Perhaps it’s because the ZAR:USD exchange rate is so topical, or perhaps it’s because I’ve been writing about it in the last few weeks, but I am noticing lots of this sort of thing on my twitter timeline:
“In 2011, one USD would have set you back R6.50. Today, it would cost you R13. To stay constant in dollar terms, your salary should have doubled.”
The statement is true. All fact, etc.
But is it interesting?
Here is a similarly true statement that could have been made back in 2011:
“In 2001, one USD would have cost you R14. Today, it would cost you R6.50. To stay constant in dollar terms, your salary should have halved.”
How about that statement – is it interesting?
Here is another:
“In 2009, one litre of unleaded 93 petrol would have cost you R6.43. Today, it would cost you R13.01. To stay constant in unleaded 93 petrol terms, your salary should have doubled.”
Also interesting?
Not really.
What I’m trying to say is: there is no reason for a South African salary to keep rand-for-rand pace with changes in the cost of US dollars or the cost of fuel. Those changes affect part of our monthly expenses, not the full lot.
And if someone really want to earn a dollar salary, then they must emigrate to a place where they can earn US dollars. And it will almost certainly be a place where their expenses will be denominated in US dollars. Which would make sense – because currency is just a medium of exchange – and “earning an income” means “exchanging your services for the ability to buy other goods and services”, so it would be helpful if that medium of exchange were a common one.
Allow me to rework that earlier statement:
“In 2011, one USD would have cost you R6.50. Today, it would cost you R13. To stay constant in dollar terms, your salary should have doubled, your grocery bill should have doubled, your rental should have doubled, and actually, everything should have doubled. But if those didn’t, and they all kind of kept up with inflation, then the only things that really doubled are the imported items in your shopping basket (if it wasn’t absorbed into the margins of the importers), and the cost of overseas holidays to anywhere that isn’t an emerging market holiday destination. Also, possibly fuel – but that is also influenced by the price of brent crude, so possibly not.”
Just as:
“In 2001, one USD would have cost you R14. Today, it would cost you R6.50. To stay constant in dollar terms, your salary should have halved, your grocery bill should have halved, your rental should have halved, and actually, everything should have halved. But if those didn’t, and they all kind of kept up with inflation, then the only things that really halved in cost are the imported items in your shopping basket (if it wasn’t absorbed into the margins of the importers), and the cost of overseas holidays to Europe and the US. Also, possibly fuel – but that is also influenced by the price of brent crude, so possibly not.”
For more on this sort of thing:
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.
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