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Post by mank on Jul 23, 2013 6:29:50 GMT 3
The metropolis of Detroit is a major pillar of the US economy, by any credible source. It is the birth place of US's auto industry – home of Ford Motor Company, Chrysler and General Motors. It is also an IT hub! With all that economic weight on its name, last week Detroit became the largest city in U.S. history to file for bankruptcy. Ouch! Why it matters:Ask Jackswanga. He surprised me by going back into the archives of his chan’gaa minds and retrieving a related thought that I had posted on this board several years back. Coincidentally that thought is relatable to local bankruptcies as has happened in Detroit, and as I see it unfolding in the near future in Kenya, nationally or locally, if we continue irresponsible public finance discipline. Since the days of referendum politics I feel increasingly uneasy with the prospects that Kenya is fanning its own financial calamity as it ever-reaches for what is unnecessary, unproductive, or inefficient. Before I go any further, let me clarify that I was never against a new constitution – rather I was, and always am for a constitution that is both sensitive to our means and essential. Before I ever took an economics class I had learned enough survival economics from mama. Mama would typically buy in small packages so she would spread her shilling over as much of what we needed in the week as possible – then once in a while mama would have enough of the shilling to go up the scale in some items without sacrificing the range of necessities. If she ever sent one of us to buy some of the items, she would coordinate all the buying so that in whole it would adhere to the principles of survival economics that governed her budgeting. It’s amazing the invisible data crunching that household budgeters like mama go through when there is not much of the shilling to work with. In my view, Detroit and Kenya are ridiculous failures at the simple economics that we learn from mama in the household kitchen. However we should not dare compare the two entities because Detroit can come out of its quagmire within no time, given its means, but Kenya can be doomed for generations upon a slight slip beyond a certain balance. Entities that are such ridiculous failures have the tendency to become beggars (rescue seekers from higher governments or private interests), robbers (call them tax-hikers if that sounds better), or both! In the US, when a citizen entity has squandered its financial decency, filing bankruptcy is a legal exit from its obligation to others (investors and pensioners), and an entitlement to unchecked taxation (in the case of local governments). By filing bankruptcy Detroit has simply claimed the right not to honor its debt obligations, and the right to tax its residents more aggressively to revitalize its accounts. Those who have worked for the city for their lives, and were hoping to retire comfortably after a lifetime of contribution to retirement accounts, no longer can be assured of that comfort in retirement. The city can also be expected to scale down on, or withdraw services that it customarily renders, meaning the same individuals who must adjust their livelihoods in retirement to accommodate a new mouth for which they never budgeted must also take charge of services they took for granted. Can Kenya, or a Kenyan county fall bankrupt? Or more realistically in my view, what will happen in Kenya when the country or a member county falls bankrupt? How did the motor city of the US fall bankrupt?There are various schools of thought as to how or why Detroit’s economy crumbled. Those schools of thought are not necessarily contradicting each other, or even in competition. The most popular explanation is that recent economic woes of the auto industry trivially translated to Detroit’s economic nightmare due to over reliance of the city on the single industry. However this explanation is not sufficient by itself because while the auto industry has been on the rebound (thanks to the bold policy moves of the “Kenyan” in the Whitehouse), Detroit has been on the slide leading to filing for bankruptcy last week. Another explanation of the Detroit’s financial decay is an overburdened pension structure: Extended Narrative Here In other words the city was continuing amass pension and other retiree liabilities that were not backed up with the ability to pay. Hand in hand with this explanation, or supporting it, Detroit has suffered sustained outmigration for years. Outmigration means a declining tax base. Its widely alleged that while the tax base declined, Detroit maintained the same or increasing sizes of its projects and public service staffing – bloating the wage budget and unfunded retiree liabilities. I find this explanation to be sufficient, even on its own account, to bring a powerhouse economy down to its knees! Kenya SituationKenya's political officials have the tendency of imagining that the resources of a country are inexhaustible. Therefore when they want something, they acti like a two year-old. They just want it, and can't care what it takes. I have written before about the president’s retirement bill sponsored by Anyang’ Nyong’o those days of Goliath-decimates-all. At that time it seemed like Moi was immune to age and retirement – politicians went to work, and the winning idea was a gargantuan bribe bill. I have since forgotten its beef, but from what I hear it seems Moi and Kibaki (and their bloodlines) are currently milking a retirement program that may not be much leaner than what was on the bill. The current constitution was meant to scrap the provincial government and replace it with local (county) governments. The last I heard, the 47 District Commissioners that Kibaki appointed are still in office. I trust they are receiving pay, else they would have gone home by now. We have a wide range of governmental bodies whose addition to desirable functioning of the country is difficult to justify. Two houses of political representation is not what a little country in Kenya really needs in my view. But when we decide that’s what we’ll go for, we better know what each house is required for so they are not for every stepping on each other’s toes - and let it be proportionate to the country for pete's sake! Importantly, each house (as every program) should have a constructive contribution to the functioning of the national system so that it is not a sucker for resources, but a contributor or part of the infrastructure for generating resources. Remember each layer of government, and every one public office position, comes with a pension liability assignment to the country – wages and salaries are known to be a huge responsibility for government, but what’s sure to cripple an ill-planned government are the pension burdens that come with the ill-planned government. We have the politicians’ so-called-salaries that make other public employees wonder what the heck. With those not tamed, even with the recent pathetic pretence of the Public Service Commission to have tamed them, teachers, doctors, etc, even the government drivers that outnumber government vehicles, will demand higher wages – and they should get them. There is a thirst for tourism that our politicians fund for themselves any time they are bored with their every-day idling in Kenya – recently we have heard about a window-shopping spree in China for office furniture. That’s not how mama would go about buying furniture. But of course they would ask “kwani pesa ni ya mama yako?” This kind of wondering aloud never comes up in projects that support some productive process or even contribute in the synergy of anything that is productive. All this, and much more, and we don’t boast of any industry! We have to wake up or it won’t be long.
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Post by jakaswanga on Jul 23, 2013 21:08:59 GMT 3
Yes Mank, a country like Kenya can go bankrupt. But unlike companies or cities which can dissappear when they go bankrupt, a country stays, well, sort of, in the sense the people remain there ---I think in the beginning of the Union that later became the USA, some states only joined because they were bankrupt and thought salvation would come within the Union --I will revise my USA history and report later! I will also check the details but I believe in the recent past, both Argentia and Brazil were economically defined as bankrupt. And it took those collapses to have them regenerate themselves into the formidable economies they now have now become! So yes, the short of it is Kenya can indeed go bust! --How would a busted Kenya look like? Zimbabue with its zillion kwacha notes? or just about as we are now? NB: It should be 'waragi' amigo. Kenyan chang'aa scares me! even chemicals used to preserve the dead have been lab-tested in kenyan Chang'aa! That thing is the 'fatal hemlock'! I would rather do weed than Kenyan chang'aa!
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Post by jakaswanga on Jul 23, 2013 21:26:57 GMT 3
Mank wrote: Mank, I assume, that Detroit was able to maintain this 'comfort zone lifes-tyle' for the while, because of the availability of cheap credit. That is, the city progressively went into debt to fund fun, until no new creditors could be found, foolish enough to believe Detroit was credit worthy, in the sense of the city could reasonably be expected to repay at some point in the future!
I find this [availability or not of credit] an important nuance. When a non productive economic entity, already in hefty debt, is starved of credit, it has no options but to surrender.
Actually it was a similar construction that forced Berlusconi and Papandreau [Italy and Greek premiers respectively to resign]. When Angela Merkel's Bundesbank which controls the ECB said no credit, Greco-Italian options were to find the money in the open financial markets. Those markets looked at their ratings and balked! Mighty Italy and Great Greece had only enough money to pay salaries for 3 months, and none to import medicine!
New leaders were requred who would accept the dictates from far and wide, and effect the demands of the financial markets. {I presume Detroit now goes into receivership either by the state government, or the federal governemnt, who will bail her out with tax-payers loot!?]
NO MONEY FOR MEDICINE IN GREECE: of course there were economists who suggested thIS is not a bad idea. The sickly would die OFF, and that is good riddance by natural selection. One should not waste money keeping 'non working sick people' roaming alive during a crisis, they reasoned. Harsh, possibly to the rank of cruelty, but not entirely nonsense I think.
Detroit was Mo-town. A monoculture. And guys were making better and cheaper cars elsewhere, The Toyotas and the rest, and your gringo amigos pretended to be immune.
Well, our whole Kenyan political elite is wasting money by the buckets, and we pretend it wont hurt us somewhere ahead. I share your pessimism Mank. I want a lean and mean government.
No parliament, the senate is enough legislature. And no more than ten cabinet ministers. And performance levels raised to the level of Singapore.
Taking efficiency seriously for a moment! Those their excellency governors newly sworn it, do not look it to me! Those Prados for instance in Kisumu while the tax-base is boda-boda stale sweat and hawkers! A detroit tale I think!
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Post by mank on Jul 24, 2013 0:43:13 GMT 3
...NB: It should be 'waragi' amigo. Kenyan chang'aa scares me! even chemicals used to preserve the dead have been lab-tested in kenyan Chang'aa! That thing is the 'fatal hemlock'! I would rather do weed than Kenyan chang'aa! Plenty apologies Amigo for that awful insult. Would moonshine have worked better? No, don't do weed man. If you are talking about communion, then its a whole different business. I will quit before I am accused of some form of commerce. We'll be back to the issue amigo.
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Post by mank on Jul 24, 2013 3:43:38 GMT 3
Yes Mank, a country like Kenya can go bankrupt. But unlike companies or cities which can dissappear when they go bankrupt, a country stays, well, sort of, in the sense the people remain there .... Indeed! The country stays there. Its the citizens who surfer. Even cities, especially cities with a foundation to boast, can weather bankruptcies quite well. If you listen to Detroit's policy makers sugar-coating the bankruptcy you can be deceived that a bankruptcy is an opportunity ... and it is, but not for the residents. It is an opportunity for policy makers to regroup and prove that they can use a second chance. A city and a country will always have a second chance, but always on the shoulders of its residents. So our anxciety about the prospects of a bankruptcy must ideally be expressed through the eyes of the citizen to whome every bad decision by the policy makers is a personal threat. ---I think in the beginning of the Union that later became the USA, some states only joined because they were bankrupt and thought salvation would come within the Union --I will revise my USA history and report later! I will also check the details but I believe in the recent past, both Argentia and Brazil were economically defined as bankrupt. And it took those collapses to have them regenerate themselves into the formidable economies they now have now become! Amigo, I hope you are not trying to tell me that a bankruptcy is a good thing. It is one thing for bankrupt states to come together in a bankrupt union knowing that such harambee betters their chance to triumph over the bankruptcy but quite another for states that are not bankrupt to reclessly choose it, individually or in a union. Bankruptcy is threatened by the union in the first case, but it is a threat to the union in the latter. Good thing I read elsewhere that Kenya is a mineral-rich country now. I choose to treat that like I would an April 1 prank, but I know our policy makers won't lose the opportunity to coin another program for the new mineral giant of the world!
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kelly
Junior Member
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Post by kelly on Jul 24, 2013 7:35:19 GMT 3
In my opinion, having two chambers in itself is not a bad thing. Having 47 counties, 22 ministers as stipulated by the law is neither here nor there. What we must interrogate is the purpose of these entities, their roles and separation of duties, compensation vis a vis the work they do etc.
Second thing is on the bankruptcy. While bankruptcy is undesirable, depending on the situation, it may be the only prudent thing to do. Argentina and Barazil are very good recent examples. South Korea had to be bailed out in 1998 ditto Egypt in I think 1992. They all went on to repay their debts and even enjoy surpluses contributing back to IMF and WB.
In Kenya's case, we do not hold people responsible or accountable. Either it is a culture thing or forced on us by the tribal nature of our country. Have yet to find that out, but many walk free amongst us, people who should be cooling their feet in jail.
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Post by jakaswanga on Jul 25, 2013 22:25:17 GMT 3
]Amigo, I hope you are not trying to tell me that a bankruptcy is a good thing. It is one thing for bankrupt states to come together in a bankrupt union knowing that such harambee betters their chance to triumph over the bankruptcy but quite another for states that are not bankrupt to reclessly choose it, individually or in a union. Bankruptcy is threatened by the union in the first case, but it is a threat to the union in the latter. Good thing I read elsewhere that Kenya is a mineral-rich country now. I choose to treat that like I would an April 1 prank, but I know our policy makers won't lose the opportunity to coin another program for the new mineral giant of the world! Mank, you know sometimes I highly doubt the lofty premise of you economists, that man makes rational choices in his economic behaviour. I see so many irrational choices being made financially with the budget of countries, that I am ready to think and believe, that more often than not, man is captive to his drifts, like certain base biological drives, and these are the stuff he tries to maximulise the joy of [EVEN WHEN EVIDENTLY THAT MEANS RECKLESSLY CHOOSING THE PATH OF BANKRUPTCY! . Greed is therefore a very powerful drive which i am ready to say overrides reason most of the times, and that is why, where there are no checks and balances, corruption will be the practice. --- Like the perks our own Mpigs have defined for themselves. Are they not creatures captive to greed, and operating outside rational thinking? [AS PER THE OFFICIAL BRIEF OF THEIR JOB DESCRIPTION --gaurd her future!?] I was also going to say, carrying on as a doubting-Thomas on the rationality of humans in economics, that even the free market quickly degenerates into a 'monopolists imperium' stiffling free competition --but that is for another day. Suffice is to say, that while I do not wish a bankruptcy on any state, let alone our own, history tends to go the side of 'mtoto akililia wembe, umpatie!' ---We are asking for a bankruptcy ourselves and we know it, that is why the vague intimations by Uhuruto about 'unsustainable' public wage bill. WHY DO THEY NOT ENACT LEGISLATION TO CURB IT? (Because the Mpigs would impeach them on integrity issues! ] That is, it looks like nations learn best by direct experience: abstract lessons from others who have gone bust, are not enough deterrences from falling into the same negative dynamics!Hmm ---I am afraid if I look at the economic history of nations, and let me now restrict myself to Afrika, many governments indeed would appear to have 'recklessly chosen the path to bankruptcy --- Egypt where the Mubakrak court are reportedly many times richer than the whole country; Nigeria where a caste of generals including Buhari, Obasanjo, Baba, are collectively richer than the country; Nguema, Dos Santos!NB: Mine deposits? see the new thread by Nok! --welcome back Nok after a long off!
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Post by mank on Jul 27, 2013 7:19:05 GMT 3
]Amigo, I hope you are not trying to tell me that a bankruptcy is a good thing. It is one thing for bankrupt states to come together in a bankrupt union knowing that such harambee betters their chance to triumph over the bankruptcy but quite another for states that are not bankrupt to reclessly choose it, individually or in a union. Bankruptcy is threatened by the union in the first case, but it is a threat to the union in the latter. Good thing I read elsewhere that Kenya is a mineral-rich country now. I choose to treat that like I would an April 1 prank, but I know our policy makers won't lose the opportunity to coin another program for the new mineral giant of the world! Mank, you know sometimes I highly doubt the lofty premise of you economists, that man makes rational choices in his economic behaviour. I see so many irrational choices being made financially with the budget of countries, that I am ready to think and believe, that more often than not, man is captive to his drifts, like certain base biological drives, and these are the stuff he tries to maximulise the joy of [EVEN WHEN EVIDENTLY THAT MEANS RECKLESSLY CHOOSING THE PATH OF BANKRUPTCY! . Greed is therefore a very powerful drive which i am ready to say overrides reason most of the times, and that is why, where there are no checks and balances, corruption will be the practice. --- Like the perks our own Mpigs have defined for themselves. Are they not creatures captive to greed, and operating outside rational thinking? [AS PER THE OFFICIAL BRIEF OF THEIR JOB DESCRIPTION --gaurd her future!?] I was also going to say, carrying on as a doubting-Thomas on the rationality of humans in economics, that even the free market quickly degenerates into a 'monopolists imperium' stiffling free competition --but that is for another day. Suffice is to say, that while I do not wish a bankruptcy on any state, let alone our own, history tends to go the side of 'mtoto akililia wembe, umpatie!' ---We are asking for a bankruptcy ourselves and we know it, that is why the vague intimations by Uhuruto about 'unsustainable' public wage bill. WHY DO THEY NOT ENACT LEGISLATION TO CURB IT? (Because the Mpigs would impeach them on integrity issues! ] That is, it looks like nations learn best by direct experience: abstract lessons from others who have gone bust, are not enough deterrences from falling into the same negative dynamics!Hmm ---I am afraid if I look at the economic history of nations, and let me now restrict myself to Afrika, many governments indeed would appear to have 'recklessly chosen the path to bankruptcy --- Egypt where the Mubakrak court are reportedly many times richer than the whole country; Nigeria where a caste of generals including Buhari, Obasanjo, Baba, are collectively richer than the country; Nguema, Dos Santos!NB: Mine deposits? see the new thread by Nok! --welcome back Nok after a long off! Jakaswanga my friend, There again you go with your unapologetic attacks on the economist. But then you don't realize how consistent with economic thought you still argue. All we need to reconcile all your concerns is recognition of conflict of interest among those we give power to decide for us, and our docility as their subjects. The pillar of economics is that a decision maker acts to maximize self interest. Yet too often you teachers and your preaching relatives keep talking about morals as the guide to decisions. When mpigs keep hiking their salaries they do so not because its in the the interest of those who sent them to the house, but because it is in their own interest and those who sent them there are not putting up a credible resistance. Then they tell us that they need new desks in their offices, and on basis of that need they coin a trip to China. These are the moronic projects I decry, but I cannot say they are irrational on the part of the Mpig ... only irrational if the Mpig is really representing the people. We are the lot that complain about politicians not being serious about finance, well knowing that the most powerful of them are also the most endowed capitalists with private interests in various financial institutions of the country. We stand easy waiting for them to institute "our programs" and voluntarily malnourish "their cow." But why are you and I not putting a good fight against these Mpigs and their self interest? Are we irrational? Oh boy! Information! There is a lot that can be said there, but lets just say "information" and then use a simple illustration: Too many of us don't realize that an Mpig going to China on our dollars is paying hardly anything personally, even if you include their share of the risk of national bankruptcy in the cost, to reap a hell of personal satisfaction in return. That's why its trivial that if we do not fight them then they will hike their salaries, go to China and wherever else they wish to tour. Till you and I realize that just because we voted them in we did not give them a nerve to feel our pain. And that's where you damn teachers come in ... teach the damn kids to raise questions about the projects undertaken in their names and the names of their mothers and fathers. Much has been made about "bankruptcy as a last result." Kelly has been on it too. I do not object. If we make the best choices all the way, and then at some point determine that things are falling apart and the best option we have is bankruptcy, then by all means we should take it. What I "chant down" is the plunder of the public resource in pursuit of the gain of few. Cut Thomas Malthus a slack. He was wrong only because he lacked future information. Otherwise his thesis was sound. People judge his little "futuristic oversight" yet they duplicate his dismal views even though time has dismantled his view of human capital as a limited resource no different from limited earth surface. They are morons if we put them on the same scale of measurement with ol' Tom.
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Post by jakaswanga on Jul 27, 2013 13:25:39 GMT 3
Jakaswanga my friend, There again you go with your unapologetic attacks on the economist. But then you don't realize how consistent with economic thought you still argue. All we need to reconcile all your concerns is recognition of conflict of interest among those we give power to decide for us, and our docility as their subjects. The pillar of economics is that a decision maker acts to maximize self interest. Yet too often you teachers and your preaching relatives keep talking about morals as the guide to decisions. When mpigs keep hiking their salaries they do so not because its in the the interest of those who sent them to the house, but because it is in their own interest and those who sent them there are not putting up a credible resistance. My brother Mank, Take my solar-plexus drives at economists as a small domestic, insignificant in the bigger picture of evolution. I am a renaissance man, and modern economic thought, I accept, is very much a creature of the same: Man acting on ratio! Man pontificating himself as the center of the universe, his mind supreme, having slain God with his mythological system of beliefs, upgraded by the illogical appendages of infallible theoriticians, aka Holy Men.Yes, scientific inquiry is the new religion for renaissance man! He who knows that he knows not! So when I man a roadblock and flag the economist down, Mank, it is a spot-check on the health of the project, for bouts of atavism are wont to manifest themselves once too often. And, I suppose, constant vigilance is mandatory, lest the recidivism unto cave-man ---the so called trogloditic urge embedded in the limbic system, emerge victorious. ---Actually this is already the case in most of the world! Cave-man armed with atomic bombs and posionous gas! So perhaps you should give me this caveat: Under NTP, , man is all rational. Inject a bit of power into him, the equilibrium is disturbed. A monster awakens! -NB:-- Greed is good -- Michael Douglas in the bonfire of vanities I think, translating Reaganomics $ Thatcherism into Wall Street talk.But the fight against greed, and other good base instincts, is the civilisation project! A project probably beyond Kenya, even in the next quarter century! Lakini kidogo kidogo hujasa kibaba, and neither was Roma built in a decade! There is abviously an awakening afoot, with the kind of seditious thinking you show here below: ---Extremely good food for thought Mank! Good homework! we say in our trade! NB: If you are serious, I am pleasantly surprised you think my arguments are consistent with economic thought, only that I be ignorant of it! I may just believe you on that and promote myself into an 'economist'! Always has a higher paygrade than 'historian'! --not so!? Ciao, amigo!
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Post by mank on Jul 28, 2013 4:53:57 GMT 3
Ndugu Jakaswanga, Hei, yawah, hiki kimonimoni chako ni cha wapi? You are such an artist! My brother Mank, Take my solar-plexus drives at economists as a small domestic, insignificant in the bigger picture of evolution. I am a renaissance man, and modern economic thought, I accept, is very much a creature of the same: Man acting on ratio! Man pontificating himself as the center of the universe, his mind supreme, having slain God with his mythological system of beliefs, upgraded by the illogical appendages of infallible theoriticians, aka Holy Men. .... In defense of economic thought, I will repeat something I said in another thread, that economists don't put themselves in the center of the universe (having killed God), as you allege. Like other scientists who study phenomena, the economist is not part or master of the phenomena (but a student of them). Be converted brother, and become a daily observer in this earthly laboratory where people and institutions, in making their day by day decisions, are your guinea pigs. Economic thought embodies theories by which behaviour of individuals (and their various collective units) and businesses can be anticipated and even prospectively quantified. This is not to compete with the religious thought that sees preachers spending their lives away begging individuals to act this, or that way, for else hell is nigh. Economists are not in the business of telling people (or their organizations) how to behave (not to be confused with when they are called upon to prescribe economic policy). There is no religion for economists, and economists are not necessarily unreligious. Ofcourse when you figure out what inspires people to make the decisions they make, and when you figure that the decisions they make are rational (as they're consistently governed by the objectives of the individuals) then you are less likely to put your time into the projects the preachers put theirs. You are also likely to find yourself very bored when you listen to the preacher. ... But the fight against greed, and other good base instincts, is the civilisation project! A project probably beyond Kenya, even in the next quarter century!... There is abviously an awakening afoot, with the kind of seditious thinking you show here below: Awakening you said? Oh brother, have you paid too much attention to what sister Kathure says of me? There is no awakening. I have always had the thoughts epitomized by the "seditious thinking" above. What distinguishes my reaction to the situation of our misleadership is my trust that men, motivated by the human desire to better the self above all else, are less sensitive to the pains of society than to their desires - therefore when society fails to demand its due, and instead choses to believe in the goodness or altruism of the previleged few (Mpigs), then it gives the previleged few that much unlimited space to persue their individual ends at the alter of that society. Its our system that gives us our leadership, not the leaders. I won't spend my time expressing hate for a few individuals for fattening their bellies with our stuff when I know different about what makes them do so. The point is, I am inclined to inquire into the system in which the exploitation occurs than to join in the belief of "evil men at the helm." But why are you and I not putting a good fight against these Mpigs and their self interest? Are we irrational? Oh boy! ---Extremely good food for thought Mank! Good homework! we say in our trade! NB: If you are serious, I am pleasantly surprised you think my arguments are consistent with economic thought, only that I be ignorant of it! I may just believe you on that and promote myself into an 'economist'! Always has a higher paygrade than 'historian'! --not so!? Ciao, amigo! Amigo, I will leave that homework as such, for we have barely scratched the surface of economic thought, and there we are already, going into the crevices. Too fast! Let me asure you though that I am not kidding about your economic inclination. If only we could jump the hurdle of the only preaching I have made (and will ever make) about economics - that it is not a preachy art, rather a science describing economic behaviour, the rest would be quick for your inquinsitive mind.
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Post by jakaswanga on Jul 31, 2013 20:38:37 GMT 3
I think we can not conclude our discussion [ did you say we had barely scratched the surface? ]on the possibilities of state bankruptcies, Kenya or some other, without talking a bit about debt, or the debt portfolio such an entity has. I had been collecting some data on the KPD --Kenya PUblic debt, and something perplexed me, upon which I hope you will shed some light. Some of the big capitalist countries --- Italy, Belgium, the Netherlands, Spain the UK, the USA, have ratios in the range 70%-150%. And they are not very hysterical about it. But from a layman's perspective they would seem to be living on credit. In the extreme that is, compared with say Russia with debt:gdp at 18%! They need a constant supply of credit to maintain those high rations, not so? ---For Italy the markets have already said NYET, thence that, out of options, Angela Merkel could force Silvio Berlusconi out. As the price of her bail-out. Looking at this table.... en.wikipedia.org/wiki/List_of_countries_by_public_debtwhat intrigues me is this: Kenya's ratio is 50%, which, comparative the western powers, shouldn't look worrying. So why are we worried? Why are we ringing the alarm bells!? conjuring up horror scenarios! 1. is it the level of our productive forces or what? that does not instill confidence in our 'credit worthiness'? nor 'future prospects'? ----What did 'witman' Oscar Wilde say again about Great Expectations? 2. Is it the type of loans we have? and the type of conditions imposed? So whilst Italy would never spend even 3% of her GDP servicing loans and paying interest rates, some African countries, while their debt ratios were less than 40% GDP, were coughing up to 35% of state expenditures repaying and servicing debt? --- The 'reparative extractive regime' of the IMF and WB, which ensures African countries do not have the wherewithal to accumulate for heavy industrialisation funding, but must mortgage their natural resources: BONDAGE. The bondage of a serf to his lord, passed over generation after generation. www.globalfinancialdata.com/news/articles/government_debt.pdfBrother Mank, some of our exchanges here may well, amuse you! jukwaa.proboards.com/thread/8557/100-kitendawili-facebook
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Post by mank on Aug 1, 2013 2:45:58 GMT 3
Jakaswanga,
Hi mate, you just changed gears on this one. Talk about homework!
I will be back, to see what value I can add.
Keep it burning!
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Post by mank on Aug 1, 2013 6:57:33 GMT 3
....[ did you say we had barely scratched the surface? ]on the possibilities of state bankruptcies, Kenya or some other, without talking a bit about debt, or the debt portfolio such an entity has. Ouch! That wouldn't be fare. No, it was economic theory I said we had barely scratched. I had been collecting some data on the KPD --Kenya PUblic debt, and something perplexed me, upon which I hope you will shed some light. Some of the big capitalist countries --- Italy, Belgium, the Netherlands, Spain the UK, the USA, have ratios in the range 70%-150%. And they are not very hysterical about it. But from a layman's perspective they would seem to be living on credit. In the extreme that is, compared with say Russia with debt:gdp at 18%! That's why I think you should let loose that other profession cocooned in a historian shell! Starring an apt conversation is by itself a big contribution. But before I go too far, let me confess that I will ponder this matter only as a theorist, as I have not paid attention to these very worthy macroeconomic issues you bring up. Now you bring very interesting statistics. There are some obvious extremes on the scale of Debt:GDP that we can easily dismiss as ridiculous: with Zimbabwe's number at 203, we must wonder who still lends them anything. In general however, I think Debt:GDP ratio alone is a very poor measure of credit-worthiness, or the health of debt account. Just recently we alluded to the Malthusian pessimism of old; I think the tendency to measure credit-worthiness on this ratio alone is one practice through which that pessimism is perpetuated today. Fortunately though, only newsmen and politicians want to convince us that this ratio is anything to go by - you may have heard US noisemakers against public debt claiming that US is approaching bankruptcy while giving aid to countries that have much less debt per GDP. Perhaps I am taking too wide an angle - let me come back to the point in the next part. They need a constant supply of credit to maintain those high rations, not so? ---For Italy the markets have already said NYET, thence that, out of options, Angela Merkel could force Silvio Berlusconi out. As the price of her bail-out. Looking at this table.... en.wikipedia.org/wiki/List_of_countries_by_public_debtIf you are the king and you hear markets saying they won't give your kingdom any more debt, you should right away realize what it has taken you too long to realize - that you are misusing public debt! So Angela Merkel's bid on Silvio Berlusconi may not be misplaced, or even mere politricks. I think you and I are moving with the curve (if not ahead of it) when we ask the questions we ask now, before markets start having a heart burn. I assure you I will make a point here, somewhere! what intrigues me is this: Kenya's ratio is 50%, which, comparative the western powers, shouldn't look worrying. So why are we worried? Why are we ringing the alarm bells!? conjuring up horror scenarios! 1. is it the level of our productive forces or what? that does not instill confidence in our 'credit worthiness'? nor 'future prospects'? ----What did 'witman' Oscar Wilde say again about Great Expectations? 2. Is it the type of loans we have? and the type of conditions imposed? So whilst Italy would never spend even 3% of her GDP servicing loans and paying interest rates, some African countries, while their debt ratios were less than 40% GDP, were coughing up to 35% of state expenditures repaying and servicing debt? --- The 'reparative extractive regime' of the IMF and WB, which ensures African countries do not have the wherewithal to accumulate for heavy industrialisation funding, but must mortgage their natural resources: BONDAGE. The bondage of a serf to his lord, passed over generation after generation. Don't let Malthusian pessimism get the better of you Brother Jakaswanga. But I know you ask these questions not because you are all naive, but for the discourse. In any case you give the answers, albeit in form of questions. Let's take a step back, and make it clear that the debt we talk about here, is public debt (government debt) as opposed to total debt (which would include a country's private debt). That said, public debt is really supposed to finance the type of investments that a country values, but into which private enterprise does not invest enough. Said differently, public debt is supposed to energize private invesment. We look up to government to build roads, provide guidance of various forms in nurturing our environment, oversee public healthcare system, etc. More closely, we look up to government as an insurance of sorts at times of disaster, man-made or natural (although private insurance should be caltured to the full extent possible). Disasters include systemic economic shocks that overwhelm private enterprise - without government investment, shocks like the financial one of 2008 can spell economic doom for the world. Now, the point my friend, is that, if a government has to borrow (for want of its current account) to finance any of these noble investments at a time when they are needed, it is government failure if the government doesn't go out and borrow, no matter what the Debt:GDP ratio! By that standard, I would not complain if I was a citizen of Zimbabwe, and Mugabe (with a chance that we'll be saying Tsvangirae from next week) was borrowing a few million dollars to finance projects that empower the private sector (I can sure dream!) In other words, the main problem with debt is not how much debt is accummulated (although that's a problem ofcourse, in that it comes with interest cost), but what new debt is going to be put into. If new debt is being put into projects that will increase productivity, it means new debt is even likely to help pay past debt. But what shall we say about new debt that is incurred to send a few overpaid Mpigs for another tour abroad? It continues to heap up unproductive but still costly debt! That's why we must make noise about any aggravation our 50% debt:gdp situation. ...not the end...
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Post by nok on Aug 1, 2013 12:22:49 GMT 3
]Amigo, I hope you are not trying to tell me that a bankruptcy is a good thing. It is one thing for bankrupt states to come together in a bankrupt union knowing that such harambee betters their chance to triumph over the bankruptcy but quite another for states that are not bankrupt to reclessly choose it, individually or in a union. Bankruptcy is threatened by the union in the first case, but it is a threat to the union in the latter. Good thing I read elsewhere that Kenya is a mineral-rich country now. I choose to treat that like I would an April 1 prank, but I know our policy makers won't lose the opportunity to coin another program for the new mineral giant of the world! Mank, you know sometimes I highly doubt the lofty premise of you economists, that man makes rational choices in his economic behaviour. I see so many irrational choices being made financially with the budget of countries, that I am ready to think and believe, that more often than not, man is captive to his drifts, like certain base biological drives, and these are the stuff he tries to maximulise the joy of [EVEN WHEN EVIDENTLY THAT MEANS RECKLESSLY CHOOSING THE PATH OF BANKRUPTCY! . Greed is therefore a very powerful drive which i am ready to say overrides reason most of the times, and that is why, where there are no checks and balances, corruption will be the practice. --- Like the perks our own Mpigs have defined for themselves. Are they not creatures captive to greed, and operating outside rational thinking? [AS PER THE OFFICIAL BRIEF OF THEIR JOB DESCRIPTION --gaurd her future!?] I was also going to say, carrying on as a doubting-Thomas on the rationality of humans in economics, that even the free market quickly degenerates into a 'monopolists imperium' stiffling free competition --but that is for another day. Suffice is to say, that while I do not wish a bankruptcy on any state, let alone our own, history tends to go the side of 'mtoto akililia wembe, umpatie!' ---We are asking for a bankruptcy ourselves and we know it, that is why the vague intimations by Uhuruto about 'unsustainable' public wage bill. WHY DO THEY NOT ENACT LEGISLATION TO CURB IT? (Because the Mpigs would impeach them on integrity issues! ] That is, it looks like nations learn best by direct experience: abstract lessons from others who have gone bust, are not enough deterrences from falling into the same negative dynamics!Hmm ---I am afraid if I look at the economic history of nations, and let me now restrict myself to Afrika, many governments indeed would appear to have 'recklessly chosen the path to bankruptcy --- Egypt where the Mubakrak court are reportedly many times richer than the whole country; Nigeria where a caste of generals including Buhari, Obasanjo, Baba, are collectively richer than the country; Nguema, Dos Santos!NB: Mine deposits? see the new thread by Nok! --welcome back Nok after a long off! Jakaswanga thank you for welcoming me back. Now to you and Mank; I would be excited to know if you support Leviticus or the Laws of release as stated in Deuteronomy / Exodus
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Post by jakaswanga on Aug 1, 2013 21:35:34 GMT 3
Brother Mank NB: Mine deposits? see the new thread by Nok! --welcome back Nok after a long off! Jakaswanga thank you for welcoming me back. Now to you and Mank; I would be excited to know if you support Leviticus or the Laws of release as stated in Deuteronomy / Exodus Nok, Let me leaf something from here: Read more: jukwaa.proboards.com/thread/8472/why-richard-rotich-missing-action#ixzz2ak31Ixh1Nok, I think Of late, THIS IS HOW DISJOINTED THE GOVERNMENT HAS BEEN GOING TO WORK AROUND THE PROBLEM OF SHORTAGE OF REVENUES. ----In the absence of donor largesse, upping taxes in some 'smart or stupid form', and reneging, are the only viable options left. Take a look at the following farce in my opinion. (NB: For me, I classify the plan to confiscate Teacher's July salaries under 'renege'. Fiddling with military payrolls, a tax up) Here is the other upped tax from the banking sector the 10% excise duty: increasing taxation just like that! the Banks pass it on direct to the clients! www.standardmedia.co.ke/?articleID=2000089778&story_title=confusion-hits-banking-sector============================= Reneging options: ---All those CBA's are up for grabs! None will be honoured, well, to the letter, nor to the time. That indeed is a sure sign of a cash-flow strap. and another www.standardmedia.co.ke/m/story.php?id=2000086117&pageNo=2No July salary for teachers: TSC rallies to the side of Bellio Kipsang and Kazungu Kambi. A season of anomy begins. www.standardmedia.co.ke/m/story.php?articleID=2000089726&story_title=TSC-We-didnt-commit-to-pay-July-salaries-in-dealwww.standardmedia.co.ke/m/story.php?id=2000089725&pageNo=1 These disputes are recurring, like serialised soaps, so one can get their years wrong! But, We evidently need the services of the money-doublers! The wash-wash of Kisumu, or the money-doublers of Onitsha market! NB: Tea is hit by the Egypt chaos. Coffee, pyrethrum, flowers, miraa are not moving: but the reasons to be fair, have nothing to do with Jubilee. 1. Ethiopia offers better rates for flowers. 2. Coffee from elsewhere has penentrated traditional Kenyan lucrative markets, in addition to consumer taste changes, fuelled by long recession in the west. Miraa, well, Mank, what about miraa? 2. Part of these large CBA agreements, are heavy saddles from the previous administration, the GCG, but of course Uhuruto were big men in that one too, worse, Uhuru ran finance for quite a while under the GCG! so in a way, his own chickens are coming home to roost! But if one laughs at the wash-wash and the Onitsha MDs, then Harvard man Rotich has to show he is no sham, like the wash-wash!
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fimbo
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Post by fimbo on Aug 1, 2013 22:05:19 GMT 3
A country cannot go broke when it borrows on its own currency. The government can just print paper to pay off its debtors, employees, whatever
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Post by mank on Aug 1, 2013 22:19:32 GMT 3
A country cannot go broke when it borrows on its own currency. The government can just print paper to pay off its debtors, employees, whatever Fimbo, How would the country be able to continue borrowing in its own currency? Where would the money be coming from?
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fimbo
Junior Member
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Post by fimbo on Aug 1, 2013 23:19:05 GMT 3
The government doesn't really borrow paper money to fund operations because its owns all the paper. Why would it borrow when it owns THE printing press?
It "borrows" goods and services (local only, remember here that certain sections of the public consume those goods & service)and pays for them with paper (here money is acting as a medium of exchanging wealth within the economy, and the government is like a robin hood, the paper doesn't have or store any value!).
Of course, if it prints too much paper then the people supplying the goods and services might complain very loudly and refuse to supply the goods in the future ... but that is not exactly the same as going broke.
The only complication in this story is the handshake between Treasury (fiscal policy) and CBK (monetary policy), since CBK, the government banker, is "independent".
CBK has a different mandate, (actually to stop too much printing), and might refuse to honor the government's checks.
Where would the money be coming from? DelaRue
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Post by mank on Aug 2, 2013 0:05:42 GMT 3
The government doesn't really borrow paper money to fund operations because its owns all the paper. Why would it borrow when it owns THE printing press? It "borrows" goods and services (local only, remember here that certain sections of the public consume those goods & service)and pays for them with paper (here money is acting as a medium of exchanging wealth within the economy, and the government is like a robin hood, the paper doesn't have or store any value!). Of course, if it prints too much paper then the people supplying the goods and services might complain very loudly and refuse to supply the goods in the future ... but that is not exactly the same as going broke. The only complication in this story is the handshake between Treasury (fiscal policy) and CBK (monetary policy), since CBK, the government banker, is "independent". CBK has a different mandate, (actually to stop too much printing), and might refuse to honor the government's checks. Where would the money be coming from? DelaRue Fimbo, Yeah, your's is a Robin Hood economy for sure, but today's economies are not Robin Hood. That's why we have forex rates and government bonds. If a country is simply borrowing the paper it prints, then it is not really borrowing. It is stealing from those who hold value in that currency and those who provide it with services - how long would you continue to provide such a country with services though? Soon enough the currency's true value (paper) reveals itself, and no one wants to hold it. Imagine a situation in which treasury is constantly sending trucks to Ruaraka to pick up more paper that's just been printed and borrowed (to pay teachers, Mpigs and whoever else) ... Among the "whoever else", take out security personnel for the trucks because there would be no need of security over paper that no one would ofload if the truck gates were left ajar (no one wants the paper). At what point do we say the country is bankrupt? You said such a country cannot get bankrupt! Can it now?
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fimbo
Junior Member
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Post by fimbo on Aug 2, 2013 0:34:54 GMT 3
I was giving the extreme example. Money Supply is made up of two components: the monetary base (paper money and checking accounts, otherwise known as M2) and money velocity.
Sometimes, Money Supply can be increased by increasing the money velocity without touching the monetary base. Put another way, say the government owes 10K teachers a million total but it only has ksh 10.00 in its account at CBK. It can write 10,000 checks of 100 each to the teachers while at the same time bank 300K being taxes on those salary payments.
Its balance with CBK immediately increases to 300K. Let say it takes about a month for all the teachers to cash their checks, and that each spends the money in the local economy where it incurs a sales tax of 6-16% so that the government ends up making money of that million "debt".
I think you are aware of the big debate in the US on the multiplier.
It all depends on the idle capacity in the economy and the value of the services the people/economy is getting.
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Post by mank on Aug 2, 2013 1:22:26 GMT 3
I was giving the extreme example. Money Supply is made up of two components: the monetary base (paper money and checking accounts, otherwise known as M2) and money velocity. Sometimes, Money Supply can be increased by increasing the money velocity without touching the monetary base. Put another way, say the government owes 10K teachers a million total but it only has ksh 10.00 in its account at CBK. It can write 10,000 checks of 100 each to the teachers while at the same time bank 300K being taxes on those salary payments. Its balance with CBK immediately increases to 300K. Let say it takes about a month for all the teachers to cash their checks, and that each spends the money in the local economy where it incurs a sales tax of 6-16% so that the government ends up making money of that million "debt". I think you are aware of the big debate in the US on the multiplier. It all depends on the idle capacity in the economy and the value of the services the people/economy is getting. There's no question money supply can be increased by increasing the velocity of money. But does that make your theory any more practical than we have seen it to be? The money economy you postulate is one in which even trucks moving the "money" can be left, doors ajar, without fear of theft (as I imagined in the earlier post). In that economy you cannot increase velocity of money. The participants of that Robin Hood economy would have turned to barter trade well before the last security man stopped reporting for work. By the way, money in that economy is a misnomer because what would be coming from Delarue to workers accounts would be just paper or digital marks that are not acceptable to anyone as money. I am not sure there is more left to the thesis that a ...country cannot go broke when it borrows on its own currency ... (and) ... government can just print paper to pay off its debtors, employees, whatever .
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Post by OtishOtish on Aug 2, 2013 2:18:01 GMT 3
Have a chat with Comrade Mugabe & the Big Economic Brains around him.
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fimbo
Junior Member
Posts: 60
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Post by fimbo on Aug 2, 2013 3:29:29 GMT 3
OtishOtish,
There is your evidence right there. Despite incredible mismanagement, as far as I know Comrade Mugabe never defaulted on his "debts" and Zimbabwe was never bankrupt.
The thesis behind the phrase "...country cannot go broke when it borrows on its own currency ..." is relevant when comparing a country to a state like Detroit or Greece, which for obvious reasons could not print their out of trouble.
To the sentence ..".. It all depends on the idle capacity in the economy and the value of the services the people/economy is getting... " I should have added and the relative political power of those receiving the services verses those whose savings are stolen in the debasement of the currency.
The political power of constituencies like teachers, the military, doctors, MPs, civil servants etc is such that there is really no risk that the government will run out of fancy pieces of paper to give them.
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fimbo
Junior Member
Posts: 60
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Post by fimbo on Aug 2, 2013 4:01:49 GMT 3
The paper is a promissory note to the bearer with the full faith and credit of issuer (country) backing it. Its value depends on the credibility of the issuer.
There is a constraint to government borrowing as follows: 1. There is a limit to the goods and services a government can consume, even if it has all the money in the world, call it absorption capacity, somehow I do not see trailer loads 2. There is a limit the goods and services the public will sell/lend to/through the government. People are not stupid, the ones paying the bills want small government. 3. We are a democracy, and we hope, the people will kick out the administration long before truck move money with doors ajar. 4. We are talking hyperinflation here right, in that scenario people are more worried about how to execute (3) with minimal disruption
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Post by OtishOtish on Aug 2, 2013 4:38:18 GMT 3
OtishOtish, There is your evidence right there. Despite incredible mismanagement, as far as I know Comrade Mugabe never defaulted on his "debts" and Zimbabwe was never bankrupt. Quite so. We should all emulate Comrade Bob's economic model: his solution to the problem of debt---i.e. simply mismanage your affairs to such an extent that nobody will lend you money---is unusual, but why not? I am also reminded of a bold idea to deal with the USA's budgetary problems: the USA Treasury has the legal powers to mint any sort of coin and designate it any value. So why not mint a coin with a "value" of $1 trillion and send it to the Federal Reserve, there to be used to pay any and all of Uncle Sam's bills? (I guess this would answer the question of "where would the money come from?") As the former head of the US Mint helpfully explained: "* The accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the Treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.
* Once the debt limit is raised, the Fed could ship the coin back to the Mint where the accounting treatment would be reversed and the coin melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.
* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted."www.washingtonpost.com/blogs/wonkblog/wp/2013/01/08/former-head-of-u-s-mint-the-platinum-coin-option-would-work/en.wikipedia.org/wiki/Trillion_dollar_coinWhat kind of science do they call economics? Anyway ... to see what the coin would look like, go here: www.theatlanticwire.com/business/2011/07/agreeable-fantasy-1-trillion-coin/40599/
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