When Inflation rate rises from 10.28% to 11.48% between March and April what does that mean to you?
Let’s define Inflation – a continued rise in how much goods and services cost in an economy. Any inflation means that the currency (in this case the kshs) is worth less as each unit will be able to buy fewer of these goods and services.
For example a packet of Tuzo milk 500 ml is now 80 shillings in a shop near you from 40 shillings. That means the 80 shillings that would have bought you a loaf of bread and packet of milk can now buy only one item.
Let’s translate further. Any time that inflation is rising faster than your earnings you are actually getting less than you coould get previously. It is in fact equivalent to a pay cut without the luxury or reduced tax on your pay. It also generally means an average Kenyan is getting poorer every month irrespective of their income level. They also go into debt and fail to save.
As inflation rises, in addition to businesses being forced to raise their prices, banks are forced to raise interest rates in order to maintain a profit margin. Now that is an ideal situation where interests are not capped by central government. In Kenya this was fine and already SMEs and micro entrepreneurs could not access credit which is critical for growth.
These marginal businesses will fail, thus increasing unemployment and harming the overall economy.
An inflation growth rate of more than 1.2 % per month is CRAZZZY. In the UK, price stability means ensuring that the price level increases gradually, by an average of no more than 2% per year. Now Multiply Kenyas by 12 months and see what that looks like.
Because inflation erodes the value of money and assets, If assets are stored in a monetary form, inflation means that asset values fall. This explains why, during inflationary periods, individuals often choose to put their wealth into physical assets, like property, rather than keep it in a monetary form in a bank account.
Looking at all known factors of high inflation, in Kenyas the cause is mainly Excessive public sector borrowing.
�Now let’s talk about the Government borrowing from Raia through M Akiba Bonds at a simple interest of 10% per annum. You already can see how that’s a rip off against the prevailing inflation rate. Assuming the inflation rate remains constant Kenyans who have loaned the government their cash will be making a loss of 1.48% . And they cannot touch it without a ‘penalty’ on the rate. As inflation rises faster than the return on these bonds, they become less valuable. That’s when people rush to sell them, further depreciating their value. The government of Kenya now is operating like a pyramid scheme.
Finally If inflation reaches the double-digits, that’s hyperinflation. If it continues to happens, you will soon need a wheelbarrow to buy a loaf of bread. It only happens when the government is so irresponsible that it prints or borrows money without regard to the inflation rate. It happened in Germany in the 1920s, and in Zimbabwe in the 2000s.
So in truth the Jubilee Government led by Uhuru and Ruto together with Central Bank of Kenya led by Njoroge in close Cahoots with Treasury led by Rotich are here to make sure you are poor for as long as they are in office. Also just noticed the two regions they come from… but that’s non of my business. Maybe it’s yours.
#Vegetarian
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