Don’t forget SARB QE: Part 2

Since 2000 the SARB probably printed about R100 billion out of thin air.  This allowed the commercial banks to use about R40 billion to fractionally leverage at about 40:1 and create about R1,6 trillion in additional money out of thin air (That’s 1,600,000,000,000).

About R50 billion appears to have gone into the public’s hands as they demanded more nominal cash in the face of rising price inflation.  The remaining R10 billion is sitting in bank vaults to meet the higher cash withdrawal demand at bank ATMs.

We can see that while the SARB printed R100 billion out of nothing, the commercial banks created about R1.6 trillion out of nothing by crediting customer accounts with digital currency and then charging interest on the money they created out of nothing.

This means that if you were a borrower in the last 10 years you did very well.  This is because you got your hands first on newly created money and were able to go into the market place and bid resources away from others before price inflation increased and lowered the real purchasing power of money again.

If you were unable to borrow money during this period and received this new money relatively late in the chain, then your living standard likely fell.  Sorry for you.

This is the modus operandi of a fractional reserve banking system: to stay ahead of the pack most people must sell themselves into debt bondage.

A safer way would have been to buy gold.  It is up 700% in rand terms since 2000.  The JSE is up 310% since 2000, not as good a protector against serial currency debasement as gold has been over that time.

Unfortunately for the poor, access to gold ownership has been barred by lack of knowledge and ‘unfriendly’ vehicles of gold ownership.  This is slowly changing, but not fast enough.  Instead of buying gold many of the poor are trying to keep up through debt bondage.  Hence the explosion in unsecured lending to low income people.  These folk will find a temporary boost in lifestyle but at the expense of great debt burdens down the line.

Until the SARB reforms the monetary system gold prices will keep soaring in rand terms and the poor will become worse off, leading to civil and labour union unrest.


About Russell Lamberti

Russell Lamberti is a regular contributor to Mises SA. He is Chief Strategist at ETM Analytics, an Austrian-influenced economic research firm based in Johannesburg. Although he wrties about many topics, you'll most often find him slaying patent and copyright law and exposing the biggest bubble in history: fractional reserve banking.
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  • Gerhard

    Great article and information, thanks. I have wondered about the SARB balance sheet for some time now, this explains the issue very well. I linked to your work on my site too.

  • Mehul

    amazing Russel, thanks- where can i find the data on the SARB’s assets on balance sheet? would appreciate your assistance- thanks

  • Chris Becker

    It’s on the SARB’s website, you’ll find the data under the SARB’s monthly financial statements (assets & liabilities). In pdf format.

  • Joe Johansen

    Russel , any update on this? Also :if there is neg interest rates in Europe etc, and we have lets say 6% -one can assume that there should be an influx of foreign capital? Currently we see selling of shares and bonds. If you have high interest rates relative to the world, and money is being printed(“early hyperinflation”), at what stage will foreign investors baulk and flee? Lastly in case of rampant inflation , can one assume that stocks will increase with debasement of currency eg Old Mutual in Zim?