Statement on the Reserve Bank
By Dr Mario Oriani-Ambrosini MP

 

National Assembly: Cape Town, 21st June 2011 

Mr Speaker:

 

It is a matter of grave concern that the Reserve Bank has for a second year in a row posted a huge loss. This year the loss is of about 1.2 billion rand which follows last year's loss of about 1.1 billion rand. These losses are motivated by the Reserve Bank's decision to avoid further artificial appreciation of the rand under the action of speculators. By leaning against the market the Reserve Bank is incurring into losses, effectively buying rands expensively and selling them cheaply. It is also incurring losses by, as they put it, "sterilising" the effect of this operation by retrieving rands from the market place to avoid inflation. The sterilisation account is a government account and these operations are conducted at government cost, with the taxpayer being finally responsible for the payment of debts caused by the Reserve Bank's strategic failures. 

 

Where we met with the Governor of the Reserve Bank she and her advisors clearly put it to us that is it futile to contain the appreciation of the rand by means of market operations of this nature, yet they are doing it.

The appreciation of the rand is destroying our industrial basis and undermining all privately driven efforts to generate employment in this time of crisis.

 

Two years ago we pointed out that the only sustainable strategy to deal with the present situation is that of seriously cutting interest rates.

 

The Reserve Bank admits that the main cause of the appreciation of the rand [which is the main cause of them trying to lean against the wind, which is the main cause of their cumulative 3.3 billion rand losses] is the fact that our interest rates are now higher than those of competing countries with a similar credit profile. Foreigners buy our treasury bills because they have a greater yield. 

 

However, we cannot pursue the sane financial course of action, which is cutting interest rates, because we need to continue to finance our ever increasing deficit and national debt with new issues of treasury bills. In the older days the debt trap was exclusively when one had to borrow to finance the debt.  Nowadays we must identify a debt trap also in the situation in which we are forced to borrow at the detriment of our economic recovery, expansion of industrial basis and employment of generation. We are now in the second type of debt trap. 

 

The Reserve Bank continues to conduct policies which are not in line with government priorities in respect of employment generation, trade and industry. The root cause of this ever increasing divorce between the general interest and the interest of the banking community enshrined within the Reserve Bank lies in the long overdue reform of the monetary system.  Many of the functions which have been historically privatized through the concept of a central bank ought to be returned to the treasury, especially those which relate to the power of seigniorage. The day in which once again the people will become the owners of their money and the treasury will be able issue debt free money rather than having to borrow it at an interest, problems of this nature will no longer occur. 

 

The emancipation of working people and family alike requires that due consideration be given to eradicating the root cause of all social evil within modern society, which lies within the expropriation from the people of the sovereign power to issue their own currency, forcing our treasury to be unable to print a single rand while having the freedom to borrow as much as our foreseeable national debt of 15 trillion rand with no limit or concern for as long as it does so at an interest to be paid to the international money trust.

 

Contact: Dr Mario Oriani-Ambrosini MP, 082 556 0240