Inflation now at 2.7% so what are you complaining about cost of living?
- Thread starter Okiya
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DeepInYourMind
Elder Lister
One inescapable thing is you cannot lie to the person on the ground that life is good because the metrics are good. Only fake intellectuals like Ndii divorced from reality will believe such things. Even liar Kamaliar tried that with Americans, telling people that the economy is doing great with job numbers up and inflation down, but the people on the ground experience a different reality daily.
One way of reducing inflation is reducing the spending power of the people so much that demand of everything goes down. It doesn't mean that people are doing well
One way of reducing inflation is reducing the spending power of the people so much that demand of everything goes down. It doesn't mean that people are doing well
Denis Young
Elder Lister
The problem is how you and many other Kenyans choose to understand basic concepts. Either because you do not understand or don't have the capacity to understand.
The reason why inflation going under 3% is so key is because it triggers a reverse of the MPC policy: from raising interest rates to cutting.
The reason why people are complaining there is very little business and money is not circulating is because the MPC raised interest rates so high to combat monetary inflation (a lot of money chasing few goods).
Now we are expecting a further cut on top of the recent -75 basis points in the next MPC meeting in DEC. Possibly even 100 basis points.
That in turn will make credit more affordable for businesses, companies will start hiring again, disposable incomes will increase into 2025.
You are describing the US/UK economy. In Kenya credit may become affordable but it doesn't mean it will be accessible. Banks will still play the safe bet of buying government securities.
Companies will not hire in 2025. The cost of doing business is high.
Denis Young
Elder Lister
Go look at the interest on TBills. That has also come down. Same will happen with bonds. They will become less and less attractive for banks.
It is not going to be a sudden shift, but gradual.
Banks will still prefer bonds and tbills. Do you think there's a bank that will give you a loan to finance an LPO from national or county government?
Denis Young
Elder Lister
That will never change until the government balances its budget. So long as the government borrows banks will always buy the government paper. Any smart individual will do the same rather than put their money in an MMF, who are most likely investing in the same paper.
Hii mambo ya LPO si kitu mpya. Kenya owes over 600B in pending bills. Why would a bank loan you to money knowing very well that money is unlikely to be repaid?
Bei Bado ni Ile ile
upepo
Elder Lister
When you learn economics from blogs, you start mistaking real-life economic challenges for academic exercises, where adjusting a factor here and there is all it takes to solve a problem. Any first-year economics student will tell you that these tools are hardly reliable even in complete first-world economies, leave alone a third-world basket case where 75% of the economy is informal. Textbook scenarios should never be carelessly transposed onto a real economy.
The low inflation is due to diminished demand. Why would businesses need cheaper credit to increase production when they can't clear the current inventory? That's like advising a malnourished man to exercise more to build muscle mass.
So walk me through how you arrived at the conclusion that businesses will start hiring and disposable incomes will increase in 2025
Ngimanene Na Malege
Lister
You have decided to eviscerate the Economist from Mathira?
Denis Young
Elder Lister
Clearly you fall under the category of 'lack the capacity to understand'.
When covid came what took the biggest hit was labour. People could not work, they could not manufacture. As a result there were fewer goods in the market while incomes remained relatively unchanged. Worse still, taxes and fees were shaved off and people had more disposable incomes. So you had a lot of money chasing fewer goods, hence prices went up (demand led inflation).
When the MPC raises interest rates and taxes went up, it took money out of people's pockets. As a result, demand for products reduced.
It was intentional dumbass!
But as with all policies, too much of the high interest rates can cause the country to grind to a halt, causing a recession. That is why we had our first rate cut just the other month. We are now in the cutting phase. Slowly but surely, money will start to flow, tax reform will come and the economy will start churning again.
Don't bring your whining to me just because you lack the capacity to see and understand trends.
Denis Young
Elder Lister
The MPC are in the rate cutting phase. It is as simple as that. You are not going to see a quick turn over because banks will always resist reducing their rates quickly. They are very greedy.
Other major factors will be political stability and tax law reform. When you have a government pulling in the same direction, like I have said before, suddenly you will see things start to work.
upepo
Elder Lister
Young man you are describing an advanced economy not the Kenyan economy. About 80% of the Kenyan employees are engaged in the informal sector. For these employees, when you don't open your business for the day, you don't make income and so you don't take anything home. These were the most affected category during Covid. I don't remember the Kenyan government giving grants to such people. So that part about incomes remaining unchanged is totally wrong and a sure indicator that your understanding of economics is questionable.
Denis Young
Elder Lister
I made no reference to the informal sector, that is just an assumption you made.
I was discussing productivity. As in people were less productive but continued to earn their salaries, hence the incomes largely unchanged.
Furthermore, are you suggesting 80% of working Kenyans earn nothing if they don't open their shops? Are you suggesting that informal sector means that they operate a physical business with walk-in customers?
upepo
Elder Lister
In informal employment, if you have zero productivity for the day, you earn nothing at the end of that day. It does not matter where or how you operate. That is 80% of Kenyan workers: Farmers, taxi drivers, bodaboda guys, mama mboga, food kiosk operator, saloonist, juakali mechanic, carpenter, welder, shop owner, hardware owner, matatu driver, matatu owner, cybercafe operator, mjengo guys, makanga, photocopy shop, bar seller, land broker, bicycle mechanic, motorbike spare shop, tea picker, cooking gas reseller, painter, casual workers, chemist, mkokoteni etc..
It follows then that the salaries of the remaining 20% are not enough to cause inflation, especially when you consider that they have to share their money with more broke relatives and friends.
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I've never seen you admonish corruption anywhere. It's a topic you and Othello don't really like to mention. But take it from me, there's nothing going to happen economically as long as Ruto & the corruption lurk around.
But you said your fundamentals show that in 2025 Kenya will be the land of milk and honey economically. Let's wait.
DeepInYourMind
Elder Lister
If we were to take your predictions seriously, Kenya would have been halfway to catching up to Singapore at the moment
DeepInYourMind
Elder Lister
As upepo says, when you take money out of people's pockets in Kenya people go to bed hungry, and struggle with basic needs.
Anyone who even believes this is a good idea is the real dumbass! And if it is a politician, that is pure evil.