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Tuesday, 15 January 2013

THE POWER OF INFLATION: OUR WORST ENEMY


FOOD FOR THOUGHT: In 2002, When Steers introduced for the King Steer Burger,it cost R11.50 back then.



Today, it costs R39.90 for the same burger. The price is up 250% in ten years, a compounded annual increase of 13.3%, or 250% in total!The price of petrol in January 2002 was R3.61 per litre in Gauteng. Today, a litre of petrol costs nearly R12. This amounts to an increase of 230% in ten years, or compounded annual increases of nearly 13%.

In 2002 you could buy a King Steer Burger and a litre of petrol in exchange for R15. Today, you could only just get a litre of petrol, and 7.5% of a King Steer Burger, maybe one bite. You couldn’t even afford to buy half a King Steer burger today with R15.

In real terms, the poorest South Africans are getting poorer as their salaries cannot keep up to this kind of price inflation.Had South Africans used gold as a medium of exchange, the story is different.In exchange for an ounce of gold you could get 290 King Steer Burgers in 2002. Today, you can buy 331 King Steer Burgers for the same ounce.Likewise, you could buy 925 litres of petrol in 2002 for an ounce of gold. Today, you can buy 1100 litres.It is the declining value of the rand, because the Reserve Bank creates too much inflation, that the price of everything is going up. Unless the Reserve Bank stops the printing, prices are set to spiral out of control in coming decades. 

1 comment:

  1. Anonymous1/15/2013

    Inflation is definitely making hard for people to save. Lowering the interest rates are making it for pensioners as their money rapidly loses value over time. At the end of the day, Savers are Losers...

    ReplyDelete

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