeftyCrab

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Is now a good time to to buy a place?will rates go any lower and how quickly will it go up again?

Unless you take a fixed rate (which usually has some fat added on by the bank so not usually worth while) your lending rate will also fluctuate.



Now might be good, or it might get even better later on if/when the economy implodes. We will never really know what the future holds so if you want to buy just buy.
 

STORMERSFAN

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Unless you take a fixed rate (which usually has some fat added on by the bank so not usually worth while) your lending rate will also fluctuate.



Now might be good, or it might get even better later on if/when the economy implodes. We will never really know what the future holds so if you want to buy just buy.
Thank you.. I work for a bank and we get prime - 2..which would make the rate 5.25..but Im still a bit scared.. Cause what goes down must go up.. It just depends how long it takes to go up as my salary will normally go up on average 7.5 %per year(on average for the last three years)
 

HeftyCrab

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Thank you.. I work for a bank and we get prime - 2..which would make the rate 5.25..but Im still a bit scared.. Cause what goes down must go up.. It just depends how long it takes to go up as my salary will normally go up on average 7.5 %per year(on average for the last three years)

I think the biggest saving you will get will be from deflated prices due to the bad economy, so even when the rates go up you should still save long term. It all depends on your risk appetite.



As an example, the house I bought a few years ago was bought by the previous owners in the 2008 recession, and then they sold it a few years later to us (for a good price) and still made several hundred thousand rands in capital gains due to the market price correction.
 

dyllindd

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I.e. getting unearned income. Nope, don't feel sorry for them.
To be clear, there is a difference between saving money and getting interest just to keep up with inflation (unfortunate by-product of a parasitic financial system) and investing money just to earn interest as an income. The latter parasites can get rekt, hopefully the former don't lose.
I think unearned income might be a bit of an overstatement. There are a lot of elderly people in the country that use the interest from savings in addition to their pensions to make ends meet. If you earn significant amounts of interest from savings and investments, you end up paying tax on it as well.
 

dyllindd

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I think the biggest saving you will get will be from deflated prices due to the bad economy, so even when the rates go up you should still save long term. It all depends on your risk appetite.



As an example, the house I bought a few years ago was bought by the previous owners in the 2008 recession, and then they sold it a few years later to us (for a good price) and still made several hundred thousand rands in capital gains due to the market price correction.
Agree completely. Also work for a bank. I am looking at buying my first property. Only thing I can't seem to see are the deflated house prices. Estate Agents are becoming worse than used car dealers.

I was recently in contact with an agent about a Linden Property that had been listed since March 2019. Wanted to enquire about a possible OTP on the property below the listed price. Was told outright that no offers would be accepted. As a show of good faith I provided her with a pre-approval for the offer amount and was still being shot down. After reminding her that she is legally obligated to present each offer to the seller, she is suddenly struggling to get in contact with the seller for feedback...
 

Techne

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Higher interest rates put downward pressure on prices - this is economics 101.

Could you give one potential benefit of deflation?
Fair enough, you are right that higher interest rates put downward pressure on prices but that is not the full story. Why do interest rates influence prices?
Part of the answer has got to do with money supply.
Lower interest rates --> promotes borrowing --> Increased money supply --> Inflation (and with inflation I mean "prices go up" and/or "value of money decreases").
And:
Higher interest rates --> decreased borrowing --> LESS increase in money supply --> LESS Inflation (or disinflation).

As long as there is borrowing from banks there is an increase in money supply (the current monetary system considers debt as an indicator of money supply) and this contributes towards inflation and debt that can never be repaid anyway.

If we go into negative interest rate territory then private banks do not want to lend any more money because they don't make any money from lending at negative interest levels. Also you will see that those that can pay off debts will do so quicker because of the negative interest rates and both these factors will cause deflation in monetary supply.
The following effects will be seen:
1) People that were struggling under debt will have more spending power (due to less money going towards paying off debts) and this will keep the economy going for a short while.
2) People relying on positive interest rates for income will have decreased income. And this unfortunately includes pensioners. But this also includes private banks.
3) Asset prices will decrease and will force renting income to decrease (either that or no-one will have the ability to rent anymore).

The biggest issue will be those that rely on interest rates for income to pay off their debts. They won't be able to pay off their debts.

Deflation will thus force at least one of the following options to occur:
1) Governments can print money and give it to private banks so they can lend it to people and hope the economy bounces back. This is what is happening in the US and it is the worst solution IMO.
2) Governments can print money and invest it in people's businesses to help them stay afloat and help the retired as well. Government can lend money at zero percent interest over a set (reasonable) period of time. This will have the added benefit of decreasing the relevance of private bank interest and fractional reserve lending BS.
3) Governments can force the private banks to write off debts (only those that cannot ever be repaid, a debt jubilee).

So, if deflation results in option 1 then I consider it terrible. If deflation results in a combination of options 2 and
3 then I say go for it.
 
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Techne

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Great. My retired parents are now parasites because they managed to save and put away money for retirement. They are living off the interest from those savings which has taken a massive hit this year.
I think unearned income might be a bit of an overstatement. There are a lot of elderly people in the country that use the interest from savings in addition to their pensions to make ends meet. If you earn significant amounts of interest from savings and investments, you end up paying tax on it as well.
Yeah they used a flawed system we all have to use. It sucks. They, like most decent people believe that saving money for your old age is a good thing. But a monetary system that considers debt (coupled with interest that essentially makes the debt unpayable) as an indicator of money supply was always going to favour those that go into debt and eventually screw over the savers. The absolute worst pensions are those where the saved money is almost completely tied up (you can take it but incur BIG tax penalties, which is most of them) to generate income from the interest and given to the investors when the person dies.
 
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rietrot

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Yeah they used a flawed system we all have to use. It sucks. They, like most decent people believe that saving money for your old age is a good thing. But a monetary system that considers debt (coupled with interest that essentially makes the debt unpayable) as an indicator of money supply was always going to favour those that go into debt and eventually screw over the savers. The absolute worst pensions are those where the saved money is almost completely tied up (you can take it but incur BIG tax penalties, which is most of them) to generate income from the interest and given to the investors when the person dies.
You get interests on savings aswell and it actually compounds.

You are mistakening features of the system as flaws.
The debt (as in money supply) is never meant to be repaid. If it was there would be zero money in circulation. Interest rates are needed so that money aren't worthless pieces of paper.

There's more value (assets) in the world than debt money, so the books balance.
 

JurgensBeMe

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Thank you.. I work for a bank and we get prime - 2..which would make the rate 5.25..but Im still a bit scared.. Cause what goes down must go up.. It just depends how long it takes to go up as my salary will normally go up on average 7.5 %per year(on average for the last three years)
anything under prime is decent. Just don't blow your money on the first house you see. It is going to be a buyers market for houses like this country has probably never seen before. if you got the means to buy a house now, you are going to get great deals, just take your time and shop around.
 

Techne

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You get interests on savings as well and it actually compounds.
Unearned income that needs to be abolished or taxed heavily.

You are mistaking features of the system as flaws.
Or they are just flaws of a flawed system that everybody just happen to use because they don't know of anything better. Sort of like swimming in a sewage river your whole life and saying the turds are features of the river.

The debt (as in money supply) is never meant to be repaid. If it was there would be zero money in circulation. Interest rates are needed so that money aren't worthless pieces of paper.
Government debt yes but it is only a fraction of the money supply.
Private banks most definitely want their debts to be repaid with interest of course so they can lend it out again.

And this is where the problem (or the turds in your turd river) lies. Private bank interest is parasitic on the economy.
A simple example is when the government increases money supply by printing 1 million and "selling"/giving it to the banks. The banks then lend out 10 million to users. So this increases the effective money supply by 10 million but due to interest the amount owed to the banks is more than the actual increase in money supply. For a short while this stimulates economic activity until the interest owed grows too much. Banks then get bailed out, rinse and repeat until printing money no longer helps.

There's more value (assets) in the world than debt money, so the books balance.
Assets are useless without money supply and you can argue that the opposite is true. What you have there is a tautology.
 
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