Someone stop Tito please!
2008-06-04 08:42
Max du Preez
Will somebody please stop Tito Mboweni in his tracks? The man is like the Terminator, unstoppable in pursuit of a singular obsession, no matter what destruction he causes.
I'm talking about the Reserve Bank governor's unhealthy obsession with raising interest rates to contain the rate of inflation. Repeat a thousand times, Tito: It doesn't work, it doesn't work!
Actually, that's not true. Raising interest rates does work - for the banks. It does not work for the poor and it does not work for middle class people. Hiking interest rates certainly has never had any real impact on the inflation rate.
Let's talk about the middle class first. If you're reading this, you're probably a member. Well, let me tell you, Tito is going to make you a lot poorer by the end of next year.
We are the people who pay thousands every month on the mortgage on our homes and on our hire-purchased cars. Tito's robot-like raising of the interest rate whenever he's in the mood has already seen to it that your property is worth a lot less now than last year - and you're paying more and more for this withering asset.
I've never understood the logic of making people pay more for the same things in order to combat inflation. Surely inflation would go down if people spent less and saved more?
Flies in the face of analysis
Well, it seems I'm in good company. Professor Joubert Botha, former professor of economics at Wits and past president of the Economics Society of South Africa, declared in an open letter to the Reserve Bank this week that the belief that there was a direct relationship between prices and the interest rate "flies in the face of two centuries of economic analysis by the founding fathers of monetary economics".
Botha believes external factors are too strong for the Reserve Bank to reduce price levels. But if anything is to be done, it would be through controlling the credit banks can give. (Pow! I just heard a series of heart attacks in the newsrooms of our business publications. And a primal scream from a multitude of throats: This is socialism!)
Talking about credit - can you believe that right in the middle of this economic crisis, in fact only two weeks ago, Nedbank sent me (and, I suppose, tens of thousands of others) an SMS encouraging me to take out a loan of R100 000!?
Yes, we middle class people will pay dearly for Tito's obsession, and some of us will lose our homes and some our businesses in the next year. The rich (like Tito) won't even feel the pinch.
Freeze the rate!
But don't feel too sorry for yourself. The poor will suffer a lot more.
It seems as if it will take full-on food riots for Tito and the other two suits at the controls of our economic policy, Trevor and Thabo, to realise that the sky-high fuel price and soaring food prices are preparing the ground for a dangerous destabilisation of our society. It was no coincidence that the xenophobic attacks in our poorer townships occurred now.
Yes, there are steps the government can take to prevent this from deteriorating into a catastrophe. Start by freezing the interest rate - even better, cut it by three percent.
Next step: cut the tax on the petrol price in half (about 20% of the money you pay at the pump goes to the government).
And then swallow your pride, Thabo and Trevor, and institute a monthly Basic Income Grant of, say, R150 per family. The least we can do is to see to it that all our children have at least one meal a day.
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Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24. News24 editors reserve the right to edit or delete any and all comments received.
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