TREVOR MANUAL will come to rue the day he chose to support the Dollar and devalue the Rand. South Africa’s entry into financial markets has literally cost every man, woman, and child R6000*. In an instant we have wiped out the gains of the last five years, pushing the currency back to levels that are dangerously close to the devaluation which occurred during the mid-nineties. The Reserve Banks activity in buying the Greenback shortly before the devaluation should become a subject of public inquiry, since in so doing, we have allowed our country to yet again become the slave to Wall Street Bankers.
The recent crisis in capitalism comes after the market in derivatives based upon junk bonds was allowed to get out of hand, forcing the collapse of several banks including US Treasury’s Fannie Mae and Freddie Mac. To call it a “sub-prime” crisis is to miss the point about junk bonds. The continued use of complex derivative schemes that leveraged assets that did not exist, or had little worth in the real world from an equity perspective remains. The problem of what Joseph Stiglitz calls “the phantom economy” , in other words, a false economy, is the result of the abandonment of financial regulations in favour of a wholly deregulated market – George W Bush’s supposed radical reforms. The role of the South African Reserve Bank in the critical period before the devaluation needs to be to be investigated, but is not all that surprising, since the Bank has continued to allow itself to be drawn in as a guarantor of last resort, even for debt that it does not own, propping up the system with tax-Rands.
We saw this happen during the last two devaluations. The post-apartheid financial crisis of the mid-nineties, and the crisis immediately following the dot.com meltdown where trades based upon the false supposition that there was infinite growth on the Web came to an abrupt end, tumbling down as the reality of money supply overtook the tulip-mania inspired by an illusion painted by bespoke market analysts and so-called “rocket scientist-economists”.
While a lot is being said about Joseph Stiglitz’s “phantom economy” not enough is being said about the role of the media in amplifying the Wall Street experience, in effect forcing the rest of the World to regard the global economy through an up-market American lense.
There is a real danger in today’s’ modern interconnected world that we will repeat these boom and bust cycles with ever-increasing speed, as entirely inappropriate responses, become increasingly built in to the programme, resulting in an overheated spiral into nowhere, such as Manual’s own miscalculation over the worth of the Rand bailout, amplified by the technology that drives our mindset, and which will cause further problems for economies down the line, that have very little floating on Wall Street.
Those moved by the sight of Wall Street traders crumbling because of an apparent economic downturn — a technology-driven financial cycle seemingly pointing to a nadir resembling the Great Depression on paper, need to pinch themselves, wake-up, can one really trust the “facts”, from an unreliable media, bedazzled by US-based economists? Can one blame those who have never experienced prosperity or the “good times” for turning a blind eye, and basking in schadenfreude – those who have been excluded from the global economy and who have never had a stake in the financial system – a system which Trevor Manual is so intent on protecting?
There is very little left to be said for Manual’s G8 policies or the Tito Mboweni dance on interest rates for that matter, except enough is enough, the Congress Party has had its day, bring in the National Convention and save the Rand.
* That’s R6000 x 47 million people = R282 billion