Money Myth Matters … Mini-Post № 1
Is Tito preparing
an IMF financial parachute?[i]
South Africa
already has more foreign debt than it can pay back yet Minister Mboweni is at
it again.
The common view is
that on his beg request the (say) IMF[ii]
will scurry throughout Europe with a collection-box explaining SA is in the
crap again; please give generously. The €-billions raised will be converted into US$[iii]
and the dollars sent to Pretoria from where Ramaphosa will dish them out and save
the country.
The con doesn’t
work that way.
Yes, SA will be
granted a loan - for the lender it is free and guaranteed income for years to
come. Some Party-aligned minister will
sign to pay back the foreign currency - not the (weakening)
Rand equivalent. And hesheit will agree to pay interest, not on the
(weakening) Rand equivalent balance but on the unpaid balance of the foreign currency.
But nobody will
collect €uro and no big European bank will send any cash. What happens is the SA
Reserve Bank or a private profit-making bank,
or a collection of private profit-making banks
in SA (Standard, Nedbank etc.) will be ‘authorised
digitally’ to issue the Rand equivalent of the loan based on the conversion rate of the day.
‘Where does the
South African bank get the (‘authorised’) money from? It creates it out of
nothing (thin air),’ explains Professor Richard Werner[iv].
What really happens is the lender bank (IMF in my example) borrows the money
from SA’s banking fraternity, locally in SA, and then lends it back to SA. ‘It was all a big con.’ [v]
Uncontrolled debt leads
to bubbles, lower living standards, fewer jobs. Debt used for non-productive
purposes leads to total national collapse. So why does SA still play the
finance game according to rules that were redundant 100 years ago?
Surely doing things
locally is the way to go? If a district in Limpopo needs money to develop
wouldn’t they be better served by a local bank
vetting the project and issuing local money[vi]?
Of course, they’d have to find honest bankers and real projects.
If you don’t like noose replacing parachute in the
heading how about,
‘Is Tito about to seek IMF help to finalise the making of the
remaining whites the scapegoat for deeper poverty?’[vii]
A ‘loan’ together with a Structural Adjustment
Programme will do it.[viii]
[i] In a long effort my favourite SA money-knowledgeable professor,
Patrick Bond, explains how deep the hole is. https://mg.co.za/article/2018-12-18-00-is-tito-preparing-an-imf-financial-parachute-now-a-171bn-foreign-debt-cliff-looms?
[ii] Captured by the major western banks the IMF is run by Christine
Lagarde. She was found guilty of “negligence” involving R6.5-billion back in
the days when she was French finance minister – makes her eminently qualified
to deal with the SA government?
[iii] Because that’s the demand of the US banks (backed by a brutal
military) and if you don’t like moving in and out of the US$, tough.
[v] Beginning at 29.32
into the video. Richard Werner is essential reading/listening for anyone
interested in looking after their own money.
[vii] It looks as though it
is happening … Fin24 headline today … ‘IMF head Christine Lagarde in SA, will
meet with Ramaphosa and Kganyago’
[viii] Where there is smoke …
Bombshell plan to lay off 30 000 public servants | News | Politics | M&G
