UhuRuto finally slays Kibaki era hyperinflation

[RV Pundit]

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Eggs are selling @10bob. Petrol @83.Electricity down by 25%. Some fares have reduced.

Now companies are starting to reduce manufactured goods prices.

http://www.businessdailyafrica.com/Corporate-News/Bidco-cuts-cooking-oil-prices-on-low-energy-costs/-/539550/2641766/-/n3fakjz/-/index.html

If low global oil prices hold and investment in power sector comes fruition, the SGR come on board, and the 10,000 tarmac roads under annuity programme...we could be back to Moi era low inflation (except in 93-96).Consumer federation and activism need to demand price reduction in every good and service now.

Kibaki grew the economy but hyperinflation eroded any effect on mwananchi.

[Mr Mansfield.]

NONSENSE,

Global economy boomed during 2003-2007 period which led to a massive boom in commodity prices which led to higher prices of products,that was beyond kibaki control however he brought the KSH/USD 63 in 2007 until ODM began destruction and global economy worsened..inflation was highest in Moi time,with stagnant economy and weak shilling but all this has to do with international politics which affects global economy which we are a part of,

Without Prejudice.

[Georgesoros]

Pundit
Whatever that goes up must come down, thats economics. Inflation erodes buying power of the masses but when it comes down, so does the economy. Economy may stagnate if right policies are not in place.

[MOON Ki]

As far as I know,  Kenya has never had a period of hyperinflation.    The following Wikipedia article has a decent enough list of countries that have experienced hyperinflation and when:

http://en.wikipedia.org/wiki/Hyperinflation

Another thing is that inflation is not necessarily bad.   Some inflation is good;  it all depends on where one is.   A very good example is Japan, which has been struggling to fight deflation for years.   After quite a few years of resistance, the central bank there finally set to work on inflation-targeting.    A couple of years ago, they set a target of 2% by about now:

http://www.wsj.com/articles/SB10001424127887323485704578256701087555208

It is now clear that even 1% will be an achievement:

http://www.bloomberg.com/news/articles/2015-01-19/four-years-after-boj-shock-and-awe-still-no-2-inflation-seen

A quick explanation of why it matters:

http://www.bbc.com/news/business-21137148

The seemingly obvious approach of "printing money" and "giving it away" (credit at very low cost) doesn't work in a place like Japan, largely (I think) because of cultural attitudes.     

[Georgesoros]

Moon
How can you explain land prices going up from Shs1million to Shs50million in 15 years/half acre in Karen?
Same goes everywhere. If I wanted to develop I have to charge a lot to cover my costs, so up goes the cost of goods.

[MOON Ki]

Moon
How can you explain land prices going up from Shs1million to Shs50million in 15 years/half acre in Karen?
Same goes everywhere. If I wanted to develop I have to charge a lot to cover my costs, so up goes the cost of goods.

I'm unclear as to what I am supposed to explain.   I take it that your position is that: (a) it's inflation, and (b) that's a bad thing.   I see no reason to dispute that ... in general but with limits.   Part of my point is that not all inflation is bad.

On your example: One reason why land prices are probably going up is that it's a "self-fulfilling prophecy".  People see land prices going up, so they put money into land, which it turn pushes the prices up, and so people see land prices going up ...  And I'm sure that those who own land in Karen see absolutely no problem with land prices going up there. 

What a case like Japan shows is that if you don't have some level of inflation, then you have serious problems: people just sit on their money and nothing happens.

But that's perhaps an aside.  What exactly would you have me explain?

[RV Pundit]

Moonki,
Hyperinflation is hyperbole but there is no doubt that inflation went haywire in kibaki regime we had to change the formulae of calculating it from arithmetic mean to geometric mean.  The underlying inflation was under control and never went double digit.

The inflation that really hit the poor the most is inflation on food prices, housing and other basic commodities. You have to understand that inflation affect people differently. Lower class people whose expenditure consist of mainly food and basic commodities were really hit hard. Middle class and upper class will still afford eggs at 30bob.

Under kibaki regime..inflation was the main issues in 2007 election..it was ODM main agenda...that effectively countered kibaki economic growth.In NARA..it become so bad..there were food riots.

Inflation has to go hand in hand with rising income levels...did income rise with inflation under kibaki????????????

You do not need to be economist to know under kibaki era....prices of unga rose from kshs 28shs to 150shs! Did the urban poor in kibera seem income levels rising from day income of 100b to 500bob? Maybe? At best it cancel out...at worse it responsible for high poverty rates we see around.

In this regime.. Uhuruto by chance or luck..will deliver 7% growth rate with low inflation...and will therefore really dent poverty.

And that is the dillema we face.. a growing economy but with poverty rate stuck at 50%.

[MOON Ki]

Inflation has to go hand in hand with rising income levels...did income rise with inflation under kibaki????????????

Yes, I was aware of that .... the first part.   

In this regime.. Uhuruto by chance or luck..will deliver 7% growth rate with low inflation...and will therefore really dent poverty.

And that is the dillema we face.. a growing economy but with poverty rate stuck at 50%.

(a) Will?  As far as I can tell, that 7% is merely a projection.  Let's wait for the reality.   In the meantime, I would say "might".

(b) You then say that the 7% growth will really dent poverty.   There, even "might" could be too strong.   Your following sentence explains why.

[RV Pundit]

If you have been around and reading these kind of projections; then by now you'll know WB/IMF are normally pessimistic on their projection and normally the kenya economy outperforms their projections; just check recent projections.

By now the WB is making a revision..because data for say last two quarters are in...

There is no doubt that baring a disaster kenya economy will grow at 7%.....

And the good news is that we seem to have finally slain the inflation dragon...this is normally the 'worse' quarter due to dry season of Jan-march..however my own ancedotal data seem to suggest a serious drop in prices...a deflation infact.

UhuRuto gov  have a real chance to really eradicate poverty at much faster rate than Kibaki.

(a) Will?  As far as I can tell, that 7% is merely a projection.  Let's wait for the reality.   In the meantime, I would say "might".

(b) You then say that the 7% growth will really dent poverty.   There, even "might" could be too strong.   Your following sentence explains why.

[Mr Mansfield.]

inflation that really hit the poor the most is inflation on food prices, housing and other basic commodities.eggs at 30bob.
prices of unga rose from kshs 28shs to 150shs!

(a) Food insecurity,

(b) Housing deficit,

inflation is rise in prices due to shortage of a commodity,gov has to subsidize both sectors to cushion the poor,

Without Prejudice.

[RV Pundit]

Before subsidizing the gov has to explore means and ways of improving the productivity and efficiency in those sectors. Subsidy and welfare should be the last resort esp for the really helpless..those orphaned, those very old, those very sick, those disabled and generally the helpless facing some sort of disaster..either short or longterm..floods, droughts,tribal violence etc.

For example in food sector...the gov has to figure out how to improve food production(supply side) to match demand side...there is no reason why unga is expensive....except the fact that we produce very little maize from our land...then have the worse transport cost+time...and then add to energy bill (our power is 3 times more expensive than RSA or Egypt)...all that make our unga ridiculously expensive...corruption plays zero effect there (for Moonki sake).

(a) Food insecurity,

(b) Housing deficit,

inflation is rise in prices due to shortage of a commodity,gov has to subsidize both sectors to cushion the poor,

Without Prejudice.