Smart Banking Guide

South African Reserve Bank Nasty Interest Rate Manipulation

Written on November 2, 2008 – 4:58 AM | by dodolovesme

It is understandable for the depreciating rand. According to the September report of IMF, the Rand is overvalued for the past few years. South African government hopes to increase the interest rate to backup the depreciating rand. It works for the past 6 years. The Rand did very well in 2005 and 2006. The best price is 5 Rands to 1 US dollars. South African Reserve Bank did a good job to manipulate the interest rate to hold up the Rand value. Even in the disaster October, the new financial minister was still keeping optimism of the South African Economy given the facts American and European banking bailout. The new financial minister has stated no interest cut for South Africans. The all way high claiming interest rate increased more than 5% in last 38 months. The soaring food price, the high mortgage payments, and lots of family given up the food they used to have, young couples get used to stay with parents.

If you pay attention, you won’t be surprised the South African Government is hurry buying back the land from the bankrupt farmers. In the past 3 month, South African Government spent 7 billions in repossessed land.

Are South African government nasty manipulating Rand to realize their wealth redistribution strategy? First BEE, second long term planned land possession.

“The huge decline in the south African Rand in October has placed pressure on the South African external debt position and financing requirements, increasing dangerous exposure to shifts in market sentiment and speculative attacks” from economy.com

Let’s look again the Rand depreciation. The global economy hits hard on Rand. It reveals the real value of Rand. When the foreign investors have no confidence in the sinking global economy, they withdraw their investment and convert to safe dollars, Euros, Sterlings holdings which highlighted the hidden overvalued Rand.

Speculative attack? If foreign investors don’t think South African nasty financial and government policies hurt their profit, they will come to inject investment to meet South African financing requirements.

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Tags: economy, government, interest, Interest Rate, investment, rand, SA reserve bank, south african, south african investment