Hi All Some of you have asked me how the financial crisis in the USA will affect us. Lets talk about this.
That which we used to be able to rely on to be representative of the world in which we live, is changing rapidly. Over the last couple of years many of us may have been pleasantly surprised at the strength of the rand, however this has changed with the sub-prime collapse and consequent credit crunch. A fallout of this magnitude must have been difficult to predict. Recently the rand weakened significantly against all major currencies, and especially against the US dollar. The change is a combination of both the dollar strength and rand weakness, let me explain. Although the sub-prime problem initiated in the US, the uncertainty caused in the financial world has seen money flow back to the strongest economy in the world – the US. This strengthened the dollar. The same uncertainty creates a flow of capital out of SA, as we are seen as an emerging market, and a little too risky to be over-invested in at this time. Selling of rands causes rand weakness. If you had suggested to me three months ago that the dollar would strengthen against emerging market currencies, I may have bought it. But if you further suggested that the dollar would strengthen against the pound and the euro, I would have laughed you off. There you go – the world is a different place to the one we’ve known. A weak rand fuels inflation, as the price of imported goods increases. Not only will you be paying more for that new iPod or iPhone, but if inflation does not move towards the 3% to 6% target fairly quickly, the Governor of the Reserve Bank will consider raising interest rates yet again. How unfair is all this? Not only are we feeling the pain of rising prices, including electricity and food, but there is now a possibility that interest rates will increase again, putting our already tight monthly cash flow under further pressure. One relief is that the dollar price of crude oil has reduced significantly, from a high of 147 USD a couple of months ago, to 47 USD as of this morning. As we know the price of petrol has fallen twice in the last three months with a further reduction of approximately R1.40 per liter in December, giving us some relief from the financial knocks we’ve had recently. In times like these, we need to go back to the basics. Live within your means, don’t incur further debt, and be conservative in your financial decision-making. Regards --~--~---------~--~----~------------~-------~--~----~ You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. To UNSUBSCRIBE, please email [EMAIL PROTECTED] . You don't have to put anything in the "Subject:" field. You don't have to put anything in the message part. All you have to do is to send an e-mail to this address (repeat): [EMAIL PROTECTED] . -~----------~----~----~----~------~----~------~--~---
