RAND MANIPULATION – What the hell is it and why should you care??
For a really simple explanation and breakdown – let’s imagine you’re playing a game where you and your friends trade stones (For whatever reason ya’ll would be trading stones, but I reckon its a good simple start). Each stone has a value, just like different types of money (like dollars, euros, or in this case, the South African Rand) have different values. Now, suppose some of your friends are responsible for deciding how much each stone is worth. If they’re honest, everyone gets a fair deal. But if they’re not, they might make some stones seem more valuable than they really are, to benefit themselves.
In South Africa, something similar happened with their money, the Rand. Some banks, which are like big shops where people keep their money, acted like the friends who were supposed to fairly decide the value of the stones. However, instead of being fair, these banks secretly worked together to change the value of the Rand. This is called collusion. They would make the Rand seem less valuable than it really was. This is called manipulation.
Why did they do this? Well, by making the Rand less valuable, these banks could make more money when trading currencies, like if you traded a stone you said was worth less for one you said was worth more. It’s like having a secret advantage in a game, which isn’t fair to others playing.
This manipulation isn’t just unfair; it’s against the rules. It can hurt a lot of people, like making things more expensive in South Africa or affecting people’s savings. So, it’s really important for banks to be honest and for there to be rules to make sure everyone plays the game fairly.
How does this impact negatively on inflation, interest rates and fuel prices in South Africa???
1. **Inflation:**
– Imagine if you had a certain amount of money to spend on your favorite snacks, but suddenly the price of everything in the snack shop went up. You could buy fewer snacks with the same amount of money. This is similar to what happens with inflation.
– When the Rand’s value goes down because of manipulation, it means that everything that South Africa buys from other countries becomes more expensive. This is because they need more Rands to buy the same amount of goods. As a result, the prices of many things in South Africa, like food and clothes, might go up. This overall increase in prices is called inflation.
A simple practical example is if you are buying a watch from America that costs $100.00, if the rand is R10.00 to the dollar then you would pay $100.00 X 10 = R1 000.00, so you would pay a thousand Rands, but if the Banks manipulate the Rand to a point that it peaks at R20.00 to the dollar, then you would pay R2 000.00 / two thousand Rands to the dollar, which is twice the amount you should have initially paid. If you are then reselling the watches, that would mean you as the seller in South Africa would have to sell at a higher price… This is the reason we have been seeing grocery and other items skyrocketing in prices.
2. **Interest Rates:**
– Interest rates are like the extra amount you would pay if you borrowed money from a friend, or the extra amount your friend would give you if you lent them money.
– When the Rand is weak, the central bank of South Africa might increase interest rates. They do this to try to control inflation and to make the Rand more attractive to investors. Higher interest rates mean people and businesses pay more when they borrow money. This can slow down spending and investment, which can be bad for economic growth.
This impacts car financing and bonds, we now have to pay higher interest rates on a monthly… there has been a great deal of talk around how this has impacted South Africans, low income earners and middle class – with people losing their cars and houses (repossessions by the banks – the same people who caused the issue in the same place).
3. **Fuel Prices:**
– Think of fuel like a special kind of snack that cars need. South Africa buys a lot of this “car snack” from other countries.
– When the Rand’s value decreases, the cost of buying fuel from other countries goes up, because South Africa has to spend more Rands to get the same amount of fuel. This means the price you pay for fuel at the gas station goes up. Higher fuel prices can also make transporting goods more expensive, which can increase the prices of many other things too – goods sold across the country!! Don’t get me started about the petrol and diesel costs!!
So, when the Rand’s value is manipulated and decreases, it can lead to higher prices for a lot of things (inflation), make borrowing money more expensive (higher interest rates on loans, credit cards and your bond), and increase the cost of fuel, which affects almost EVERYTHING in the economy!
Why should you care and why should you be mad? A lot have said that this criminal acts amount to treason (Treason is the crime of betraying one’s country, especially by attempting to kill or overthrow the sovereign or government. It typically involves acts that are considered harmful to the state’s security or the interests of the nation).
You aught to be concerned and mad due to how much your groceries have significantly skyrocketed and essentially making us all a bit poorer by the day as our salaries have stayed flat, you aught to be mad due to the high interest rates that directly impact how much you paying a month on your house and your car finance, your petrol/diesel costs and almost everything in the economy. I know we South Africans have gone through so much that we have resorted to making fun and making memes of everything that is going wrong in our beloved country as a coping mechanism, this has perhaps led to us not creating awareness, pushing back and holding those in power accountable, the future of this country and your kids and their kids’ kids depends very much on this!
By Flabbo The UnAuthordox (FlabboX)
