Sunday, September 14, 2008

I do not save, hence I am rich!

So he says, 'I do not save, hence I am rich.'

I agree with what he says because if we take the example of the financial markets which are what drives many an economy by providing capital for guys to create new businesses and new jobs. Uganda is not rich because we have weak financial markets. This is because people are saving their money, not in banks, but in land and property. As such there is no money to drive growth. So we remain poor because we save. Money should be invested in production because that is when the multiplier effect kicks in. Investing in land and waiting or in a house that is already built just removes that money from circulation. But buying shares allows companies to use the money to increase production. Starting a business also increases jobs. If we all buy land and houses who will buy them from us when they gain value if we do not provide jobs for people? We must remember that your land is not worth what the valuer says in real terms, its worth what you get for it when you sell or the what you get when you borrow against it.

So please invest rather than save. Remember that money in an economy is like fuel in a car; if you put diesel in a car you need a turbo to make it perform like a petrol powered car. Saving is diesel fuel, but investment is petrol (super). Do not be an economic saboteur in the eyes of Keynes. The growth of the Chinese economy has been fueled by consumption, the recession in the US was started when consumers stopped buying. Withholding money means job losses.

And that is the aim of the plan to have no money on our accounts. The idea is that we create holes into which this money goes into. We must chose these holes carefully so as not to regret over spending. Because if the money is idle on the account, chances are you will blow it on some useless luxury that will not create more money for you. The Americans are rich because they are always in debt. So create liability to consume all your money. The best way to benefit from such a situation is if that liability funds an asset. If you have excess money, put a deposit on land and pay the balance slowly from subsequent months' income. When you are done paying for it, sell it for lump sum cash and use the cash to fund a business. Contribute to a fund that will take your money and give it to some company to create jobs. Start a fund of your own and create jobs. Take a holiday and pay a waiter's salary. Drink beer and help pay a sorghum grower in Uganda. But please take your money out of the bank because after they pay salaries they will just buy government paper and all that does is diesel fuel the car with no turbo. And so the economy is like a taxi (Kamunye). Very fast downhill but painfully slow uphill.

Thankfully she said she agreed with what he said.


Marriedgal said...

While i basically agree with you, i feel you have missed a crucial point as regards Uganda. We simply do not trust our 'systems', because we really do not have systems. Leave your money in the bank so someone can steal all of it? The bank will lose its liquidity and it will be closed, Greenland style. It works in America because everybody follows the rules/laws. Nobody does that here. We therefore have to invest in assets that can survive our country's 'instability'

Buff Boy said...

We have not had a coup for over 20 years. We cannot still plan for instability. That is to paralyze ourselves. Incidentally my baby sister has a similar fatalistic mentality. She is always asking, 'supposing something happens to you?' Yes, at some point something will happen to me; I will become rich!

Marriedgal said...

Hahaha. Well, instability does not have to be int he form of a coup only. Even a bank collapsing can 'destabilise' a country. Now when you think of our country, with all the rumours of who has fingers in which pot, i can't trust my finances with anybody. Especially if you consider the amount of interest you would have to pay on a loan, and the people you would have to compete with in your business, if you have no connections. I therefore beg to differ with you. Our country is still unstable, for the simple reason that we do not know where it/we are headed.

Unknown said...

pukdqpI seem to think like u...
The hand the gives, is the one that recieves.