Click on the image for all the information YOU need!

Wednesday, September 28, 2011

You Have Reason To Be Very Afraid

The Kenya shilling recently crossed the Kshs 100 mark against the dollar, and was still galloping furiously as it did so. Obviously not everybody is an economist and so I will deliberately keep the language simple and jargon-free in this post.

The long and short of it is that you have reason to be afraid… very afraid.

One of the reasons you must be very afraid is that all this is happening before the full effects of the 2012 general elections set in. I will tell you what those will be later in this post. But let me start by saying that I ignored the advice of a friend to start this post by referring to my earlier articles warning of this chaotic situation about 3 months ago. I hate it when somebody tells me “I told you so..” and I am sure others hate it too and so I have not even linked to the set of articles I did then. They are really NOT important now.

This is hardly the time to start looking clever and smart and maybe a prophet of sorts when the country is faced with the worst economic crisis of its’ history. Yes, the worst ever in the history of the republic of Kenya. What a feather on the cap of the Kibaki legacy this is!!!

Let’s just cut to the chase and talk about what Kenyans should now expect.

Clearly we have reached panic mode. What that means is that we should now expect massive capital flight. That means that people will flee from the Kenyan shilling to save their cash and assets from further rapid depreciation. This will further erode the value of the already weak shilling. An exchange rate of Kshs 120 to the dollar is not too far in the horizon now.

This will cripple many businesses that rely on imports. Massive layoffs will follow, and businesses should already be shutting down as you read this.

Looking out of your window now all may seem calm, but be warned, it is the calm before the storm which shall surely come.

Who is to blame? Prof Njuguna Ndungu the governor of the Central Bank who waited too long to do anything, even as analysts screamed at the top of their voices that there was a problem? Personally I don’t think so. The main culprit is President Kibaki who has been the real Finance Minister and the real governor of the Central bank all along. His old school economics has run out of legs in the modern world of sudden upheavals and unprecedented unpredictability and chaos. Clearly a younger less “experienced” man would have done much better for Kenya. This is yet another wake up call to Kenya voters to let all the old men go home to rest and let’s elect younger blood for better or for worse to handle the new world.

What really scares me is that as we head to 2012 I was still expecting plenty of capital flight anyway as many in the monied class relocate to avoid paying for their sins under the new fully implemented constitution. Not to mention money markets that will be jittery as we go into another election when the wounds of the last chaotic one have yet to heal. If things continue the way they are then the shilling will probably be exchanging at Kshs 300 by the time we go to the polls.

No comments:

Related Posts Plugin for WordPress, Blogger...