How is South Africa Faring in the World Economy? When Money Destroys Nations Authors Explain (Video and Podcast)
When Money Destroys Nations by Philip Haslam and Russell Lamberti takes a look at the collapse of the Zimbabwean dollar in 2009 after years of rampant money printing.
In their book, the authors makes a case for painful but necessary global reform in this area, illustrating how the collapse of one system can have a ripple effect across the globe.
In September this year, Lamberti was a guest on ZAR Podcast where he attempted to answer the question: “What is wrong with the Rand?”
Lamberti says the Rand’s weak performance is the “net effect of poor policy in South Africa”. He adds, however, that global markets are also putting a lot of pressure on the currencies of emerging markets.
Reflecting on China’s effect on the world economy, Lamberti says the country has definitely been overstating their growth numbers. Not only that, but “the quality of the GDP that they state is so poor”, he adds.
China’s economy is at the back end of a big credit boom that’s now turning into a bust, Lamberti says, adding that they are trying to stabilise their currency by selling off dollars. Listen to the conversation to find out how this development is hurting emerging markets in general and South Africa in particular.
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South Africa is the 49th most competitive country out of 140. Lamberti says that the results need to be treated with caution and explains why South Africa has jumped seven places since the last survey. He says that this rise in the competitive rankings is despite public sector distrust and government involvement.
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Lamberti wrote an article earlier this year on why credit ratings are important. Read the article:
Credit ratings are a big deal because governments the world over borrow a lot of money, usually from banks, large pension and insurance funds (i.e. your retirement money), and other governments. The combined size of all government bond markets in the world is $40 trillion, more than twice the size of America’s entire GDP. The South African government bond market is well over R1 trillion in size and in 2014 alone the government will borrow roughly another R150 billion. Because the SA government bond market is so big and attracts so many foreign lenders, the risk associated with SA government debt affects confidence in the currency and the debt risk profile of large and systemically important borrowers such as metropolitan municipalities, Eskom, Transnet, banks, and other big corporations.
Is gold a viable alternative currency to money? In August this year, Haslam discussed the idea of gold being a silver bullet in his newsletter.
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Gold and Centralised Governments
People often ask me what I think of gold as an alternative form of money and as a hedge against a global currency crisis. It’s not an easy question for the simple reason that you cannot answer questions about the economics of money printing without first discussing the politics of money printing.
When a government prints money on a vast scale, it does so because there are usually no alternatives – debt funding typically dries up and taxation funding reaches its limit.
People aren’t fooled for long – naturally few people want to give hard earned goods and services in return for money created out of nothing. Over time they begin to look for alternatives to the government instituted currency.
Read the Forward to When Money Destroys Nations, written by Leon Louw, Executive Director of the Free Market Foundation:
This is a splendid book with much to offer lay readers as economists. It is a rare example of scholarly substance combined with accessible narrative and human interest. It explains much more than hyperinflation. Readers experience a rollercoaster ride through the ghastly horrors inflicted on entire populations by central bankers and politicians who use money to become diabolical oppressors. It provides disturbing insights into ominous parallels between Zimbabwe’s hyperinflation and profligate polices that have become increasingly trendy in supposedly responsible countries, including the USA.
It is hard to believe that such manifest madness happens at the behest of seemingly intelligent people.
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