My Economic Outlook 2015 By Michael Kamau Nairobi, Kenya 22nd January 2015 2015, the year of greater uncertainty, further economic gloom & economic disintegration, and worsening societal breakdown: The American economy is the foundation on which the current global economy is built, and indeed, when the USA catches a cold, the rest of the world catches flu. The US economy is currently in deep financial chaos, Economic hyper-tension, and is overheating big time i.e. & e.g. US public debt has grown by an astounding & astronomical US $ 7 trillion in 6 short years i.e. from US $ 11 trillion in 2008 to US $ 18 trillion in 2014 (see real time growth of US public debt at usdebtclock.org). This is a sign that the global economy is currently being kept afloat by the equivalent of life support machines in the economic sense i.e. massive debt & massive creation of artificial wealth, and the reality is that the global economy could come tumbling time with a crush at any time i.e. Capitalism/the free market economy is now living on borrowed time globally. The end of the world? Not quite, but yes indeed, the passing of an era i.e. & e.g. the world did not end with Sodom & Gomorrrah, the world did not end with Noahs Ark, the world did not end with the brutality, autocracy & despotism of the Middle Ages, the world did not end with the Spanish Inquisition, the world did not end with the bubonic plague, the world did not end with the bitter rivalry, brutality and armed conflicts that characterised the crusades, the world did not end with slavery, the world did not end with World War I & World War II, the world did not end with colonialism, the world did not end with Apartheid, and the world did not end when HIV/AIDS was a terrifying epidemic in the 1980s & 1990s. As many as have come before us, shall come after us, so it is doubtful that the current global economic crisis heralds the end of the world. The current global economic crisis will run its course, just like World War I and World War II ran their course, and thereafter, the generations that come after us, shall rebuild society from the ruins left by the current global economic crisis. The ratio of current US public debt (i.e. US $ 18 trillion), to US Gross Domestic Product (GDP), is 99%, but if u think thats bad, and a sign of overheating, the current ratios of public debt to Gross Domestic Product (GDP) of all G7 countries i.e. the seven richest countries in the world, is in shambles i.e. the current ratios of public debt to Gross Domestic Product (GDP) for the USA, the United Kingdom, France, Germany, Italy, Canada & Japan, currently stand at 99% as mentioned, 389%, 249%, 186%, 150%, 94% and 59%, respectively (see usdebtclock.org/world-debt-clock.html). There is certainly no way that such situations can sustain for very much longer, and as mentioned, this is a sign that the global economy is “overheating”, and is currently being kept afloat by the equivalent of economic life support machines. We here in Kenya are no better, and are also in a deep crisis of our own i.e. & e.g. Bomet County took out a bank overdraft of 150 million Kenya Shillings (approximately US $ 1.6 million), for the purpose of paying December 2014 Bomet County public sector salaries (see page 34 of the Sunday Nation of 21st December 2014), and Nyamira County also took out an unspecified bank overdraft of 127 million Kenya Shillings (approximately US $ 1.4 million i.e. see page 28 of the Sunday Nation of 28th December 2014). Undoubtedly though, all 47 Kenyan counties are under deep financial pressure & deep financial strain, which is why no doubt, there was a push in the just ended year i.e. 2014, for a referendum dubbed Pesa Mashinani i.e. More money for the counties from the central Kenya Government. The central Kenya Gornment also has severe strains of its own i.e. & e.g. the debt ceiling in Kenya was raised to 2.5 trillion Kenya shillings in the year 2014, and since the current Kenyan Gross Domestic Product (GDP) stands at approximately 1 trillion Kenya Shillings, this represents a current ratio of public debt to Gross Domestic Product (GDP) of 250%, which is no less favourable than the current ratios of public debt to Gross Domestic Product (GDP) of the G7 nations mentioned above, and Kenya, is nowhere close to being in the status of any of the G7 countries mentioned above. And it doesnt help that Kenyan economy has been in the doldrums, in stagnation & in recession for the past approximate 17 years in uninterrupted continuation i.e. Kenya is now essentially a retail market with no corporate players i.e. & e.g. the Dutch corporate bank, ABN Amro, pulled out of Kenya in the late 1990s, while all major corporations in Kenya have progressively closed down their corporate divisions over the last 17 years and/or closed down divisions catering for specialised market segments, over the last 17 years. Cases in point are Standard Chartered Bank Kenya Limited and Barclays Bank of Kenya Limited, which have over the past 17 years, closed down either corporate divisions or divisions catering for specialised market segments like e.g. Standard Chartered Investment Services (SCIS), Standard Chartered Estates Management (SCEM), Standard Chartered Kenya Nominees (SCKN), Barclays Merchant Finance Limited (BMFL), Barclaytrust Investment Services Limited and Barclays Spread Eagle Services. Citi Group still maintains a presence in Kenya, but Citi Group in Kenya were only last heard of in a major way back in 2008, during the then massive Initial Public Offer (IPO) of communications giant Safaricom i.e. the biggest company in East & Central Africa. And to illustrate just how desperate a situation the Kenyan economy is currently in, Safaricom, with a current customer base of approximately 22 million subscribers, has recently established what is known as Safaricom Investment Company (SIC), which deals in real estate, encroaching and infringing in a market segment i.e. real estate, that numerous regular hard pressed Kenyans rely on for a living and for survival. Two other Kenyan giants i.e. Kenya Airways & the Nation Media Group are following in Safaricoms unsettling & worrying example i.e. & e.g. Kenya Airways has indicated that it wants to apply for a licence to operate as a mobile phone service provider, and the Nation Media Group has also ventured into the money transfer business, with a hand in what is known as Nation Hela, an indication that there is no focus, no direction & no substance in the Kenyan economy, and what we instead have in Kenya, is a jumbled up, messy & desperate economic Molotov cocktail of trial & error. Safaricom has also been unable to maintain a corporate segment since the year 2000, and their airtime denominations have progressively come down since the year 2000, from 250 Kenya Shillings, to 100 Kenya Shillings, to 50 Kenya Shillings, to 20 Kenya Shillings, to 10 Kenya Shillings, to 5 Kenya Shillings, to what is referred to as Okoa Jahazi, a service where a subscriber can obtain airtime on loan for denominations between 1 Kenya Shilling and 4 Kenya Shillings. The deterioration at Safaricom since the year 2000, is a reflection of the general deterioration in Kenya over the same period. Way too many giant Kenyan enterprises are either insolvent, or in deep financial doldrums, and these include the Kenya Planters Co-Operative Union (KPCU), the National Cereals & Produce Board (NCPB), Mumias Sugar Company (MSC), Pan Africa Paper Mills, the Kenya Tea Development Agency (KTDA), the Kenya Tourism Board (KTB) & Karuturi Flowers. And whereas Safaricoms approximate current subscriber base of 22 million customers is very attractive by any and all standards, it compares palely with Indias current mobile phone segment subscriber base of 900 million customers, raising the grim possibility that Safaricom could very well decide to decamp to India. The G7 nations mentioned above, control the world economy, and control the key Central Banks around the world, which is why they have been able to keep interest rates at a bare artificial minimum level, otherwise there would be massive hyper-inflation around the world right now, but these artificial circumstances cannot go on for very much longer. It is obvious that what the G7 nations are partly doing to keep the world economy afloat, is to print money, and when liquidity (printed money) not backed by tangible wealth is introduced into any economy, one very negative effect is hyper-inflation. A case in point is the hyper-inflation experienced in Zimbabwe in 2007, which eventually led to the collapse of the Zimbabwean dollar. The richest countries in the world i.e. the G7, are currently countering this projected hyper-inflation, by keeping interest rates artificially low, using their massive influence in key Central Banks around the world. The downside of this strategy though, is that deflation now threatens to bring down the global economy in a “no-win, no-win situation” i.e. & e.g. current tumbling crude oil prices globally Legend also has it that the then ruling party in Kenya i.e. the Kenya African National Union (KANU), printed money to fund its high profile election campaigns in 1992, the result being the hyper-inflation experienced in Kenya in the years 1993 & 1994. Then Kenyan President D.T. arap Moi, his then Finance Minister Musalia Mudavadi, and then Central Bank of Kenya Governor Micah Cheserem, were however able to skillfully stabalise and normalise matters by the year 1996, and e.g. the Kenya Shilling did not collapse like the Zimbabwean dollar, as mentioned. The thing with Kenya and Zimbabwe, is that both economies in the two mentioned scenarios, did not have the luxury of keeping interest rates at artificially low levels, as the G7 currently is, an artificial G7 situation however, that cannot go on much longer, as mentioned. Will we see the fall of Capitalism in 2015? Maybe not, though Capitalism is in gradual and certain capitulation. Either way, 2015 does not look like it will be a favourable year for any of us around the world. Michael M. Kamau, Nairobi, Kenya, 22nd January 2015, michaelmundiakamau.webs.
Posted on: Sat, 24 Jan 2015 07:42:05 +0000
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