Law of money, value and payment.
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Date
2002
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Abstract
Societies have, since time immemorial, traded real goods and
services for expectations of goods and services in some future. These
expectations have been associated with tangible and, lately, intangible
property - which is generally called money. From the crude quantity
theory of money, the purchasing power of a monetary unit is given as 1/ P
= T/(Mv). P is the price of the traded goods and services T, M is the total
money supply and its turnover rate is v.
The total money supply M is dominated by bank credit. In the
South African law (and elsewhere) the judicial recognition given to bank
credit (1) as money seems to have happened as an unintended side-effect to
accepting cheques as delivery vehicles in a cash transfer without any
tangible money moving from the transferor to the transferee.
In payment of money, the law of property and the law of contract
overlap and become inseparable. Both the English and South African
laws define payment as performance of a preceding duty. The Supreme
Court of Appeal, in the Vereins- und Westbank case seems to have
declared an abstract transfer of ownership of money to be payment even
though no preceding duty to pay was found.
The profit of a financial investment is called interest and is
calculated from a simple or compound interest formula. Despite medieval
legal, theological and ethical objections, neither is illegal in the South
African positive law. The last remnant of the medieval protection of a
guilty debtor (often the ruler) at the expense of an innocent creditor is the
in duplum rule. This is particularly obnoxious during modern rampant
inflation that was unknown and could not be predicted when only
metallistic money was in use. The influence of the in duplum rule is being
limited by recent restrictive judgments in South Africa and in Zimbabwe.
In South Africa, the Government has a constitutional duty to
ensure that its subjects are not deprived of property. Specifically, the
Constitution prescribes in Section 224(1) that the South African Reserve
Bank must 'protect the value of the currency'. It is shown that the recent
Reserve Bank policies, unless urgently modified, are in conflict with the
publicly promised inflation rate of no greater than 6%.
The exchange rates depend fundamentally on the price levels of
the traded or tradable goods and services in the respective economies.
This leads to the concept of purchasing power parity, which is most
accurately reflected in the relationship between interest rates in different
states and their relative foreign exchange depreciation rates.
It is submitted that the South African Exchange Control
Regulations have outlived their usefulness (if ever they had any) and are
unconstitutional - at least in so far as they interfere with the South
African Reserve Bank's obligation to pursue its primary object
'independently and without fear'. In the main, the South African Courts
have applied restrictive interpretation to the Exchange Control
Regulations and they have justifiably ignored the public international law
obligation of the Republic to recognise the Exchange Control Regulations
of fellow IMF members extraterritorially. (1) To money related claims on banks - see the body of the thesis for the
two-creditor-two-debtor legal aspects in the 'bank credit'.
Description
Thesis (LL.D)-University of Durban-Westville, 2002.
Keywords
Money--Law and legislation., Banks and banking., Theses--Law.