Rand weak, not strong

Finweek English Edition - - Letters -

VIC DE KLERK’S sug­ges­tion – that the rand is strong – is in my view not based on real facts (“Rand reer­ing to­wards be­com­ing dan­ger­ously over­val­ued”; 15 April). The value of a cur­rency rises or falls rel­a­tive to an­other and not in re­la­tion to in­vented math­e­mat­i­cal stan­dards, for­eign to ba­sic eco­nom­ics. The rand is cur­rently very, very weak. In 1979/1980 the US dol­lar/rand ra­tio was 1+ to 1. It’s now 1 to 7+. Early on, the pound ster­ling/rand ra­tio was 1 to 2. It’s now 1 to 11+.

De Klerk com­plains South Africa’s in­dus­tries can no longer com­pete with im­ported goods. If the said in­dus­tries have a de­sire to be com­pet­i­tive they must be in­no­va­tive and in­crease pro­duc­tiv­ity. They should de­sist from try­ing to pres­surise SA Re­serve Bank Gover­nor Mar­cus to in­ter­vene in the cur­rency mar­ket. Such a step would have neg­a­tive ef­fects on the whole econ­omy.

Fur­ther­more, Adam Smith’s “In­vis­i­ble hand” is sup­posed to dis­place in­ter­ven­tion­ist eco­nomic poli­cies in a free mar­ket sys­tem.

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