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."

By Mwarang'ethe

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 ESSENTIALS, 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.