http://www.businessdaily...8/-/tjjsm9/-/index.html

What an interesting read but I tend to agree with the Governor on this...

@Genghis...No wonder the capital you manage has been doing so badly.

If you cannot make a simple connection such as "Furthermore, the fact that your grandmother now has 5k more to spend means you have 5k less to spend!!!

Armchair researchers!!! "

The time you end up with Inflation causing money is when the money is generated without being backed by gold, services or commodities available in the market or when paper money is issued. The only other extreme cases include capital flight, money laundering etc.

By the way, do our politicians know the level of inflation late last year in Uganda, Tanzania and other African countries in the league of Kenya economically or they are also armchair economists? Some

I haven't read the article but it reminds me of a Kiambu police officer who blamed increased carjacking incidents on smooth roads...its as if he wanted the road to be filled with potholes to contain carjacking.

@Maichblack and Kihangeri: Don't be in a hurry to condemn Gengis Khan.

The speed of money can cause temporary inflation, especially in an inefficient market economy like ours. Here is how:

The transaction we call demand and supply is dependent on matching goods/services on the one hand with people’s capacity to consume on the other. The key enabler of consumption (demand) is money. Money usually shows up in our pockets at fairly defined time periods - in Kenya ours is largely an end of month economy. The producers of goods and services have set their systems to match that cycle, and usually can not change the cycle at short notice.

What happens when a system comes a long that can force the money to appear at different time periods?

By increasing the speed at which money transits through the economy, systems like M-pesa can enable large concentrations of money out of phase with economic production - that is at times when the requisite goods are not in market yet, even though the holders of the money have capacity to buy. This leads to a temporary rise in prices.

Back to our inefficient market, the rise in prices is not always followed by a commensurate fall when goods become available, ergo, inflation.

Before you shout rink! let me give you an example instead: the behavior of the price of sugar over the past few years, has not always had a cause in shortages or even speculation. Sugar consumption in Kenya is now virtually an inelastic good, the poor get over 50% of their calories from sugar. It is a candidate for such M-pesa type inflation

1) I'm not condeming @Gengis Khan. I'm condeming the "researchers". In this case @Gengis Khan was just a messenger. I'm not in the habit of shooting the messenger. Actually, if I'm not mistaken, @Gengis Khan holds an opinion similar to mine.

2) Your argument doesn't make any sense - at least not to me! If I normally get money at the end of the month, how will MPesa make money appear suddenly "out of phase"? Where is the money coming from? The money must come from another individual - not from Safaricom or the technology! Now, is this individual giving me the money because MPesa exists or because we had an agreement [independent of the technology] and we just decided to use MPesa as a medium of transfer?

You must have been a student of one of the lecturers @Gengis Khan is talking about!