Why a weak rand sucks for SA

[Keeper]

Also...for the record: The Res bank's primary mandate is to keep inflation in check, not manage the ZAR. They manage inflation to the best of their ability & let the Rand float where it may. In my eyes this is a pretty solid approach.

Sir, do you know where inflation comes from?

 

[Keeper]

Could I have a link to a source for that? Never heard thats how our currency was valued. I thought it was valued by the market like other currencies.

Do you have a source for this?

A currency is valued by supply and demand. It really is that simple. :erm:

 

[Drunkard #1]

The US unemployment figures are as they are because people who are not looking for work are not counted. As you say the Germans are keeping up but probably not as well as they could but most of Europe isn't. The Germans also don't appear to be too happy about all these bailouts.

You're implying that unemployment has fallen because more people have given up looking for work. I haven't seen any figures confirming that, and don't get the feeling that it's the case. Apart from Germany, I've given up on Europe - too socialist for my tastes.

Yeah but when much of your business is building offices in Century City or selling Nokia phones to poor people and selling them airtime, well I dunno. If we sold this stuff to foreigners, sure. But we sell it to each other and live off each other, while the Nokias and the Windows running in those offices are imported.

Every country has okes selling Nokias to peasants, but successful countries also have companies selling Lodox machines to international hospitals. Problem is, we've got a handful left, and they're all "assessing their options" on a regular basis thanks to our business-unfriendly climate. It really is that bad.

The gold price is tied to the value of the Rand though. Maybe Anglo/De Beers mine it but usually with a higher gold price, Rand usually recovers. Gold is purchased in Rand? Or govt collects some of the revenues in exchange for mining concessions. Why are Nigeria and Saudi Arabia rich even though BP and Shell sell the oil?

Not as far as I can tell. The Rand and the gold price are very loosely correlated. As for oil, the wells are nationalised - BP and Shell buy the oil from Saudi Aramco and Nigerian National Petroleum Corporation JVs.

 

[Drunkard #1]

Wat, US is fine? Are you living up to your name. Remind us again how is their surplus looking like lately.

Yeah, they're really struggling.

 

[Space_Chief]

You're implying that unemployment has fallen because more people have given up looking for work. I haven't seen any figures confirming that, and don't get the feeling that it's the case. Apart from Germany, I've given up on Europe - too socialist for my tastes.

What about this?
http://research.stlouisfed.org/fred2/series/EMRATIO

Employment to population ratio. It's fallen terribly and while it has stabilised, it is not rising.

Every country has okes selling Nokias to peasants, but successful countries also have companies selling Lodox machines to international hospitals. Problem is, we've got a handful left, and they're all "assessing their options" on a regular basis thanks to our business-unfriendly climate. It really is that bad.

Yeah except when you also profit from those Nokias because you assemble them and/or license their IP it works better.

Not as far as I can tell. The Rand and the gold price are very loosely correlated. As for oil, the wells are nationalised - BP and Shell buy the oil from Saudi Aramco and Nigerian National Petroleum Corporation JVs.

Well if the Gold also tanks, it won't be exactly a good thing to add to our worries.

 

[chicken247]

I'm not going to recite econs101 for you. Buy a book or Google it.

Oi! I want to learn what you know to better understand this myself. I am sorry I wasted your time. I thought x = 0.1103 last year march and x = 0.0908 today. Rand vs $ debate is just a country value emo-debate, yes? Individual exported units consists of cost functions. It is a simple sum then. No emotion.

1. No it didn't,

2. How does that help, when we're earning in Rands, or converting to Rands after our exports are paid for, and

3. Labour is by no means cheap in South Africa, and isn't the only input cost.

1. The $ is the world reserve currency?, thus if labour cost does not increase by 20% for local industry exporters after local inflation then it is 20% (min inflation ) cheaper than last year march.
3. I agree that there are many other input costs that need to be considered.
2. I think these crises are often used to force a decision. Politics!

 

[chicken247]

Yeah but probably to get that 20% benefit you'll need to import USD equipment and expertise

Thank you, yes, 80% or more of the JSE top-40 do that , don't they.

 

[Space_Chief]

Thank you, yes, 80% or more of the JSE top-40 do that , don't they.

Yeah but you import stuff bought in USD, GBP, JPY, EUD, etc.

 

[HavocXphere]

Sir, do you know where inflation comes from?

No sir I do not. Mostly because not even the economists can agree on this.

You seem to favour the monetarist school of thought. Alternate views include:

http://en.wikipedia.org/wiki/Inflation#Keynesian_view
http://en.wikipedia.org/wiki/Inflation#Rational_expectations_theory
http://en.wikipedia.org/wiki/Inflation#Heterodox_views

Personally I favour the Keynesian view. They all have some merit so your choice depends mostly on what day of the week it is and/or the alignment of the stars.

 

[farcry]

>> Personally I favour the Keynesian view.
>> They all have some merit so your choice depends mostly on what day of the week it is and/or the alignment of the stars.

I am, and I assume other are, only interested in the truth. No matter if its ugly.

I have spent some time looking at ZeroHedge for the original article without finding it yet.
Fortunately there are many others related to the similar topic "Currency Wars". Google it to find out more if you have not heard of it yet.

Here is a link to an SA written article which gives one a basic understanding. http://www.mises.co.za/2013/01/the-currency-war-for-dummies/

I also recommend looking into how Central Banks (of all countries) control economies (creating and destroy money) and how this ability of creating money allows them to manipulate markets.

 

[Drifter]

Bottom line is, we are fahrked, and getting fahrked harder every day.

 

[w1z4rd]

A currency is valued by supply and demand. It really is that simple. :erm:

So I assume this is your way to not provide a link to bank up your claim that:

We need a currency that doesn't have people in control of unlimited money printing.

Okay, I understand.

 

[w1z4rd]

>> Personally I favour the Keynesian view.
>> They all have some merit so your choice depends mostly on what day of the week it is and/or the alignment of the stars.

I am, and I assume other are, only interested in the truth. No matter if its ugly.

I have spent some time looking at ZeroHedge for the original article without finding it yet.
Fortunately there are many others related to the similar topic "Currency Wars". Google it to find out more if you have not heard of it yet.

Here is a link to an SA written article which gives one a basic understanding. http://www.mises.co.za/2013/01/the-currency-war-for-dummies/

I also recommend looking into how Central Banks (of all countries) control economies (creating and destroy money) and how this ability of creating money allows them to manipulate markets.

Mises... do you know that mainstream economists, see that adherents (as it is faith based economics) of Mises in the same way that biologists look at creationists? Please post from a respected site, not from the extreme far right (and mostly debunked) Austrian school of economics.

 

[Arthur]

Mises... do you know that mainstream economists, see that adherents (as it is faith based economics) of Mises in the same way that biologists look at creationists? Please post from a respected site, not from the extreme far right (and mostly debunked) Austrian school of economics.

Hahaha. What a dilettante. You know nothing of Mises. The last thing you can say is it's faith-based. Most adherents are strong and doctrinaire atheists, as was Mises himself. He spent his life trying to debunk the religious case for the State. He even makes the Celebrity Atheist list. But you didn't know that of course.

A clottish thing to say.

As for Austrian School economics being debunked. Yeah, right. Only by those who follow bunkum economics. But then that's what you'd expect. Just like Marx debunked your liberalism, eh.

 

[w1z4rd]

Hahaha. What a dilettante. You know nothing of Mises. The last thing you can say is it's faith-based. Most adherents are strong and doctrinaire atheists, as was Mises himself. He spent his life trying to debunk the religious case for the State. He even makes the Celebrity Atheist list. But you didn't know that of course.

A clottish thing to say.

Well, I kinda feel that way about most things you say Arthur, so there, our opinions are out in the open.

Austrian economics (or the Austrian school of economics) is a school of economic thought that eschews mathematical modeling and empirical testing in favor of a narrative approach termed "praxeology."[2][3]
As the claims of Austrian economists are difficult to verify through empirical testing (and the same economists openly admit to it), it is generally considered to be a heterodox approach[4] or outright pseudoscience.[5] Austrian arguments as to why statistical methods cannot adequately describe human behavior can seem intuitively compelling, but they fail to provide the mathematical proof demonstrating why normally unbiased estimates suddenly become biased simply because they are dealing with people who make decisions. Perhaps one reason they are so uncomfortable with empiricism is that Austrian economists are more interested in defending the political ideology of libertarianism than they are in advancing economic understanding,[6] and rigorous testing can sometimes undermine deeply held political beliefs.

http://rationalwiki.org/wiki/Austrian_school

Is the Austrian school of economics faith based? Without a doubt. They reject empirical evidence.

Many economists are critical of the current-day Austrian School and consider its rejection of econometrics, experimental economics, and aggregate macroeconomic analysis to be outside of mainstream economic theory, or "heterodox."[7][8][9][10] Austrians are likewise critical of mainstream economics.[11] Although the Austrian School has been considered heterodox since the late 1930s, it began to attract renewed academic and public interest starting in the 1970s.[12]p

General criticisms[edit]
Mainstream economists have argued that Austrians are often averse to the use of mathematics and statistics in economics.[84]

Economist Bryan Caplan argues that many Austrians have not understood valid contributions of modern mainstream economics, causing them to overstate their differences with it.

Methodology[edit]
Critics generally argue that Austrian economics lacks scientific rigor and rejects scientific methods and the use of empirical data in modelling economic behavior.[10][84][92] Some economists describe Austrian methodology as being a priori or non-empirical.[10][20][84][93]

Economist Thomas Mayer has stated that Austrians advocate a rejection of the scientific method which involves the development of empirically falsifiable theories.[92][93] Furthermore, many supporters of using models of market behavior to analyze and test economic theory argue that economists have developed numerous experiments that elicit useful information about individual preferences.[95][96]

http://en.wikipedia.org/wiki/Austrian_School#Empirical_objections

And now a little on Mises

Ludwig von Mises is the patron saint of the Austrian school of economics, although not the actual founder of the school (that would be Carl Menger). He is revered as one of the chief gods of libertarianism for developing the Austrian method of praxeology, which he described as a 'general theory of human action'[1] Mises has had an immense amount of influence on libertarian thought and was greatly admired by the likes of F.A. Hayek, Ayn Rand and Murray Rothbard.
His brother Richard Von Mises was a real scientist and doing actually philosophically important work in developing an early definition for randomness. Obviously, they didn't get along.

First, Mises completely rejects reality positivism and the scientific method in the social sciences and humanities:
“”Praxeology is a theoretical and systematic, not a historical, science. Its scope is human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts. Its cognition is purely formal and general without reference to the material content and the particular features of the actual case. It aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences. Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts.[2]

He then proceeds to derive his immutable "laws" of economics from a single axiom, the "action axiom." Mises doesn't formulate it as simply as his followers like Rothbard, who usually state it simply as "humans act," or "Individual humans act with a purpose," this is the essence of the axiom. Mises, however, distinguishes what he calls "action" from instinctual behavior. Action is defined as behavior that is done with some intention in mind, i.e. a goal-oriented one. While he admits the possibility of materialistic explanations, he argues that the assumptions of dualism and free will are necessary for a "science" of human action. Of course, besides the problem of deriving an entire system of faith-based economics from a single axiom, Mises runs into the problem of making a clear-cut distinction between "action" and "instinct" that doesn't exist in psychology and the cognitive sciences (indeed, he dismisses the whole of psychology, anthropology, etc. as merely "historical" and thus unable to make any predictions). Mises also claims this tautological axiom is irrefutable, and thus a rock-solid basis for all economic theory. If you attempt to refute the claim that humans act, then you are, by definition, acting!
Another flaw in this system is that Von Mises never gave any clear definition of how new theorems are supposed to be proven by this axiom. Methods of mathematical logic that are axiom-lite (like natural deduction or sequent calculus) were just being developed when he started, so it's understandable that he didn't mention them. This doesn't change the fact that in order to prove that this axiom implies any particular thing will require background knowledge, observations and other a posterori, challengable things. So though in theory he developed his system from a single axiom, in practice he added new assumptions ad hoc and use the time honored method of Ipse Dixit to prove them.
Mises was naturally a staunch opponent of Marxism and he held that Marx believed in a fundamentally different logical structure of the mind across different classes. In Human Action, he accuses Marxism of "polylogism," i.e. that different classes use different sets of logic. Mises builds on Menger's notions of subjective value and marginal utility to define people as "economic calculators" (this largely a rehashing of the "economic calculation problem" argument Mises made in the 1920s). The knowledge of prices (which represent peoples' subjective value of goods) is distributed across all people (economic calculators) because value is subjective and thus different for each person. This economic calculation problem provides a philosophical argument against socialism, however, it doesn't make a socialist system logically impossible, e.g., it may just be highly inefficient. As (anarcho-capitalist) economist Bryan Caplan notes:
“”Ever since Mises, Austrians have overused the economic calculation argument. In the absence of detailed empirical evidence showing that this particular problem is the most important one, it is just another argument out of hundreds on the list of arguments against socialism. How do we know that the problem of work effort, or innovation, or the underground economy, or any number of other problems were not more important than the calculation problem?[3]
From here, Mises goes into how awesome completely laissez faire market policy is, gold buggery, and other typical Austrian hijinks. However, sane students of economics probably closed the book way back at the point when Mises declared his "theories" unfalsifiable.

http://rationalwiki.org/wiki/Ludwig_von_Mises

You're all a bunch of socialists.
—Mises on hearing economists debating the merits of a progressive income tax.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.
—Mises endorsing fascism as a temporary bulwark against the commies

There you go Arthur, Mises is exactly the type of person and ideology I would expect someone like you to fall for. Two peas in a pod.

 

[Rkootknir]

You can google "money supply"...they publish it in brackets...Like M1, M2, M3...etc. One containing a broader definition of money vs the next. (maybe I've got it in reverse)

You'll find what you're looking for easily. I haven't checked but I'd call a preemptive BS on the money printing angle.

If there is printing it's marginal. Seasonally adjusted M3 money supply:

01/2008: 1694991 (Before \ during financial crises)
11/2013: 2500311 (Latest available)

Numbers from here: http://www.resbank.co.za/Research/Statistics/Pages/Statistics-Home.aspx

That's an increase of about 6.9% p.a. which is about 1-1.5% ahead of CPI as per StatsSA. If there is more printing than necessary to prevent deflation it doesn't look like it's too severe.

[edit]
I'm not sure if M3 is the right one to use here though - it does include long term deposits and not just liquid instruments. If anybody knows if one of the other indicators is better to use let me know.

 

[Arthur]

ghoti, as per you usual style of quoting other people's ideas - maybe you should read what you quote.

1) "Patron saint" does not mean religion is involved. It's a figure of speech. Where you get the religious/creationist nonsense from is beyond us.

2) Anyone who knows anything at all about Mises knows your attempt to twist a quote out of context is ignorant, cheap, and thoroughly dishonest. He was an implacable foe of fascism, which is just one species of socialism, the kind where ownership is collectivised under the control of an oligarchy. It is no accident Hitler's party was called Socialist, or that Mussolini was a collectivist.

3) The attempt to smear Mises as "unscientific" or "anti-mathematical" are patently meretricious and false. He often said that in the real world mathematical models are unreliable as predictors of what will happen, for the very simple and obvious reason that it involves human choices, and those are not susceptible of mathematical certainty.

The following example illustrates his point: "If it takes one boy two hours to mow the lawn, how long will it take two boys to mow the lawn?" The mathematician-economist will say "why, one hour of course". But in the real world, it just doesn't work like that. In fact, the lawn might never get mowed because the two boys go off to swim. A simple example to illustrate the point that outside of a narrow econometrics (which he fully used, as a finance minister for many years), sociology, anthropology and a whole host of other non-metricable factors come into play. This is obvious and common sense. Trying from that to paintMises as anti-mathematical is a cheap and dirty trick by Keynesians and other statist-collectivist apologists of Big Government. It is a disservice of the truth. Shame on you.

 

[w1z4rd]

ghoti, as per you usual style of quoting other people's ideas - maybe you should read what you quote.

1) "Patron saint" does not mean religion is involved. It's a figure of speech. Where you get the religious/creationist nonsense from is beyond us.

Wow, really? I wish you could apply that logic to what I said

Also, it was not me who made the creationist comment, its how mainstream economists often feel about "economists" from the austrian school of economics:

"One of the questions every great biologist invariably faces is "Do we debate the creationists?" Similarly, all great economists must ask themselves the question "Do we debate the Austrians?" John Maynard Keynes did it in the '30s and won. Now the Austrians are whining that liberal economist Paul Krugman won't debate them."

http://rationalwiki.org/wiki/Fun:Austrian_school

2) Anyone who knows anything at all about Mises knows your attempt to twist a quote out of context is ignorant, cheap, and thoroughly dishonest. He was an implacable foe of fascism, which is just one species of socialism.

He was quoted in context. I just dont think you saw that. It clearly states his comment was in the context of opposing the communists. Dont know how you missed it, but Im not suprised.

Most intelligent economists (you know the main stream guys you hate so much), know a lot of what Mises did was a joke.

3) The attempt to smear Mises as "unscientific" or "anti-mathematical" are patently meretricious and false. He often said that in the real world mathematical models are unreliable as predictors of what will happen, for the very simple and obvious reason that it involves human choices, and those are not susceptible of mathematical certainty.

Actually its 100% accurate and a view shared by most economists, including many of his adherents Im sad you missed wildcats posts on the topic where he spent hours debating how silly empirical evidence was in economics. Even he understood this.... but in his defence, he actually knows more about Mises and the Austrian school of economics than you do.

I miss wildcat. The guy has some bizarre beliefs but at least he could put forward an informed argument.

 

[Garson007]

Germany is doing well because East Germany is a labour camp and the rest of Europe is keeping their currency down.

 

[HavocXphere]

I seem to have attracted quite a few "economists" with my (semi-joking) post.

Germany is doing well because East Germany is a labour camp and the rest of Europe is keeping their currency down.