9. Inflation

In the Sunday Times (July 27 2008) Chris Visser, Sanlam Chair in investment management at the School of Business and management at the University of the Western Cape, says: "Local prices are simply local prices translated via the Rand exchange rate (with some tax)". This simply cannot be true - imagine if the Chair in Economics of Harare said that of the Zimbabwean currency - we would all busrt out in histerical laughter because we know that a "good" currency would strenthen under the condition of other currencies being inflated and the local one not. And stuff in the local currency will cost the same as before.

In a country with a "good" currency the exchange rate reflects good economic policy. What do we mean by a "good" currency - simple, where the money supply is curtailed in relation to the goods and services being produced in that coutry. This is what I learnt in Economics I (which is by the way as far as I got - does it show?).

With my limited knowledge I am not able to say "raise the level of competitiveness on the supply side and prevent excess monetary accommodation that would push the demand side beyond a sustainable level..." But I guess allowing in cheap imports and stop printing money and reduce taxes and government expenditure will do the trick for me - and for the poor and for economic growth and for equality.