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Tuesday, May 24, 2011

The Coming Two Tier Global Economy: Which is Thy Tier?

Recent posts by Chris:
Ikolomani: Why the man with two wives won

Why the next president of Kenya will be the "wrong kind of president for Kenya."


And when money failed in the land of Egypt, and in the land of Canaan, all the Egyptians came unto Joseph, and said, Give us bread: for why should we die in thy presence? For the money faileth. Genesis 47:15.

Wherefore shall we die before thine eyes, both we and our land? Buy us and our land for bread, and we and our land will be servants unto Pharaoh: and give [us] seed, that we may live, and not die, that the land be not desolate. Genesis 47:19.

The history of mankind is the unconscious product of a myriad of infinite small and unnoticed efforts. This is to say that, most of mankind’s activities are done sporadically and in disorder without much thought. This may be done by a single individual, or groups of individuals acting generally from immediate motives. The results of these unconscious activities in majority of cases transcend the knowledge and intentions of contemporaries. It is only when coming generation peruse these activities; they then may begin to form an idea of what was motivating the previous generations. This being the case then, to find a clue to the immediate, accidental, and transitory motives which have spurred of the men of the past and of the present to their labours; to describe vividly and whole-heartedly their anxieties and vicissitudes and their struggles and illusions, as they pursue/pursued their work; to discover how and why, through this work, the men of one generation have often, not satisfied the passions which impelled them to action, but effected some lasting transformation in the life of their society, this should be, the unfailing inspiration of the historian's task.

Dear reader, unnoticed by the majority of hard working and suffering working men and women, the global economy is now increasingly a two tier economy. The first tier/class shall consist of controllers of hard money and hard assets which bring in interest, rent, dividend and monopoly profits. The second tier/class shall consist of holders of worthless papers. The second class shall be forced to work harder and longer even as their living standards fall.
Sample this. On 19th January, 2011, the Standard reported this: “No easy ride to home ownership in 2011.” Among other stuff, we are told this:
“In 2003, Peter and Susan Maina wanted to buy a three bed roomed apartment in Nairobi’s Westlands. It was going for Sh3 million but the couple decided to instead invest in the stock exchange. Last month, Susan and Peter were dumbfounded when they sought the same property along Nairobi’s Rhapta Road and were told they have to part with Sh14 million. We never imagined the price would more than triple in seven years as we expected an oversupply following the construction boom," Susan says. According to the couple, their estimation was a small increase of the selling price from Sh3 million in 2003 to say Sh5.5 million last year.”

In 2003, the average price of gold was about $ 370. This information, you can find here: . The exchange rate between the Kenyan shilling and the dollar was $ 1 to KES 76. This, you can get that here. This therefore, means that, with $ 39, 474. 00, Peter and Susan would have bought around 107 ounces of gold. If they disposed the 107 ounces on 21st May, 2011, they would have pocketed USD 1512 times 107 ounces which gives us $ 161, 784. 00. These dollars converted into Kenya shillings at the rate of 1 USD = 85. 5 KES, would give us KES 13, 913, 424.00. Bingo! Must be so for the Lord Commands, “Do not use dishonest standards when measuring length, weight or quantity,” in Leviticus 19:35.

As such, instead of the miserable KES 5.5 million they seem to have, they would be having KE 14 million. Herein, is the bitter lesson. What has appeared to the masses as wealth increment since 2003 has been nothing, but, DESTRUCTION OF THE PURCHASING POWER of the currency. Remember this. This is WEALTH TRANSFER from many to the few. However, the reality as we would expect, is rearing its head and Kenyans are perplexed as we see here, here and here. If you are in love with LIES and BULLSHIT from your TYRANT, who is not accountable to you, courtesy of Article 231 of your wonderful new constitution, see it here. For instance, in the last few months, this TYRANT has devalued your currency, i.e. your LABOUR to enslave you without consulting you as you can read here: “Anxiety as shilling fizzles”. However, if you are like Professor Ben Sihanya, and there are so many like him, consultation is anchored in Article 10 of the new constitution as he preaches to us here. Translated, “consultation and transparency” in all USELESS matters like the recent CJ nomination spectacle. Woe unto you lawyers for you weigh men down with burdens hard to bear, while you yourselves will not even touch the burdens with one of your fingers.

Without endorsing gold as money for it is not, we can say with confidence that, whoever put his/her labour in gold has preserved his purchasing power. However, if you believe in paper wealth like Peter and Susan, woe unto you for you shall cry with one eye with tears going down into your stomach. And, the good or bad news is that, this is the way it shall be as we go forward.

However, what is going on? In 1999, the then UK Chancellor, Mr Brown, decided to sell UK’s gold reserves. The announcement was made this way: “Today we are announcing a restructuring of the UK’s reserve holdings to achieve a better balance in the portfolio by increasing the proportion held in currency. This will involve a programme of auctions of gold.” If you read the newspapers, you will be told that, Gordon Brown was just stupid and he did not know what he was doing. If you believe such ridiculous and childish ideas, you are sleeping in a time of a revolution. All, this, you can read here: “Goldfinger Brown’s £2 billion blunder in the bullion market Chancellor ignored advice on sell-off”.

Now, pause for a moment and watch this. Also, please notice what he says about terrorism.

Let us move on. If you are awake, you should have noticed something very strange has been happening since 1980’s. From this period, we have witnessed massive sale of basic industries, or natural monopolies by states. For instance, in Kenya (this is worldwide phenomenon), Kenya Post and Telecommunications Corporation (KPTC), gone, Kenya Railways Corporation (KRC), gone, Kenya Power and Lightning Company, gone, Kenya Airways, gone, Kenya Refinery, gone, National Cereals and Produce Board (NCPB), gone, Kenya Mombasa Port, to be sold soon. For more on this, you may read here. As usual, the priests will yell, efficiency. They said the same as they enclosed common lands in England and Scotland which was then extended to other continents in form of colonialism. We are in the midst of the greatest enclosure of commons ever witnessed by mankind.

We are also reading this: "Hedge funds and investment banks are swapping their Gucci for gumboots." Moreover, “A study commissioned by the Organization for Economic Cooperation and Development and released in January estimated the amount of private capital currently committed to farmland and agricultural infrastructure at $14 billion.” Having cornered almost all public enterprises, they have now turned to cornering the farming land. All this, you may read here.

In simple words, the global economy has been turned into a RENTIER ECONOMY to yield interest and rents (monopoly profit) to the few who now control the gold, land, and other basic utilities which you will not do without. Having put toll booths on the ESSELinkNTIALS, they will raise prices to maintain their monopoly profits. This will take care of your income surplus leaving thee with bare subsistence income just to survive like a horse to work next day, as Karl Marx would say. This is achieved through three steps: (a) privatization (read, grabatization), (b) deflation, and (c) austerity.

We are now in the austerity phase as you see in Ireland, Greece, UK, and Portugal etc. Austerity means shifting of tax burden from rentiers to labour (YOU) as we see here and capital formation (productive investments) as we see here. Did you notice who is bearing these good news. Also see this: “IMF calls for VAT reforms to INCREASE collection”. When you combine austerity and the destruction of purchasing power of your paper wealth they give you every month assuming you got a job or will retain one, the side on which you fall in this two tier economy becomes clear. Good luck.

As previously noted, when one reads history, he comes home with three things: a lot of amusement, vital instruction on human nature and humility. We learn from Roman historian Tacitus, describing the Roman Empire’s policy, solitudinem faciunt pacem appellant “They have made a wilderness and call it peace.” In other words, as the Roman Empire economy deteriorated, the oligarchy used its control to shift the tax burden on to the shoulders of agricultural and handicraft producers. This led to debt foreclosure, demographic shrinkage, and a deepening dependency that settled into SERFDOM.

But, how did all this come about? Firstly, we find a clue in words of Emperor Septimus Severus. A few words about Emperor Severus. He was an African Emperor in Rome. Can you believe that? In his campaigns for the big seat, it was in everyone’s lips in Rome that, Optimus est Niger, bonus Afer, the African, i.e. Septimius Severus is a good candidate, the white candidate (i.e. Albinus) is the worst. When Severus was dying, his last words to his two sons, Caracalla and Geta were “live in harmony; enrich the troop; ignore everyone else.” A marvellous monetary policy still with us today.

As the Roman Empire continued its military adventures, as we would expect, to civilise the barbarians, to combat communism, to combat drugs and terrorism, it doubled inheritance taxes paid by Roman citizens, introduced tax on estates of Senator (as we are doing with our mps), taxed the capital of merchants, i.e. not their earnings payable in gold, they sacked pagan temples for gold and as expected, accused people of treason and confiscated their estates. Kenya is already stealthily confiscating as we are reading that: “State slashes money allocated for tax refunds”. This being not enough, the Empire admitted all inhabitants into citizens to expand tax base (do you hear such debate in the USA today?). As expected, all these measures proved not enough and the ultimate state solution was sought, which is DEBASING the currency, i.e. destruction of purchasing power of the currency. This brings us full circle to the story Peter and Susan above.

In the course of the 3rd Century inflation, the Roman government discovered that, when it paid its troops in debased coins, the prices rose immediately. Every time the silver value of the denarius dropped, prices naturally rose. So, what to do? In order to try to protect its civil servants and its soldiers from the effects of inflation, the Roman State began to demand payment of taxes in kind and in services rather than in coin. They wound up, in effect, repudiating their own issued coins, not accepting them for tax collection purposes. With Constantine's reform, this situation changed somewhat and, slowly and the government began to move away from collecting taxes and paying salaries in kind, and began to substitute collecting taxes and paying salaries in gold. Over the long run, this meant that the gold standard was strengthened and gold remained the real money of the Roman Empire.

However, the inflation did not end for the masses of the people. In other words, gold was a hedge against inflation for those who had it, and these were principally the troops and the civil servants. It meant that, the taxpayers had to buy these gold coins to pay taxes. If they were wealthy, they could afford. If were poor, they would be unable to pay tax and they lost their lands or became delinquents.

However, it was not just war which led to inflation. Initially, they had 20 provinces. However with no additional territory, they increased them to over a 100 provinces with the imperial administration in Rome (Nairobi), governors in provinces (Counties), and city administrations (City Councils). All this was done in the name of REFORMS.

One of the most interesting things we learn is this. Despite all of this inflation, or perhaps we should say, because of all of this inflation, the price of gold, in terms of its purchasing power, remained stable from the first through the fourth century. In other words, gold remained, in terms of its purchasing power, a stable value whereas all this other coinage just became increasingly worthless.

So, what do we learn was consequences of this inflation?

(a) The Roman state was not destroyed by inflation, what was destroyed by inflation was the freedom of the Roman people. Particularly, the first victim was their economic freedom. As this went on, we find Rome nationalizing the industry. Do you remember bailouts?

(b) By 4th Century, the small land holders had lost their lands and were now working in what we would call agribusiness owned by large land owners. Most of these big land owners were surprise, surprise, the government officials. The land consolidation was so brutal such that, at end of the day, the African province was in the hands of 6 men and whole of Roman lands were in the hands of 1800 families. Do you recall the Hedge Funds are buying massive agricultural lands as cited above?

(c) To stop price rises, one Emperor issues a famous Edict on Maximum Prices in 301 AD. In other words, stop inflation by price controls. As a result, goods disappeared in Rome. This led to riots in the streets. Do you recall oil price regulations and the pending Bill to control prices?

(d) As this went on, there emerged a two-tier monetary system in which the government, the soldiers, and the bureaucrats enjoyed the benefits of a gold standard while the nongovernmental portion of the economy continued to struggle with a rapidly inflating fiat currency.

(e) They invented government budget to gouge tax from the masses. Today, budgets are awaited with much fanfare. Think about that.

Unless drastic economic reforms are undertaken to solve the global DEBTS crisis, the USA centred world is crashing into a financially imposed austerity, Roman Empire style which will lead to neo – feudalism. And, as historians tell us, the fall of Rome was a tragic hour in which the sun of the Graeco – Latin civilization set over the deserted fields, the abandoned cities, and left behind homeless, ignorant and brutalised peoples. It was so, and it shall be so because, in recorded history, every debt crisis has ended in INFLATION, BANKRUPTCY or WAR. The hour is late. Good luck.


Anonymous said...

... tunisia & egypt are set to get loans from the world bank/imf

Anonymous said...

True that debt crisis results in 'inflation, bankruptcy or war' Let me also add that an average human being rarely sees or understands signs that financial calamity is about to happen.

Let me give a short illustraion. In 2008, CBK in association of banks came up with Credit Reference Bureau (CRB) regulations, which became operational in July 2010. We were made to believe that these regulations we meant to make access to credit easier, especially to SMEs. However, those of us who have fallen victims can tell you this was a big lie. Actually the main aim of the CRB regulations was to identify borrowers who were struggling to pay and lock them out in the money lending business. Of course banks need their super profits and lending to high risk entities is not acceptable.

Now, one might wonder; who will ever bill out those faced with inflation and near bankruptcy?

Anonymous said...

Are you harboring bitterness? Let it GO!

After crossing the Red Sea, the children of Israel came to a place called Marah. The waters there were bitter. That is why the place was called Marah, which means "bitter". The Israelites could not drink any of the water, so the Lord made the bitter waters sweet. (Exodus 15:23–25) Then, He brought up the subject of the diseases of Egypt and, for the first time, revealed Himself to His people as "the Lord who heals you".

Why did the Lord suddenly mention the diseases of the world (Egypt represents the world in the Bible) at a place called "bitter"? What do diseases have to do with bitter waters? I believe that it is because He wants His people to know that a major cause of diseases in their bodies is harbouring bitterness and resentment!
If you have been bitter about something or someone, it is time to let it go! Your health, joy and life are more important. If you are already sick and you know that bitterness has something to do with it, let it go! See Jesus as your healer. He is standing at your place of bitterness today and He is saying to you, "My child, I can make your bitter waters sweet. I am the Lord who heals you."

My friend let it all go and let Jesus heal not just your diseases, but your broken heart too!

Anonymous said...

All EVANGELICAL ECONOMICS. Well, evangelists will read malice even from an angel's script. And we are not sinners because of lack of charismatic tele-evangeleists.

Go on preach to the choir, you will soon tire and rest. Others have been there before but because you delude yourself with self-importance, expand the ego.

Thanks EVANGELIST Mwarang'ethe.

Anonymous said...

Another one of Mwarangethe's long and boring drivel!
Who would bother to read it?

That aside, what do you know about the Roman Empire? Until I commented about the Romans in your previous post I have never 'heard' you talk about this very important ancient empire that helped to shape the whole world. You seem even to suggest the capital of the Roman Empire was Rome. WRONG! It was Constantinople! Istanbul as we know it today was the Imperial capital of the Roman Empire! Constantinople was also the capital of many other medieval Empires that followed after the Romans.
Gosh! even your assertions on Emperor Septimius Severus are deeply flawed!
I suggest you refrain from referencing the Romans to any of your posts. (that is unless you have read everything about the Romans!)

Anonymous said...

@Anon3:09 aka Taabu,
I feel you man!Jealousy, bitterness, God help us all.

Anonymous said...

@Anon 4:08 AM
A message
for anon 4:08 AM before it's deleted due to obvious reasons.

How comes
it's become fashionable of you to see Taabu's vanishing shadow in every annonymous comment left on Kumekucha?
What about
your unbridled sycophantic cheers and other deep seated habitual tendencies of cyring wolf, "there goes Taabu", "Taabu was here", "That was Taabu", "It must have been done by Taabu"?
When will
you contribute a single post?

Anonymous said...

Because I hate Taabu! I really do(:!

Anonymous said...

Very apt Mwarangethe. I like the way you weave in Kenya's policy interventions and related contemporary events as you describe historical happenings. Of course your examples are cherry picked to illustrate the point you make, but I'm not complaining.

Anonymous said...

Shadow boxing. Why would you HATE somebody online for no apparent reason (unless and until you tell us)? In the process your hatred leaves you so hollow.

Saying I hate so is the height of being PRIMITIVE. Disagree if you must but keep it civil otherwise you join the KABILA ADUI brigade. The thin line between opponents and enemies is only known among the smart, are you?

Anonymous said...

I wish to advice KK readers to ignore the anon who is trying to stir an imaginery drama of Taabu hater vs lover to make us forget about Mwarangethes words. Its just 1 fellow who thinks he is smart

Back to the brilliant article.
I believe Mwarangethe has explained excellently by drawing from the past and connecting it to events here at home. I like the way he also draws a parallel with the roman kingdom (again ignore the confused anon historian trying to claim ownership of everything roman).
I think, we are headed to tough times and I wonder what advice Mwarangethe can give to us Kenyans who want to survive the hard times ahead.

Over to you Mwarangethe, how do we arm ourselves to survive the hard times ahead?

Anonymous said...

Anon 6:13AM your arrogance makes you hate people you don't even know on the internet. your sort is the type of support Mwarang'ethe can do without in his posts.

Anonymous said...

Mwara cannot help us! He is the prophet of doom and not the saviour! Nothing wrong with that but thats it with him. Thanks anyway mwara for your role as it leaves us informed.

Anonymous said...

Oprah Wnifrey called it a day last night. As she bowed at out last night she reminded us all - you can ahieve anything you want in this world. GO for it!!! Like President Obama, Oprah Winfrey is also a product of a Jewish push. In other words they wouldn't have been where they are today had it not for a jewish friend behind them.

Anonymous said...

Anon 8:03 AM
Speak for
yourself, it's seem as though you are not smart as you think or want other onliners to belief.

Anon 4:08 AM
/6:13 AM aka self proclaimed hater of Taabu is not one and the same person as Anon 5:28 AM.
Go figure
it out for yourself. Otherwise stick to your never ending brilliant cheers for every excellent post or commentary on Kumekucha.
Always remember
that it's okay to cheer others and it's the right thing to do in a world full of online negativity, but do so without confusing anonymous personalities on Kumekucha.

Anonymous said...

The media industry has undergone a huge revolutionary change in the course of the last ten years. That's why Oprah new her time was coming to an end and she had to withdraw before the inevitable happened or the plug was pulled on her in the same way it was done on the guy, whatever his name is, the one who has been presenting 'American Most Wanted'. Times have changed and there are very people still stay at home or rush back home just to watch the evening news or nightly news as was the case a decade ago. Her entrepreneurship was great and she is one of those wise business people who know when their time has come to move on to other more challenging ventures in life. I wish her all the best.

Anonymous said...

Please lets not derail the thread by posting boring drivel about oprah or the pensioner

Back to the content of the this post by Mwarangethe. As usual Mwarangethe does not dissapoint. However, I have an issue that I would like clarified.
When you talk of paper currency with disdain, are you proposing that we abandon this medium of exchange and go for gold coins or what exactly are you suggesting?
Secondly, someone already asked my burning question. With this knowledge at hand bwana Mwarangethe, what is your private plan to survive the perils of the future? Please share so that some of us can borrow a leaf. If this is not the right forum then I will hit your inbox. I already have your email address.

Kumekucha Prefect

Anonymous said...

Back to the content of this beautiful trateatise from Mwarangethe. Like I had written before before one of the moderators deleted my comment (Chris you really need to look onto this), my question to Mwarangethe is what is his suggestion concerning the currency. Does he propose we go back to the more stable gold coins or whats his take.
Secondly, I asked him how he proposes to weather the impending storm that he has mentioned in his article. This will help some us borrow some ideas.

I am waiting for your take bwana Mwarangethe. If this is not the right forum to reply, then I will write you an email in your private mail. I still have it.

With thanks
Kumekucha Prefect

Anonymous said...

Matter of irony.
Phil posts this beautiful work from Mwarangethe then retreats back to Jukwaa to defend the kingdom of O that if facing an impending obvious relegation to the gutter where they deservedly belong.
Ikolomani folks showed these fellows that Kenyans are not fools to be told what to do and who to elect by these paper kings like the do in their small paper kingdom.

Anonymous said...

Why is ICC only after Africans? Arresting Ratcko Mladic is pure IMPERIALISM, LOL.

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