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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (18141)	4/30/2003 4:28:53 PM
From: sea_urchin	Read Replies (1) \| Respond to of 81016

tippet > this is what I don't understand. The cash comes in -- but not for the purpose of purchasing goods -- it comes in seeking the yield The reason the yield was raised was to attract SAn money to the treasury investment --- in other words, to mop-up excess SAn liquidity and so diminish inflation. The yield was not raised to attract the foreign money. That money, as you imply, was opportunistic and found a nice, high-yielding investment in SA Treasury Bills. The Bills were printed by the SA gov who was thus able to use the proceeds of the sale of that "paper" to finance salaries, projects, whatever it chooses. In other words, the foreign money does enter the circulation and it does add to the money-supply. Indeed, the government is borrowing the money and it is thus the government, as usual, which is the actual cause of the inflation. Unlike an ordinary person, because the government has virtually unlimited sources of funds, it can pay whatever it pleases and at whatever price. The strange contradiction is that government is always crying that it is "fighting" inflation whereas it is the one who actually causes it. Thus the whole point of the increase in interest rates has been defeated. No money has been removed from circulation and the inflation still remains, in fact, gets worse. In addition, the SA taxpayer is impoverished in order to pay the interest at rates far above the world average. Indeed, if there is anything "anti-inflationary" in the exercise it is the paying of this excessive interest by the SAn taxpayer to the foreigner --- and for money which the country doesn't need. So, the foreigner is laughing, the SAn is crying, the SA government is gloating --- and the inflation persists.