National Assembly: Cape Town, 21st June 2011
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
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
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