Pegging inflation is not enough

The meeting of the Reserve Bank's Monetary Policy Committee has come and gone.

The meeting of the Reserve Bank's Monetary Policy Committee has come and gone.

The poor are left reeling from skyrocketing interest rates and consumer price hikes, especially as far as petrol is concerned.

RT Naylor wrote in his book, Hot Money, published in 1987, that: "In the late 1970s governments in the major Western countries declared war on inflation. Inflation usually won."

Tito Mboweni and the Reserve Bank seem not to be winning the war against inflation. Will they now stop increasing interest rates because they are not winning?

When interest rates go up they create a "credit squeeze".

This is unfair. It benefits lenders and speculators. Naylor says that only crank academics will subscribe to the doctrine that to control inflation it is sufficient to control the supply of "money".

He says behind the revival of this formula there is a long discredited political theory - that debtors, whenever possible, will use their allegedly superior political power to increase the money supply in order to inflate price levels, thereby reducing the real burden of their outstanding debts, which could be repaid in a depreciated currency.

Is it not about time that we revisited the private ownership of the Reserve Bank?

Sam Ditshego, Kagiso

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