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Monday, July 12, 2010

It's Not a Political But an Intellectual Crisis

By Mwarang'ethe

Following the salary increment or the attempt by our law breakers, every voice - the president, the PM, Kenyatta, the press, the pulpit, the civil society and the masses are united in repugnance, horror, indignation and disgust. We are with them in all this, but, not in one thing, astonishment. The history of state being what it is, and its testimony being as invariable and eloquent as it is, one is obliged to say that the naive tone of surprise wherewith we complain of these matters strikes one as a pretty sad reflection on our collective intelligence.

In a famous You tube awareness test, we are asked to count the number of passes made by the white team. As one concentrates on counting the passes, it is very easy to miss the guerrilla which does Michael Jackson's moon dance. You can see it here. When it comes to the saga of the MP's salaries, we think Kenyans are missing the dancing guerrilla. In our earlier article, we wrote this:

“In conclusion, what we have sought to explain is this. Law makers are only known to invent new taxes and only conquer the pockets of their subjects. It is for this reason; they have diverted the need for reforms on right of property into creation of offices which will preserve their power (read 349 mps idle mps to be paid by those who labour).”

In our last piece, written just before Akiwumi released his report, we warned that:

"More so, the new constitution provides that, before the Dear Leader distributes the goats, beans and maize which he shall confiscate from the wealthy to the needy, he shall pay himself first a salary. This salary, the Dear Leader shall decide himself or appoint a well paid committee of experts made up of his minions to decide his take. The committee of expert on Dear Leader's salary shall ensure that, the net income is as high as it was in the old constitution. Thus, the gross salary will be high enough to leave good net income as the Dear Leader is used to have. In any case, all the Bondo citizens wanted was for their Dear Leader to pay tax. To meet such stupid demands, the gross salary will be set appropriately so as to leave the net income as it was when the salary was untaxed under the previous constitution. Voila!" U can read it here:

This brings us to the related issues of the 2010/11 Kenyatta’s budget deficit, the attempt to control prices, see price control debates here and more so, the welfare state we are constructing under the new constitution. The 2010-11 budget theme was Towards Inclusive and Sustainable Rapid Economic Development. Muna Wahome of DN summarised the verdict of the nation this way: Uhuru dishes goodies in improved stimulus package.

To finance these goodies, Kenyatta has a deficit of Sh 228.4 billion. Out of this, he will borrow locally Sh 102.7 billion. These deficits are the moon walking guerrilla which Kenyans do not see as they focus on what is in vogue. Without endorsing the gold standard in any way, we use writings of Mr Allan Greenspan, the immediate former chairman of the USA Fed to demonstrate that these deficits and the welfare state we are constructing are more destructive than the “small” issue of mps salaries which we are all talking about.

In 1966, Mr Greenspan wrote an article entitled: Gold and Economic Freedom. Whenever there is word gold, please insert sound/honest money for we do not think gold is necessary to have sound money. He started this way:

"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.”

He then added that:

"A free banking system based on gold [honest money] is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state)."
He added that:

"Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale."

He further wrote that:

"Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit."

"They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves [BELIEVES] that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion."

At this stage we inquire, if Kenyan government can issue a shilling bond, why can't it issue a Kenyan shilling bill? Isn't true that what makes a bond issued by the Kenyan government good, would also make a note good? Isn't very absurd for educated people to believe that, a nation can issue Sh 123 billion in bonds, but, it cannot issue Sh. 123 billion in currency? Aren't both promises to pay? Yes, but, one fattens the usurer, while the other would only be pocketed by those who labour. In our earlier article: Why We Reject the Proposed New Constitution, we summarised the matter this way:

"When these two conspirators are not "loaning" Wanjiku their useless paper so as to rob her, the central banker issues another paper he calls a government bond. The conspirator calling himself Equity takes this bond and in return, he gives back the useless paper he originally got from the central banker. In this modern magic, these modern medicine men tell us, the mere mortars, that, this is open market operation. By this abracadabra, they create so called public domestic debt which must be paid with usury. So as to pay back the banker, Wanjiku’s little wealth that was spared by the first ngeta/robbery, must be robbed via taxation."

Our views were dismissed as utopian. Well, one member of the committee of experts has confirmed our view as we read that: "While giving an overview of the proposed law, Committee of Experts member Ms Njoki Ndungu, admitted that the draft was geared towards devolution, placing little emphasis on generation of resources." Ms Njoki tells us that: “The constitution is a tool for governance. It endeavours to ensure equity in distribution of national resources to people at all levels in the country.” In her world and those of other lawyers, governance means distribution, but, excludes wealth creation. What rubbish from people calling themselves learned. See the details here: "Business faults proposed constitution."

Ms Njoki and other ignorant learned lawyers might not be reading, but, inquiring minds are reading that: "The European Way May be Coming to End AS Debt Crisis Mounts". Among other matters, we are told that, "the threat of bankruptcy is forcing governments to implement reforms that economists argue are necessary to help Europe prosper in a globalized world – but were long viewed as being politically impossible because of entrenched social attitudes." Among other changes we are told are "making it easier for companies to fire workers or stare down unions were until recently dismissed as simply not being the "European way."

As we have noted before, the West was able to get away with welfare for sometime because of its economic structure advantage and the ability to appropriate wealth from third world. These two advantaged are disappearing and thereby, the necessity to dismantle the welfare state. The problem is that, in trying to dismantle the welfare state, they are ignoring the contradictions inherent in modern state which necessitated welfare as a cover up in the first place. Therefore, so as to avoid what must be done, they are now left with the option of attacking the most vulnerable, rejecting free trade and eventually going into wars.

Anyway, let us continue with Mr Greenspan. He further told us that:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves." (please note this line carefully).

He concluded the article this way:

"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Thus, as matters stand, the Kenyatta's deficits and the proposed state welfare in the new constitution, are nothing, but, a design for wealth confiscation. The best way to understand deficits is to appreciate that, deficits are nothing but, LEGALISED COUNTERFETTING which is worse than the “small issue” of mps salaries everyone is yapping about. This legalised counterfeiting is sanctioned by s. 211 of the “new constitution.” Many Kenyans in the spirit of voluntary servitude see nothing wrong with it. After all, having lived for a number of generations in slavery since 1885 what is the big deal?

The truth is that, counterfeiting whether done at Kirinyaga road or at the Kenyan Central Bank; the effects are the same which is destruction of the purchasing power of Kenyans. The worst hit are the poor and those on fixed wages. Ironically, we are told that, the welfare states are “designed” to help the poor. What a sick joke. However, there is one difference between the Kirinyaga road counterfeiter and central bank counterfeiter. The Kirinyaga road thug does not force you to take his note in exchange for your labour. On the contrary, the central bank priest who is an honourable citizen in the eyes of the slaves will force you to take his useless paper. If you doubt, read s. 231 of the so called new constitution although changed a bit following our submission.

If these are the undeniable facts, then, we must be forced to admit that, what we face today is not an economic/political crisis, but, perhaps the greatest intellectual failure in human history. But, it may be we are in good company. When the Egyptians were building pyramids which kissed the sky with slave labour, their priests taught them to worship frogs and crocodiles. In Nairobi, you can see a number of modern pyramids. Two of these are the Times Tower Complex owned by the central bank and the Central Bank Building both at Haile Selassie Avenue. The fact that the tallest pyramid in Nairobi is owned by the central bank and rented to a sister agency dedicated to wealth confiscation says a lot about the efficacy of modern priests.


Anonymous said...

Thank you Mwarangethe for yet another master piece thats so true.

Let those who have ears hear and those who have eyes see. We have been warned but like a moth drawn to the glowing bulb, we are willingly taking the path that can only lead to destruction.

Mwarangethe has done his part and we thank him.

Philip said...

Quoting the article:

"Ms Njoki tells us that: “The constitution is a tool for governance. It endeavours to ensure equity in distribution of national resources to people at all levels in the country.” In her world and those of other lawyers, governance means distribution, but, excludes wealth creation."

My question,

What are the solutions to wealth creation under the current system or the proposed system?

If wealth creation cannot be achieved under both system, then which is this system that wealth creation can be achieved and how do you plan to change the system?

Anonymous said...

Always OPIONIONATED. The intellectually lazy will jump in glee but the smart ones know better. If reading journals and the internet were to make present Einstein (poke hole there please) amny would have been called.

More brilliant ideas gather dust on govt shelves only that most don't know. But it never hurts to wax intellectual, ama?

Anonymous said...

Bread and butter vs thinking outside the box to please thy self. The choice is yours, make it.

Anonymous said...

Can the writer please make their excellent articles less wordy and more palatable to the public thank you in advance we appreciate the research and intellect

Mwarang'ethe said...

Anonymous wrote

More brilliant ideas gather dust on govt shelves only that most don't know. But it never hurts to wax intellectual, ama?


We would be very happy if you can give us the report that has ever dealt with fundamental institutional contradictions of the Kenyan state.

As far we are aware, all reports/ideas that have been expressed have taken the existing institutions as given.

In that sense, these ideas are just another way of running away from the serious contradictions that must be confronted. And, the best example of this is the proposed constitution which has consumed billions over 20 years.

If this constitution is the product of 20 years and all that money, then, you can imagine how shoddy all these so called brilliant ideas are.

Philip wrote

What are the solutions to wealth creation under the current system or the proposed system?

If wealth creation cannot be achieved under both system, then which is this system that wealth creation can be achieved and how do you plan to change the system?


First, as we have noted many times, our economic structure cannot create wealth.

So, how to restructure our economy must be the first thing that must be seriously addressed before we embark on constitutional reforms.

This is crucial because the findings of this research shall have a fundamental impact on the constitution. This must be so because the constitution must be guided by the findings of this research.

Once you have addressed the above issue, then, you can come to income/wealth distribution. At this stage, we need to find out via serious research who gets what for every kenyan shilling of wealth created.

In other words, for every 1 shilling:

(a) How much do those who labour get?

(b) How much does capital/interest get?

(c) How much do land lords get?

(d) How much do entrepreneurs get?

Once we find our who gets what % per every shilling of wealth created, then, we can ask, why do various classes get what they get?

From this question, we shall be able to identify institutions that allow one or two classes to pocket more than their share which brings about unequal distribution of wealth.

NB: Mark you, we are not calling for equalization of fortune. What we mean is a constitutional arrangements whereby, no one lives on the sweat of another if you remember the three ways of structuring governance system.

It is those institutions so identified, must then be the focus of our constitutional changes.

At the moment, we have not done these two stages for we are convinced Moi was the problem. But, it is a carefully calculated diversion from the real issue.

Anonymous said...

Hi everyone,

Don't overlook the case of Mwakwele beating the crap out of the Domo Domo Party in the Matuga by-elections. When the people speak in their wisdom or foolishness, we must listen. And he people of Matuga have said they don't want anything to do witha party headed by a man who turns his hospital room into a popularity campaign spectacle.

Anonymous said...

Taabu aka anon 8:42 said,
Always OPIONIONATED. The intellectually lazy will jump in glee but the smart ones know better.
More brilliant ideas gather dust on govt shelves .....But it never hurts to wax intellectual, ama?

The difference between Taabu's recycled stale gutter news and Mwarangethe's article is that the latter has IDEAS that have practical application to improving the welfare of Kenyans. What Mwarangethe proposes goes so much against the fundamentals of the current governance such that the old retiring wazees or Taabu's agemates can only dismiss them. Every great revolution starts with an idea that is conceived, then conviction and finally execution.
Kenyan's are with those like Mwarangethe who are not weighed down by chains of bondage until they embrace them as their life.

Taabu should realize his days in Kumekucha are gone.....a new era of intellectual discourse is here with us and WE AINT GOING BACK BABY!!!!

Anonymous said...

Brilliant ideas if only they would be implemented. But don't delude yourself that they are original, NO.

Anon @ Ain't going back baby. True just give your thoughts bila name-calling, will you? Why the obession with small imaginary wars? Walk the talk and avoid shadow boxing, will you? It only leaves you looking really STUPID.

Everybody has opinions unlike you without any.

Anonymous said...

ODM f****d again in Matuga..!!Peoples party...?Duh...!!

Anonymous said...

anon 8:42,

To you those who appreciate Mwarangethe's articles are 'intellectually lazy' while you 'the smart one' seems to be stuck in envysville...

You must be one of those lazy bones stuck in the rat race and i suspect you have been working for the government in the last 30 years from the way you refer to the all tired line of 'brilliant ideas gather dust on govt shelves'.

Mwarangethe has challenged you to MAN UP and bring those grand ideas on board and let the Kumekucha readers be the judge.
Someone has said you are Taabu, i cannot agree more.

Anonymous said...

I think I know where the problem is. For a long time, we have put a lot of faith on lawyers. We think lawyers are the best governors, economists, scientists, constitution writers, and just everything else under the sun. By the way, I do not even understand why a constitution should be written in a language, which only lawyers can understand with ease ( at times, is too vague even for them to understand.)

Having said that let me say that Mwarangethe has a strong case here. It is very clear that we are living dangerously. But for how long can we live like this. I can imagine those living on others sweat will get more and more wealthy. On the other hand, the slave will find it difficult to live.

PS: Honestly the writer has over quoted one Mr Greenspan; something which lowers the standard of a mastery piece.

Mwarang'ethe said...

Anonymous said...
Brilliant ideas if only they would be implemented. But don't delude yourself that they are original, NO.


There seems something seriously wrong in your head to say the least.

Haven't we quoted extensively a paper written in 1966? Didn't you fool see that?

You seem to be having issues which you are yet to tell us. We have been consistent on one thing. The failure of Moi, Kibaki or of Kenya has nothing to do with the character of these men. It is for this reason we have never seen the need to analyse the "evils" of these men for it is total waste of time.

It has to do with institutional contradictions. It is these institutional contradictions which we take as given due to what we would call institutional capture, that should have been the focus of Kenyans and not their petty hatred of Moi and Kibaki and the "rich."

To that extent, we think these ideas are "new" for Kenyans have invested so much in Moi's hatred to see the real issue.

And if not so, why are these institutional contradictions not reflected in our so called new constitution?

Anonymous said...

Bazungu say if you have big madiaba, you are not smart. Shame shame shame.

This kind of 'research' should be kept away from young impressionable african girls.

shekissesfrogs said...

Hi. I am an American. You cannot follow Alan Greenspan. He is a hack and his ideologies are what has brought on this crisis. The "welfare state" is used by he and his acolytes as a derogatory term, because he believes in confiscation, and the disproved trickle down economics.
The line "We are all in this together" only applies when the rich have lost the nations capital at the gambling table and want to be reimbursed at the expense of the poor. The great depression is referred to as great because massive unemployment creates downward pressure on wages. His mentor was Ayn Rand. After reading about your Goldberg scandal, your anglo lease scandal what we have in common is government theft and racketeering. Damn them all, and Obama too. He is another Mboya, sold to us a hero of the common man but was a CIA sponsored trojan horse.

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