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The poor logic behind interest rate rise..
Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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VituVingiSana wrote:The 'stronger' KES will not stay there much longer. CBK might as well let it drift towards 100 (not weaker than 100) & adjust interest rates to maintain it at 100.
It is time for Kenyans to buy more local goods. The largest import is fuel but that can be reduced by sourcing local bio-fuels (not easy but it can be done) over the next 5 years.
I saw a guy who made fuel from castor oil seeds, jatropha, etc. We can also use ethanol blended into the fuel we use. We can import those electric cars from Uganda-it's brilliant. But u have gud ideas. We have no value add here; hardly consume any local product. Perhaps we need to put more energy infrastructure on BOOT so that private investors could fund infrastructure with FDI. It shouldn't be hard for ADB to raise funds for clean energy projects here. Geothermal potential is high. One question though... i'm curious, what's the significance of 100? “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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i doubt kes goes back to 96 with conviction let alone 100, as long as CBK dont loosen offcourse..the only fly in the ointnment here is monetary policy, again, cbk have failed in their singular breif and as such i would suggest that market forces determine the price and optimal amount of money, ERC's review of pump prices is the best indicator of how irrelevant price controls and regulation are
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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I don't know what thinking people do here, expensive oil+weaker shilling=more expensive fuel at the pump=inflation=high interest rates, such is the ripple effect of a weaker KSH, CBK should not let up with the tightening...if people stop importing while exports continue the current a/c deficit will shrink & the KSH will strengthen...inflation will fall..btwn the current tightening is short term...CBK should do anything to strengthen the KSH
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Rank: Member Joined: 12/17/2009 Posts: 121 Location: Nairobi
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I really wish we had the return of Guys like Cheserem and Nyagah to the CBK. Both of kIbaki's appointees to the office of CBK governor have been disasters. Why are we having inflation in this country? That is a question that we should ask ourselves before we start to solve it. In fact, CBK had hinted at it before they changed their mind. We have problems with: 1. Fuel; weak shilling, disruptions in the International Oil Markets 2. Maize shortage 3. Sugar shortage These three have been the biggest indicators of inflation. The logic of "too much money chasing too few goods," just doesn't apply here. Howmany people go to banks so that they can borrow to buy sugar, or soko ugali, or even fuel? It therefore beats logic for the CBK to tighten money supply in an effort to bring down the prices of these commodities. On Christ Alone
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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the deal wrote:I don't know what thinking people do here, expensive oil+weaker shilling=more expensive fuel at the pump=inflation=high interest rates, such is the ripple effect of a weaker KSH, CBK should not let up with the tightening...if people stop importing while exports continue the current a/c deficit will shrink & the KSH will strengthen...inflation will fall..btwn the current tightening is short term...CBK should do anything to strengthen the KSH @the deal naturally any country like kenya that is emerging from developing to developed has to have a huge import bill because of fuel, infrastructure, technology etc. This is inevitable. It is up to the treasury to ensure supply of exports increase to match the import bill and stabilize the shilling.. What would you prefer a weaker shilling or economic stagnation? we will definitely get hit by one but Mark 12:29 Deuteronomy 4:16
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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the deal wrote:I don't know what thinking people do here, expensive oil+weaker shilling=more expensive fuel at the pump=inflation=high interest rates, such is the ripple effect of a weaker KSH, CBK should not let up with the tightening...if people stop importing while exports continue the current a/c deficit will shrink & the KSH will strengthen...inflation will fall..btwn the current tightening is short term...CBK should do anything to strengthen the KSH You are hired!!
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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guru267 wrote:the deal wrote:I don't know what thinking people do here, expensive oil+weaker shilling=more expensive fuel at the pump=inflation=high interest rates, such is the ripple effect of a weaker KSH, CBK should not let up with the tightening...if people stop importing while exports continue the current a/c deficit will shrink & the KSH will strengthen...inflation will fall..btwn the current tightening is short term...CBK should do anything to strengthen the KSH @the deal naturally any country like kenya that is emerging from developing to developed has to have a huge import bill because of fuel, infrastructure, technology etc. This is inevitable. It is up to the treasury to ensure supply of exports increase to match the import bill and stabilize the shilling.. What would you prefer a weaker shilling or economic stagnation? we will definitely get hit by one but @guru67. The lesser of two evils is compromise on the value of the shilling? I would disagree. Yes we're facing supply shocks indeed, but market sentiment is compounding those shocks further... these are secondary effects which delay the readjustment... and lead to other unintended consequences. KES is not just a number...it carries meaning in ur mind... the situation precipitated from simple fundamental to speculative... every1 knows we need to import more fundamentally... I asked a question above, what's the significance of 100... it's all psychological. There's no significance (doesn't matter what tech charts say). So the CB must create the impression in people's minds and that's what he's done. This has been driven by money liquidity, it's just that the bankers decided to start lending to private sector. Without liquidity we wouldn't have imported period. We have overinvested in infrastructure (doing too much too fast) to the extent that we can't borrow more cheaply and our savings are being depleted. We need to create inventory with what existing infrastructure we have and value add to be competitive. We must open doors for investors to innovate especially on energy infrastructure... u balance the equation by attracting FDI to infrastructure projects and not just accumulate public debt. We can generate economic growth in many ways, both the public and private sector can do this, but there's only a few ways of stabilizing a currency. The solution is not to inflate (through expansionary policies) but to innovate (e.g.,mpesa)... imho that's how u get to widen ur export base and get Kenyan to consume the products they produce. “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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Simply and factually, Kenya is still a net importer country. With that in mind, what does this economy (not U) need. A weak or a strong KES?
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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Cde Monomotapa wrote:Simply and factually, Kenya is still a net importer country. With that in mind, what does this economy (not U) need. A weak or a strong KES? As we stand now Monetary Policy is the quickest response we have as fiscal policy has a lag, e.g import substituiton, more geo.thermal, wind, irrigation, fuel blending e.t.c
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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Cde Monomotapa wrote:Simply and factually, Kenya is still a net importer country. With that in mind, what does this economy (not U) need. A weak or a strong KES? The question you should be asking is.... Kenya is a net importer. A stable or unstable shilling? That's the bigger issue. Ndungu doesn't favour either weak or strong. Unfortunately the situation now favours a strong KES now, only becoz the import realignment mechanism isn't working. “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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And those picketing against high interest rates coz its coming btwn them and affording another imported doodad should check themselves.
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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Cde Monomotapa wrote:And those picketing against high interest rates coz its coming btwn them and affording another imported doodad should check themselves. That way U play the part of being out of the way of imports of capital goods and payments of essential off-shore obligations which contribute to KENYA's real GDP and creates wealth & jobs for the economy U invest/live in and support ur family from!
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Rank: Chief Joined: 1/3/2007 Posts: 18,095 Location: Nairobi
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Scubidu wrote:VituVingiSana wrote:The 'stronger' KES will not stay there much longer. CBK might as well let it drift towards 100 (not weaker than 100) & adjust interest rates to maintain it at 100.
It is time for Kenyans to buy more local goods. The largest import is fuel but that can be reduced by sourcing local bio-fuels (not easy but it can be done) over the next 5 years.
I saw a guy who made fuel from castor oil seeds, jatropha, etc. We can also use ethanol blended into the fuel we use. We can import those electric cars from Uganda-it's brilliant. But u have gud ideas. We have no value add here; hardly consume any local product. Perhaps we need to put more energy infrastructure on BOOT so that private investors could fund infrastructure with FDI. It shouldn't be hard for ADB to raise funds for clean energy projects here. Geothermal potential is high. One question though... i'm curious, what's the significance of 100? 100/- is a psychological level plus it makes it easy to calculate! but it also provides a benchmark if we were to dollarize coz just take your one sok to the bank & get a $ It tough for local manufacturers but Kenyans are often stupid & aspirational. Many will buy imported sugary cereals instead of local weetabix. The same with biscuits. I even saw imported water in Nakumatt. How about buying Peptang instead of Heinz? Geothermal will take 3-5 years before we see any significant benefits. And if it is not mismanaged. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Chief Joined: 1/3/2007 Posts: 18,095 Location: Nairobi
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The only way to shore up the KES is to reduce imports. We import everything including Toilet Paper. When I shop at Nakumatt, I am shocked at what people buy. Construction: There is a local firm (I think in Kisumu) called Flamingo Tiles. Also Sai Raj Tiles. Let's buy LOCAL tiles not imported tiles just so we can say "Italian" or "South African". They provide jobs to KENYAN clay mines, KPLC, etc. Food: Stop with the (zero local content) imported cereals. They are often sugary. Go for locally manufactured Weetabix which mixes local & imported wheat & is manufactured in Nairobi. Weetabix provides local jobs including KENYAN farmers, carton manufacturers, etc. Fuel: This is hard to change but let's encourage local sources. There is a bio-ethanol fuel I saw on telly. I might get that vs LPG. How about making 'charcoal' from other sources like coffee husks or maize stalks or wood dust? Water: I avoid buying bottled water. A little trick a friend showed me. I will fill 75% of my bottle (or those durable reusable sports bottles) at home then leave it in the freezer. When I go out, I fill the remainder 25% with a bit of squash/quencher. I have a cold drink that remains cold as the ice slowly melts. Shoes: That's a tough one since Bata does not have a great range. Even it imports many of the shoes it sells. I try though! Clothes: It drives me nuts that Kenya is an exporter of textiles under AGOA (& even to Europe) yet we import clothes from China, India & South Africa. We need to create a SENSIBLE 'national dress' (not that silly stuff akina awori modeled) that should be 'copyrighted' for manufacture only in Kenya. We need to get back to Bespoke Tailoring for men using good materials & local tailors. These suits/shirts fit well & last longer. Farming/Food: Let's embrace the TRADITIONAL foods like Njahi, Cassava, etc. Why not eat healthier Sweet Potatoes instead of adding sugar to everything? Let's move away from maize (imported from Central America) to what is better suited for Kenya's climate/land. Furniture: We are obsessed by the (cheaper) East Asian furniture. Let's go for a more rustic look made by local artisans. My uncle had his cushions/sofas re-done & they look FANTASTIC. They cost 50% of the cost of replacing the sofas. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Elder Joined: 5/24/2007 Posts: 1,805
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Our real problem is huge demand for imports by way of fuel, fake batteries, sugar, 2nd hand cars, spaghetti.. you name it. We are importing things we want at the expense of what we NEED as nation. Mine is a very rudimentary but effective way. Stop ( highly penalize) all second hand car imports, Hike the fuel price even further for luxury travel. Or make sure driving is for the very rich. This will reduce fuel import and reduce by half the BOP. We should also ban all unnecesarry imports like rice, sugar ( no one died for lack of sugar in their tea), ... well basically 85% of what Nakumatt stocks. Life will be hard for a while but we will get used to it. Na watu warudi ocha wakalime! I Think Therefore I Am
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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This is all fine theoretically, but how are you going to stop our consumption habits? I had someone come for a job interview and she had borrowed 2M and said she has nothing to show for it! This is the new generation, they drink black label, drive guzzlers, wear designer and have 2 bob in their savings accounts. Business opportunities are like buses,there's always another one coming
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Rank: Veteran Joined: 7/8/2008 Posts: 947
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KulaRaha wrote:This is all fine theoretically, but how are you going to stop our consumption habits?
I had someone come for a job interview and she had borrowed 2M and said she has nothing to show for it!
This is the new generation, they drink black label, drive guzzlers, wear designer and have 2 bob in their savings accounts. Tax the shit out of imports including COMESA. Try and encourage manufacturing and value addition of our exports (including the minerals claimed to be abounding in Kenya from Gold to Oil) and stop listening to IMF.Make a decision any decision it is better to be wrong than to sit on the fence.
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Rank: Elder Joined: 11/7/2007 Posts: 2,182
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KulaRaha wrote:This is all fine theoretically, but how are you going to stop our consumption habits?
I had someone come for a job interview and she had borrowed 2M and said she has nothing to show for it!
This is the new generation, they drink black label, drive guzzlers, wear designer and have 2 bob in their savings accounts. Boss si wote am in that "new generation" and i dont remember when i ate imported stuff. my clothes are all made here except tshirts LOVE WHAT YOU DO, DO WHAT YOU LOVE.
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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kyt wrote:KulaRaha wrote:This is all fine theoretically, but how are you going to stop our consumption habits?
I had someone come for a job interview and she had borrowed 2M and said she has nothing to show for it!
This is the new generation, they drink black label, drive guzzlers, wear designer and have 2 bob in their savings accounts. Boss si wote am in that "new generation" and i dont remember when i ate imported stuff. my clothes are all made here except tshirts then you're doing badly in your peer group sunshine...style up! Business opportunities are like buses,there's always another one coming
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