Re: [Skunkworks] <OT>Banks lending rates between 24-31%
Was it the same last time around 1991-1992 around the Goldenberg scam? This time is it the global economies causing it or just the usual bad practises... The above rates may mean consumer spending will reduce by at least 10% of their earnings so we are almost back to the essential industries that will really do any serious business. This also means watch out for bad payments and reduce risk.
Hmm, had nothing to do with global economy. In fact, if it was driven by the global economy, where future outlook look bad - some are predicting we may be in the first three year of a 10 year recession - the interest rate should be coming down. Google for interest rate in the so called developed countries. This is purely driven by inflation pressure, which was the same case during the Goldenberg scam - they had effectively printed money by the truck load. Two thing are likely to have triggered it this time: 1) Kenya economy has been producing far less than what it produce for the last couple of years. They could have resulted to Kenya having a horrible high debt and further leading to Kenya now looks very risky. The high interest rate is therefore the premium of what we need to pay to compensate the lenders for taking a high risk to lend to us 2) The scum-burgs in the governments are printing money again to finance their pet personal projects aka scam, in another word, the same thing that triggered the interest in the early 90s Kind of hard to tell what is good now. If you have a lone, lets say 1 million, you are expected to pay 250 K in interest every year and I do not see anything in the market that can produce that kind of return. So in effect, the effectively killed any further investment and growth is bound to go south On the other hard, if they look the other way and let inflation keep going north, that also look horrible to both investors, employees and importers, heck just about everybody. You just have to look to Mugambe land and it does not look rosy too. Its a kind of fucked up situation really and not sure there is any good alternative any way. We will see Muriithi
Some thoughts?
When we were discussing this topic last time, I emphasized that the economy is skewed in favour of the large players that can dictate the markets. In fact the market forces don't operate in Kenya. What we really needed is a strong fiscal and monetary regime as opposed to increased interest rates (which happens to be one of the tools in monetary regime policy). To tame runaway inflation in a market characterized by monopolistic tendencies, adjusting interest rates was the worst decision from a weak institution (CBK). Thanks to this, Kenyans purchasing power has gone down more than 50%. I am therefore very sure with this stupid decision, less computing devices will be bought, less jobs will be created, more companies will go down in debt, shops will start closing, more jobs will be lost, we will rely more on foreign aid as we will be unable to finance development expenditure due to less taxes, in a nutshell, I can foresee very hard times ahead. These folks just undid 9 years of hard work with a simple stupid decision that could have been avoided had other factors been considered e.g. the high fuel prices, high cost of electricity and the fact that its easier to buy clothing than food. Food just became a luxury. On Fri, Nov 25, 2011 at 1:50 AM, William Muriithi < william.muriithi@gmail.com> wrote:
Was it the same last time around 1991-1992 around the Goldenberg scam?
This
time is it the global economies causing it or just the usual bad practises... The above rates may mean consumer spending will reduce by at least 10% of their earnings so we are almost back to the essential industries that will really do any serious business. This also means watch out for bad payments and reduce risk.
participants (2)
-
Peter Osotsi -
William Muriithi