Trillian

13 minutes ago, PiMi said:

I understand @Trillian's post, regarding this being a USD issue. Transnational purchases of materials and commodities must occur in USD. Either way, its particularly tricky for Thailand right now, IMO. Easing allows for more liquidity, but puts the baht in peril with respect to its stability as a currency. Stability in the Thai baht is a key factor in attracting and retaining foreign investment here so... I haven't searched for an answer to this but... has the BoT made mention of a target they want to achieve and maintain regarding the strength of the Thai baht? Will easing only be seen in the form of lower interest rate loans to large corps? 

Most of your questions get answered here:

30 minutes ago, hobz said:

Wow, you really know your <deleted>. Would love to have a beer with you and just talk economy.

 

So to sum up what you said (this is btw my problem, I like to sum up complex things into simple terms): even if they did want to devalue the THB (we both kind of agree that they don't want to) it's not as simple as printing money, because it could spiral out of control and / or massively damage the economy by some shock effects. And an easier way would be to make it fully convertible but it's dangerous for similar reasons, it could spiral out of control due to speculators and the shock to the system?

Yes I think that's correct, although as with any complex issue any potential solution is multifaceted. Increasing debt would help weaken THB but would generally be a bad thing; increasing imports and erasing the trade surplus would prevent excess foreign currency building in the foreign currency reserves which over time would help weaken the Baht but would leave Thai monopolies open to challenge from overseas producers; increasing borrowings in foreign currency would also help as THB was sold for USD however exchange rate risk becomes a serious concern, I'm sure there are other ways also.

BOT has been taking small steps on a number of different fronts to try and reduce  Baht strength and this includes allowing exporters to keep export sales proceeds overseas for longer, allowing citizens to invest overseas, allowing overseas funds transfers more freely, entering into currency swap agreements which prevents THB from strengthening as export sales proceeds were repatriated for Baht (60% of all export bills are settled in USD). But those steps haven't been enough to make a sizeable dent in Baht strength, it hasn't helped of course that USD has weakened, it's been around 96.0 on the Dollar Index for some time.

1 minute ago, morrobay said:

Isn't it the case that the BOT does not allow the baht to be fully convertible  because they and every one else knows it is overvalued, and therefore would be vulnerable to speculator currency attack. Eg selling the currency, stocks, bonds denominated in baht? 

I think it's true that Thailand fears external influence, speculators etc, shades of Soros and '97. 

Whether or not it is overvalued is another question, I believe it is not. The FOREX market sets the value of THB based on deals that have been transacted during the previous 24 hours and BOT has to agree that rate each day, in that respect the rate is confirmed based on economic fundamentals and also independently by the FOREX market. If the trading world felt the ex.rate was wrong a lower rate would prevail. If BOT disagreed with that lower rate an onshore and offshore market would develop, thus far that has happened since the withholding tax issue of a few years ago.

3 hours ago, hobz said:

Thanks for your reply. The key to what you're saying is that because there is export limits on THB, the Thai central bank could inflate the THB infinitely without the THB being devalued?

So if Zimbabwe just had export restrictions they could keep printing Zimbabwe dollars without crashing the currency? 

Not quite! Of course QE can help devalue a currency but Thailand has no appetite to take on debt or the inflation that would follow, if they get the scale of it wrong - the government had to be coerced by the IMF to operate a larger budget deficit for goodness sake because they are so risk averse.

BOT has no remit to initiate QE and successive governments have shied away from issuing debt which is why their borrowings are so low at 42% of GDP (53% post bail out). And unless productivity gains can be released in the Thai economy, QE would only lead to higher inflation, Thailand has had great difficulty increasing productivity which is why the whole money printing concept is a non-starter. 

When I refer to the Baht not being fully convertible I do so in the context of making it weaker. One way the country could weaken the Baht is to make it fully convertible but even today the country is reluctant to do that for fear that speculators will take a position against it, another throwback to the '97 crash.

Almost 96% of government debt is in THB, only 4% is in foreign currency loans. If Thailand were to borrow in USD this would mean selling THB for USD which would result in a weakening of the currency and this is exactly what is intended with the high speed rail link contract with China which is to be paid in USD. Thailand is in the process of fixing a forward rate on that loan at a time when the Baht is strong and USD is weak, that is sensible borrowing which may help weaken THB and be the precursor to further loans along the same lines.

11 minutes ago, hobz said:

Inflating money supply doesn't make a currency weaker? Even better reason to print money and bail everyone out.

 

When I say print money and bail everyone out I mean the central bank will add huge amounts of credit to banks and the banks will be forced to lend this money to any business or person that needs a bailout. The loans will be "forgivable" , meaning they won't have to be paid back. 

This is called inflation (inflating the money supply) and would weaken the THB purchasing power and exchange rate.

 

It's what the US is doing.. the reason the dollar is not collapsing as a result is that it's the world's reserve currency. If Thailand did the same they THB would weaken. Ofcourse depends on the amounts inflated I assume. And other factors as well as you pointed out. Is that correct or too simplified the way I see it?

You can't apply the US model of USD to Thailand and the Baht, the two are totally different economies and currencies. USD is a reserve currency, the Baht is a minor boutique currency that is restricted, not fully convertible and cannot be freely exported, the US economy is worth USD 21 trillion vs Thailand at USD 530 bill. 

Increasing the money supply in Thailand via bank lending does what exactly to a restricted currency that cannot  be exported, even if it's effectively a cash giveaway? It would increase BOT debt because they would be the ones who have to shoulder the cost of the giveaway but it wouldn't increase government debt. 

Thailand has increased the money supply, it has doubled in the past the years yet it continues to suffer from ultra low inflation, a major reason being the current account has always shown a surplus which has fuelled the rise in foreign currency reserves:

https://tradingeconomics.com/thailand/current-account

https://tradingeconomics.com/thailand/money-supply-m1

12 hours ago, lavezzi said:

I dont think that 15% GDP corresponds to 15% of polulation income.

It just might be close! Total tourism is valued at 19% of GDP and employes 5.9 mill. people, that's 17% of the labour force (35 million). There's no reason to believe that people employed in Tourism earn on average any less than people employed in most other sectors.

1 hour ago, hotchilli said:

Having the qualifications and experience is one thing... being able to use them freely and without interference is something entirely different !

The Governor of the Central Bank is appointed by the highest authority in the land and historically has been under his protection in order to maintain central bank independence, case in point ex Governor Tarisa Watanagase. That said, the role of BOT is to implement government policy.

Aw look, we're down to emoji clicks!

Here's the CV's of the candidates, you tell me!

https://www.linkedin.com/in/suchart-techaposai-875189184/?originalSubdomain=th

https://www.linkedin.com/in/tongjai-thanachanan-88148b66/?originalSubdomain=th

https://www.linkedin.com/in/anusorn-tamajai-94317a5a/?originalSubdomain=th

https://www.linkedin.com/in/sethaput-suthiwartnarueput-a0a95a56/?originalSubdomain=th

8 minutes ago, smedly said:

Jesus Christ

How many other candidates do you think there are in Thailand with his qualifications and experience, almost none in the answer, the man has a doctorate from Yale for goodness sake!

8 hours ago, KKr said:

Moreover, without having seen the actual questionnaire, it seems very heavily biased, no control questions, and possibly leading questions.
Also, it is not clear to me how the survey distinguishes between short-term "tourist" visitors, those on temporary or long term residence, and longer term visitors from neighbouring countries employed in various sectors.

How can you say there were no control questions or that there were leading questions, you said you haven't seen the survey!

10 hours ago, tomauasia said:

All these Thais asked can't speak English. Have no passport and have never been to multi culture country in fear of learning about the real world other than a stupid gold shop. Also they were all selected carefully if there was any poll at all. And the doctor is another racist muppet.

The number of Thai people travelling overseas in recent years has soared to over 16% of the population, over half the population now have passports.

8 hours ago, lavezzi said:

I dont think that 15% GDP corresponds to 15% of polulation income.

An interesting question.

9 hours ago, transam said:

"Especially in the UK", would love a link for that....????

It's true, it has become quite common and a serious problem...the pedestrian version of this is all over Youtube:

https://www.independent.co.uk/topic/crash-for-cash

https://www.bbc.com/news/uk-wales-south-east-wales-40901111

https://www.rac.co.uk/insurance/car-insurance/guides/what-is-crash-for-cash

2 minutes ago, hobz said:

Because they claim that they want a weaker baht. 

And the tourist sector needs a bailout. Aren't those good enough reasons?

Like how the US "printed" tons of money and lent it to businesses to protect jobs recently? 

So how do they make it weaker?

Forget printing money, that's a red herring in this discussion.

1 hour ago, hobz said:

This proves that the powers that be in Thailand wants a strong baht. 

 

Here's my reasoning: 

 

Before corona the government said that the reason they can't just print money to devalue the baht is because the U.S. would label them a currency manipulator. But with Covid-19 and one third of tourism going under etc, they have the perfect excuse to go on a massive money printing scheme that would 1. bail out everyone. 2. Devalue the way too strong baht (and thus encourage future tourism). 

 

why would they not do this unless they secretly want a strong baht? 

What am I missing? 

 

A central bank cannot just pick a number and devalue its currency at will, things don't work that way. The strength of a currency is determined by a series of factors include Foreign Currency Reserve levels, government debt levels and current account status, amongst other things.  If a central bank were to adjust the level of the Baht/Dollar exchange rate one morning and weaken it by say four Baht, lots of people would immediately send over USD and exchange it for Baht at the new attractive rate and by lunch time the Baht would have strengthened back to its previous exchange rate and BOT would have lost a bundle. And as you say, making that sort of adjustment, even if it were to work (which it wouldn't) would mean Thailand is indeed a currency manipulator.

In order to weaken the currency, other measures have to be taken which allows the value of the Baht to weaken more naturally on a lasting basis and printing money is not part of that picture either. The term "printing money: doesn't mean printing bank notes, it refers instead to the Central Bank extending credit to commercial bank balance sheets so that they can lend more.  But why would they do that, there is no need, commercial and retail bank balance sheets are in fine shape!

Finally the question of whether BOT secretly wants a strong Baht, personally I believe they and everyone in finance does because it's beneficial to many aspects of the economy - imports remain cheaper, fuel, oil and transportation costs remain cheaper as do energy costs. The flip side is exports remain expensive which in a downturn is not a good thing, but exporters have lived with 30 baht per Dollar before so there's nothing new there.

4 minutes ago, VBF said:

I have (always do)  - we cross-posted and therefore still disagree with you!

Apparently not enough on this occasion:

https://www.sciencebuddies.org/science-fair-projects/references/sample-size-surveys

https://www.surveysystem.com/sscalc.htm#one

Just now, VBF said:

A quote please...preferably not from Wikipedia 

Do your own research if you don't believe, it's not my job to educate or convince you!

5 minutes ago, VBF said:

Totally disagree!

10% of the population MIGHT be sufficient, but that of course is impractical

And you also have to consider WHICH 10% have been asked.

IMO, these polls or surveys are essentially meaningless.

The science says otherwise!

5 minutes ago, VBF said:

I haven't read the whole thread so this may have been mentioned

 

"The NIDA poll was conducted from 6th to 8th July and asked 1,251 members of the Thai public four questions under the umbrella: Should we let foreigners into Thailand or not?"

 

Not exactly a representative number is it?

Yes, around 1,000 is an ideal number:

https://en.wikipedia.org/wiki/Opinion_poll

46 minutes ago, JonnyF said:

GDP fall by 10%? 

 

I know you're paid to talk up the Thai economy but at least be slightly realistic or you'll lose all credibility. They could easily lose 10% on tourism alone when you include domestic travel as well as international. I have several expat friends working in manufacturing businesses (large multinationals) in Bangkok and all say that sales (exports in particular) are down between 15% and 30% for Q2. Exports make up a huge % of GDP for Thailand.

 

10%? You're having a laugh.

As of late June 2020, BOT forecasts a drop in GDP of -8.1%

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/MPR/Pages/default.aspx

Regarding exports: Exports comprise 61% of Thai GDP, of that 61%, International Tourism represents 20%.

I find some of your personal comments objectionable, please keep them to yourself in future.

2 minutes ago, spidermike007 said:

Many reliable sources state tourism is closer to 20% of GDP, if you take into account all of the related industries. Those are the very industries getting decimated right now. Just got back from a trip to Bangkok. It is shocking how many businesses have either closed, or are barely clinging on, on life support. 

It is closer to 20%, the combination of international tourism at 11.5% and domestic tourism at 7.5% makes 19%. And when the USD/THB is above 32 it is 20%.