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Thread: Budget for interest rate increases

  1. #1
    Site Caretaker Dave A's Avatar
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    Budget for interest rate increases

    We may be in for a period of relatively low interest rates, but I suggest if you're taking on new commitments, make allowance for the fact that interest rates could well rise again in the not too distant future.

    First of all we have the budget deficit. Pravin Gordhan has indicated that tax revenue is down significantly, but government will keep on spending.
    Stanlib economist Kevin Lings said he expected the budget deficit to approach 7%.

    "That's quite high in South Africa's history," said Lings. "But our level of debt is incredibly low by world standards, so we are able to absorb this.

    "They could raise taxes, but that is not a likely option, seeing that the economy is this weak. It wouldn't be the right move." He said it was risky to forecast the revenue shortfall a few months into the tax cycle.

    "However, government expenditure is well ahead of budget and it's hard to see that getting reined in," said Lings.

    Schussler said that interest rates are likely to increase, meaning that rates in the immediate future would probably not fall by more than half a percentage point.

    Lings said an argument could be made for further interest rate cuts to support the economy, but the Reserve Bank's stance indicated this was unlikely. "I don't think the Reserve Bank will look at it this way," said Lings. "They seem to be saying they have done enough, so it is likely that we are at the bottom of the interest rate cycle."

    Lings predicted that bond yields would move higher, with the percentage increase depending on "just how bad the government's financial situation is".

    "Long-term interest rates will probably rise, but they were already very low, so it's not the end of the world," Schussler said.
    full story from M&G here
    So no great disaster for now, but sooner or later you have to pay the piper.

    Second, we need to look at what is likely to happen in the recovery. Keeping on top of inflation is going to be a real handful, and with capital markets seemingy severely damaged, I think it's going to take some pretty healthy returns for liquid finance to come out and play.

    Ultimately I'm troubled that our balance of payments relied so heavily on capital inflows when times were good. Do we have the capacity to build a healthy economy without reliance on external capital props when the recovery comes this time round? If not, capital funding is going to be a precious, and possibly expensive resource.
    The trouble with opportunity is it normally comes dressed up as work.

  2. Thanks given for this post:

    Graeme (05-Jul-09)

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    You right Dave, interest rates are likely to increase again. I hate to sound negative, but will the world economy ever recover? This time around the strategy is to bring the economic system completely to its knees, and replace it with the New World Order. Which will be completlely different from the world as we know it. In the pipeline is One World Currency, Microchipping of people etc.

    Unless we wake up, and create our own alternative economic systems, the end is of the world as we know it, is here....
    Sean Goss We all are scared, but only few are brave.
    www.sgafc.co.za

  4. #3
    Platinum Member Marq's Avatar
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    and replace it with the New World Order.
    Not yet - we need the Third world war to get going properly and 2012 scenarios to play out.

    In the predicted scenarios of Siener, Notradamus, Cayce, Mother Shipton and others, as far as I know, there is no final world order for economic purposes as we think. It will be a new consciousness raised by a war of attrition whereafter the new age starts anew.

    And my favourite of course is from LZ
    And as we wind on down the road...
    Our shadows taller than our souls,
    There walks a Lady we all know
    Who shines white light and wants to show
    How everything still turns to gold.
    And if you listen very hard
    The tune will come to you at last...
    When All are One and One is All --
    To be a rock and not to roll.
    Last edited by Marq; 06-Jul-09 at 12:14 PM.
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    Alternatives

    And If you think there are no alternative economic systems.....check this out

    http://money.cnn.com/2009/06/23/smal...air_trade.fsb/
    Sean Goss We all are scared, but only few are brave.
    www.sgafc.co.za

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    wynn (07-Jul-09)

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    Platinum Member Marq's Avatar
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    Yep -Bartering been around forever in various forms.

    This article reflects a small town scenario where a basic swap of services does the trick. In an ongoing scenario however it seems to fail as an element of greed and consideration of value becomes an issue. It may have worked in the old days and it may work in a rural economy, where basic needs are the only issue but in todays world where we have many other items at hand and have seen a competitive marketplace work the odds are a bit skewed.

    That however is not the reason it will not work in your world dominance scenario.

    The taxman, politicians and power corporates like the banks will close it down. They cannot control it and they get no return from it. Therefore it is evil and therefore they will go out of their way to ensure its downfall.
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    No disrespect, but how do THEY(Banks, Corporates, Government) close it down? If I ask my plumber client to fix my leaking pipes(which I have done in the past), in return for forgoing a portion of his accounting fees, I have committed nothing illegal. Will the authorities come and "unfix", my pipes. Remember you cannot put a price tag on value exchanged nor is it,next to impossible to control
    Sean Goss We all are scared, but only few are brave.
    www.sgafc.co.za

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    Platinum Member Marq's Avatar
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    I have committed nothing illegal.
    mmmm....Now you are telling me as an accountant the vat act has not covered this point somewhere. The Income tax act I am not sure about but sure its in there somewhere and have not the time to find it there.

    The general clause used by the taxman is
    "consideration"

    in relation to the supply of goods or services to any person, includes any payment made or to be made (including any deposit on any returnable container and tax), whether in money or otherwise, or any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of any goods or services, whether by that person or by any other person, but does not include any payment made by any person as a donation to any association not for gain;

    Ask Garth Le Roux, whether he had to get his pipes unfixed.
    Check here

    And then if you havnt seen the Banks and corporates in action as they shut your water and electricity off - cause you cannot barter that with the municipality and need cash to pay for it which you got from the ......bank.

    What happens when you need...say my electrical expertise, and I do not need an accountant? How are you going to pay me? If you set up a trade credit bartering system with a group of suppliers - you are going to need to introduce the concept of 'value'. You can place a value on the barter trade and it has been done before. I have seen and been involved in these Barter Exchange systems - all have failed thanks to one entity.....the tax man.
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    Thanx for the insight. Quite scary if you think about the methods that could be employed by the authorities, to maintain control. Many people, including myself, however remain committed to exploring the bartering system. I agree that the VAT/Income Tax Act look at the "consideration", not whether money was exchanged. In the plumbing example scenario, I did in fact raise an invoice, in both my books and the clients books for the "service", it is just that no cash exchanged hands. The Vat and Income Tax on the transaction was duly paid.

    While exploring alternatives to the current system, people should never break any laws, be they common or taxation.

    Even cash as it is could be a viable means of trading, if it wasnt tainted by the banking system, ie banks creating money "out of thin air" and charging interest on it. This is the problem, not the bartering system, not cash, not even Debit Cards.

    As soon as CREDIT is introduced, it creates the opportunity for manipulation. Since so much CASH and trade in circulation is DEBT Based(overdrafts, credit cards), people are exploring alternatives.

    The GFC was caused by "Reckless" lending(read intentional financial crisis creation), to make people dependent...
    Sean Goss We all are scared, but only few are brave.
    www.sgafc.co.za

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    Site Caretaker Dave A's Avatar
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    As Marq points out, the problem with pure barter is it isn't sustainable to any large scale without becoming another form of currency.

    The problem with barter groups that I've had experience with is that the instigators tend to "create money out of thin air." I wouldn't touch any of them with a barge pole.

    At least the banks have some level of oversight.
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member Marq's Avatar
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    At least the banks have some level of oversight.
    Arrrggggg......we were doing so well up to this point.

    Even though barter has its downside, there has to be a mechanism along these lines that can work outside the controlling banking system. Barter offers a potential alternative or at least a potential that can maybe be worked into a viable system. We just have get back to basics, keep it simple and pull out the human survival type conditions that relate to a maslows needs rather than a - where am I going to get my next buck from needs - and stop turning to the banks for support that they will never give. Their 'level of oversight' is unacceptable given that they only have themselves in this picture.
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