While the new money is created digitally, which in percentage terms has become far greater than available notes, it must equally attract seigniorage as if paper notes have been printed over it. Photo: WorldSpectrum/Pixabay
While the new money is created digitally, which in percentage terms has become far greater than available notes, it must equally attract seigniorage as if paper notes have been printed over it. Photo: WorldSpectrum/Pixabay

The ominous gifts of Covid-19

By Bheki Gila Time of article published Jun 9, 2020

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FROM THE BARREL

FROM its sketchy announcements, you could tell that Covid-19 the extra-terrestrial, came bearing gifts in a mixed bag embellished with brilliant wrappings. For reasons that are understandable, beholding this spectacle filled us with angst and a lot of trepidation in equal measure. Covid-19 is an unknown gifter and its begloved hand deals an ominous deck of cards never witnessed by this generation before. So soon as we entered it through various pigeonholes of lockdown restrictions, one thing became certain. Our known and familiar world is gone and never to return. In its stead, a new one defining a new economy, new mores and new perspectives has arrived.

The purpose of this piece is an attempt to contribute towards a general discourse about how South Africa has fallen into hard times spurred by factors both local and global. In that wise, it seeks with diligence to find new unexplored avenues that could better our lot where they can, and as a country, alter the trajectory of its course where they must. That task cannot be left entirely in the hands of a few apparatchiks of the ruling party alone. Our problems are too big to trifle with through the diversion of puny measures.

How do we get out of this massive dark hole?

First, the urgent yet recurring question is how do we get out of this massive dark hole. The answer lies in the freedom to define the problem. And in pursuance of that freedom, I make bold to say that the prosperity or otherwise of the commons lies in the quality of our sovereign and the sovereignty it purports to protect. Literature abounds that there are signs that our sovereignty has been left unattended. South Africa is the most unequal society in the world resulting in a rapid expansion of a gulf between a large majority of have-nots and a concentrated small clique of haves. This means that the representatives occupying the hallowed chambers are either impervious to the deleterious effects of this reality to the Will they represent or have resolved to betray it anyway.

The first inalienable economic right of the sovereign which is supreme among all other rights of its ilk, is to create money. When it does so, it mints denominations as determined in the relevant policy documents. The Note so minted, is sold to the banks at face value. The amount received minus the cost of production, termed the seigniorage, is given to Treasury. For emphasis, it is worth reiterating that seigniorage is the only right that cannot  be given to anyone else without parliament expressly granting it. In the same vein, when delegated, it cannot be further sub-delegated.

In the natural course of its business, banking creates money. This incidence of debt, is a tacit usurpation of the most supreme right of the sovereign. Therefore whilst the new money is created digitally, which in percentage terms has become far greater than available notes, must equally attract seigniorage as if paper notes have been printed over it. The derelection of this responsibility by the praetorians of the sovereign has created a new brand of socialism. The poster child of this new version of socialism is the banks. They usurp the power to create money with the connivance of Parliament, give it to the people through loans at the most exorbitant cost, and still forget to pay for the privilege.

A dark scheme concocted deep within the Reserve Bank

Such quality, either when denuded or unprotected, leads to severely distorted outcomes which conveniently fall under the broad cognem of poverty. How we got to this point has been enigmatic all along until now. The disturbing revelations that our money is now printed in Switzerland through a dark scheme concocted deep within the Reserve Bank, is a sobering alarm bell that the ruling party can decide to end it here and now, once and for all or forever take to the hills to surrender, thus betraying their mandate bestowed upon them by its glorious history at the behest of its heroic people.

If the sovereignty of the People or colloquially the People’s Will, can be respected, Treasury may never go cap in hand to the darkest and most secretive institution, the IMF to raise loans. Besides, utilizing the people’s pension funds without a replenishment plan, is an act of desperation and may be tantamount to recklessness.

We are cautiously emerging into a newly mutated global macro-economic environment. Whilst it was predictable, our country woes and their relative small global footprint, must find a new prism of interpretation against a complex and unfamiliar power dynamic. There is a whole new emboldened China whose stature and comportment is different than when we last saw it. Pitted against the belligerent politics of the incumbent U.S administration, it is only fair to say that gradually however so reluctantly, we are nearing the most dreaded Thucydides Trap. And in our preparation for this turbulent state, our finances must be in order.

As a country we have already made significant progressive strides toward economic independence. A State Bank has already been sanctioned. Therefore, the power of printing money must be transferred to the State Bank with immediate effect. Second, all the seigniorage from the Currency Notes and the Digital Money created must be transferred to the State Bank without delay. Third, the creation of money and its incidence must be purposefully and specifically regulated by statute.

Demand all the gold back

It is imperative, if we are to create a wealthy sovereign that the representatives of the people must demand all its gold back from wherever it is kept. We have learnt with great shock that the gold vaults of the Bank of Nova Scotia were found gapingly empty. To be sure, there is nothing legal or constitutional that can support the recklessness of keeping our gold anywhere else but here.

There is a possibility that China and its political philosophers understood that the more wealthier the state becomes, the greater the propensity of criminality and graft increases. No people could ever prosper if their State is poor, especially ravished by the brazen, unmitigated and insular acts of political criminals. South Africa is yet to learn from that truism. The people assembled as representatives of the Sovereign Will may either tremble before this reality or brave it out and save their Sovereign Mandate.

The most precious gift from the Covid-19 global lockdown was the creation of new conditions from which new solutions for a vicious continuum could be fashioned. Parliamentarians are the defenders of the people’s Will. Failure to do so will render them the kind of gatekeepers, where there is no gate and nothing to keep.

Ambassador Bheki Gila is a Barrister-at-Law.

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