You will immediately discern upon descending to the bedrock of Manhattan, marveling at the massive vault door, appreciating the multi-faceted control environment, that payments security is a timeless preoccupation. Hardly any of the gold in the vaults of the Federal Reserve Bank of New York is the property of the United States, whose reserves you know from 007 lore reside in Ft. Knox. Instead, it is gold held on behalf of foreign and international monetary authorities. Indulge me, if you will, in a fascinating historical anecdote in the annals of official reserve custody, which I will endeavor, perhaps feebly, to tie to today’s theme. The Spanish Civil War was a brutal conflict that pitted Nationalist rebel forces, allied with Fascist Italy and Nazi Germany, against the Republican government supported by the Soviet Union. In 1938, with their government on the cusp of implosion and before fleeing into exile, the Republicans hastily sent their gold stock to their trusted ally, the Soviet Union, for safekeeping. This episode is recounted in a history of the Spanish Civil War by Hugh Thomas, who writes the following: According to Orlov (now I confess to not reading the whole book, so I do not actually know who Orlov is; nevertheless, according to no less an authority than Orlov!
In simple terms, inflation may be defined as the change in the general price level of goods and services. However, in every day usage, inflation may be defined as “too much money chasing too few goods”. Describing inflation this way makes it easier to link it to monetary policy which is the control of money supply in an economy. The Bank of Zambia is concerned that inflation has remained stubbornly high for quite sometime now. As at end-June 2005, inflation was at 19.2% which we consider too high to foster sustainable economic growth. The poor weather patterns over the last agricultural season resulted in low crop output, particularly that of maize, which induced inflationary pressures. The unyielding rise in world oil prices on account of high demand from China and India, due to high economic activity, disruptions in supply, arising from war in the Middle East, as well as processing capacity constraints in many oil consuming countries have also caused a general rise in the domestic prices of petroleum products thereby increasing the cost of domestic production. In order to moderate the inflationary pressures arising from low crop output, on a sustainable basis, efforts should be directed at diversifying and improving agricultural output away from rain-fed agricultural practices. Government’s commitment to increased investment in the agricultural sector is therefore commendable as this should assist in improving the supply of agricultural output, in particular that of food items. This has an important bearing towards reducing consumer food inflation.