Flip Flop Economy

[pap]

I can’t help but noticing how much Thais are borrowing.

The house prices in some area of Bangkok has gone crazy and the appearance factor of being seen in the latest imported vehicle is seen as paramount.

With recent odd Government decisions, bombs and continuing uncertainty, high borrowing by consumers and a strong Baht, the bubble has to burst.

The question is when?

People like you are fools Thailand is number one the whole world knowns that just ask a Thai. I having been living in Thailand for 16 years. This is not 1997. I wonder what your problem is always making fun you should go back to where you can from. Are you from India?

It is a simple questin on economics and does not desrve a racist coment. I love the Thai and the people of India. I am only concerned that personal borrowing is too easy and will eventually damage the country.

However, I am sad that you are unable to conduct a reasonable argument but I wish you a happy new year

i dont know if it is fair to characterise thailand as a bubble economy. Some of the issues you have highlighted could well spell trouble, but I think its till too early to say for certain.

As for the high borrowing, thais are definitely borrowing more, but as a whole i understand its still not that bad.

In any case thailand´s economy is more export driven, rather than consumer driven (maybe I am wrong but that my impression), so this high borrowing will not in itself bring about a crash.

External factors like investment drying up, or the US consumer stops buying stuff will affect thailand more imho.

I agree with your assessment. I would not call it a bubble either. I would also say I would expect Thailands economy to suffer but not like it did in the crash. That was a regional issue and not confined to Thailand. The current issues will only affect Thailand while its neighbors benefit.

Thailands neighbors will not see a huge benefit due to Thailands current issues but it will be part of why they benefit.

The real danger for Thailand is a few years out when all of the other economies in this region move downward due to a global slowdown. That kind of down turn will affect Thailand more than its neighbors. Thats when the real pain will come.

I hope I am wrong on this one.

[pap]

I'm not sure you can use interest rates to control a currency. The US dollar has dropped dramatically since it began an aggressive rate increase program.

You definitely do use it. But it definitely is only one factor. The dollar has all kinds of other problems such as its backers owing somewhere around 2000 bucks per person to pay off the debt. That last number is not right but its in the neighborhood.

The dollar would have fallen faster had the rate increases not occured.

Sorry, way off on the US national debt. Currently its 8,674,334,546,966.89 divide that by the number of Americans 298,444,215 and you get $29,065 owed per person.

I would thing a bunch of pre school kids don't quit make that much yet so it may be a while before this gets paid off.

[sfokevin]

$29 Grand each - not bad compared to the value of what we have... Can someone calculate what 50% of the total world wealth is divided by 298,444,215...

It is my understanding that Japan, France & Germany have all borrowed more as a % of their GDP...

Edited January 16, 2007 by sfokevin

[jumnien]

I thought the US population hit 300,000,000 back when we had an elected govt here in Thailand?

[pap]

I thought the US population hit 300,000,000 back when we had an elected govt here in Thailand?

Your right. Just looked up the number I used and it was July 2006.

[pap]

$29 Grand each - not bad compared to the value of what we have... Can someone calculate what 50% of the total world wealth is divided by 298,444,215...

It is my understanding that Japan, France & Germany have all borrowed more and a % of their GDP...

I don't know about you but I don't know many pre school kids that own much of that wealth. When China gets in a position to not have to carry our debt you may want to be diversified outside the US.

Most of that worlds wealth is in multinational companies that don't have to keep their corporation in the US should you try to pay off the national debt from their coufers.

[sfokevin]

If I was a preschooler and got to choose my county to be in the choice would not be difficult...

[pap]

If I was a preschooler and got to choose my county to be in the choice would not be difficult...

If you were a pre-schooler in our country and could identify the US on a map you would be one of the better educated pre-schoolers. Since it is likely that would be the only country you could Identify as that pre-schooler the choice would be easy.

Now that I am done having fun with you.....I agree with you. But barely. There are alot of really cool countries in the world. That doesn't mean I think we do everything right because we most certainly don't. But we do a lot right.

The key is we are doing.

[sfokevin]

If I was a preschooler and got to choose my county to be in the choice would not be difficult...

If you were a pre-schooler in our country and could identify the US on a map you would be one of the better educated pre-schoolers. Since it is likely that would be the only country you could Identify as that pre-schooler the choice would be easy.

Now that I am done having fun with you.....I agree with you. But barely. There are alot of really cool countries in the world. That doesn't mean I think we do everything right because we most certainly don't. But we do a lot right.

The key is we are doing.

My point was meant to be a comparison of the US vs China... Many here think that China will grow into some economic nirvana and give the nasty Americans their comeuppance... The reality is that China's growing wealth is being horded by an even smaller % of its population than the US... And the vast majority of China's people will never see their newly rich/government spend let alone borrow a dime to benefit its people...

Edited January 16, 2007 by sfokevin

[PeaceBlondie]

When we're talking about numbers, you might think they're real, accurate numbers. Someone's already said you can't trust the govt.'s figures on inflation; the real increase in consumer prices might be double what they say (here, in the USA, and elsewhere). As for national debt, it isn't 9 trillion in the USA: using proper accounting methods, it's more like 49 trillion, and nobody's really counting it right.

We have no accurate financial statistics for this lovely kingdom. We see lots of new vehicles, we see mobiles that were bought on credit, etc. As Heng states, maybe only 20% of the population knows how to save real money.

We mistakenly focus too much on the single "superpower" as if the USA were half of the entire world. It's an economy which still owes money it borrowed to fight world war one, ww two, Korea, Vietnam, etc. An economy which has borrowed far too much from China and other countries' central treasuries or moneyed elites. Not a smart move.

The article by the Bloomberg columnist, William Pesek, was interesting. The ASEAN meeting, in his opinion, was just so much hot air that he came to Thailand instead, where he was not encouraged by what he saw. He describes the "Asian tigers" as pussycats. Which raises the question: aren't most of Thailand's exports made to fellow members of ASEAN, rather than to the USA?

[gjones]

The BBC is covering this subject today. It makes interesting reading -> http://news.bbc.co.uk/2/hi/business/6260357.stm

Investors look to overcome Thailand fears By Kate McGeown

BBC News, Bangkok

Thailand is traditionally seen as having one of the most open and attractive economies in Asia - embracing the idea of a free market and welcoming foreign companies and investment.

But since the military took over the country in a coup last September, a series of incidents have begun to make business owners and shareholders uneasy.

Not only has Bangkok suffered a wave of bomb attacks, underlining the unstable political situation, but the newly installed interim government has also made several questionable economic decisions.

The latest proposal, which tightens up the Foreign Business Act that regulates ownership of Thai companies, has caused considerable concern among the business community.

"From the standpoint of international investors, the news has been negative ever since the coup," said Christopher Wong, an investment manager at Aberdeen Asset Management.

"I would say that foreign investors and companies here should be very concerned, especially in certain sectors," added Piyanuj Ratprasatporn, a partner at the Thai law firm Tilleke and Gibbins.

Stock market crash

The first incident to hit investor confidence was the coup itself.

When tanks rolled onto the streets of Bangkok on 19 September, they not only ousted the controversial Prime Minister Thaksin Shinawatra, they also got rid of his democratically elected administration.

The military tried to play down international concern by installing a Cabinet full of retired technocrats. Army veteran Surayud Chulanont was chosen as prime minister, and former central bank governor Pridiyathorn Devakula was made foreign minister.

The government looked like it hadn't done its homework properly

Thitinan Pongsudhirak, Chulalongkorn University

But just as investors were beginning to get used to the new status quo, the government took the unexpected decision to impose strict capital controls on transactions made by foreign investors.

These rules were meant to prevent the already strong Thai Baht from appreciating even further, but the government seemed ill-prepared for the stock market's reaction - a plunge of 15% in one day.

The plan was partially rescinded, but Thailand's credibility did not recover as quickly as its markets did.

"The government looked like it hadn't done its homework properly," said Thitinan Pongsudhirak, a professor of political science at Chulalongkorn University.

Controversial plan

Then came a series of bombs on New Year's Eve.

There have been few concrete leads as to who carried out the attacks, and both the people of Thailand and those who invest in the country are jittery that the events of that night might not be a one-off incident.

Despite this backdrop, the government decided on Tuesday to press ahead with controversial changes to the Foreign Business Act.

Thai legislation has long prevented foreigners from owning more than 50% of companies in most business sectors, but in practice non-Thais have often been able to circumvent these rules by using local nominees to act on their behalf, while keeping voting rights for themselves.

The practice was highlighted last year, when there was a public outcry at the Thaksin family's decision to sell its controlling stake in the telecoms giant Shin Corp to the Singapore-owned investment firm Temasek - effectively selling the company abroad, albeit through Thai subsidiaries.

The changes mean that voting rights will now be seen as one of the main criteria for foreign ownership, forcing many firms to divest shares to stay within the law.

There has been considerable disquiet about the proposals within the foreign business community, although some analysts, such as Prof Thitinan, see the step as painful but necessary, bringing Thailand in line with many other countries.

But everyone seems agreed on one thing: the proposals, as they stand, are very unclear.

Carmakers exempt

A day after the government announced the plan, finance minister Mr Pridiyathorn said he had mistakenly included telecom companies among the affected companies.

Experts are also uncertain as to whether wholesale businesses - including such firms as Tesco and Carrefour - will be affected, and Ms Piyanuj said that just a day after the changes were announced, she personally spoke to 10 companies unsure about the ramifications.

In actual fact, these new changes may not be as draconian as some companies first feared.

Major international manufacturers, such as the carmakers Ford and Toyota, will definitely be exempt because of rules promoting export-orientated businesses.

Investors dislike uncertainty, and the message that Thailand's leaders are sending right now is that don't know what they want

Christopher Wong, Aberdeen Asset Management

Lawyers admit that even those companies that are affected could well find other loopholes to replace those that have just been closed.

Investment managers such as Christopher Wong say they remain optimistic about Thailand's long-term future, and have no plans to move their Thai investments.

Perhaps the most worrying aspect of the proposals is not the changes themselves, but the fact they reveal a lack of clarity on the part of the government.

"They're flip-flopping, like they did last month [with the stock market crash], and they've now lost significant credibility," said Professor Thitinan.

"Investors dislike uncertainty, and the message that Thailand's leaders are sending right now is that don't know what they want," added Mr Wong.

Unclear agenda

The next issue the government needs to address is its theory of a "sufficiency economy", which it has been increasingly advocating in recent weeks.

This is an obvious nod towards the beloved Thai king's philosophy of self-sufficiency and moderation, while at the same time being a reaction to the relentless drive for growth that was a hallmark of Mr Thaksin's administration.

It seems evident that Thailand's new rulers intend to move away from Mr Thaksin's aggressive economic policies, preferring a more nationalist, protectionist approach.

But just how far they intend to go is still a matter of debate, because so far there is little evidence of a definite policy agenda.

"The government again needs to spell out what this sufficiency platform stands for," said Professor Thitinan.

At the moment many other Asian countries - such as Indonesia, the Philippines, Vietnam and China - are choosing to open up their doors and their economies as never before.

Until it makes its economic agenda clear, foreign businesses and investors can only fear the worst, and assume that Thailand is going in completely the opposite direction.

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6260357.stm

Published: 2007/01/15 08:31:35 GMT

[samran]

It seems evident that Thailand's new rulers intend to move away from Mr Thaksin's aggressive economic policies, preferring a more nationalist, protectionist approach.

But just how far they intend to go is still a matter of debate, because so far there is little evidence of a definite policy agenda.

Bless, dear Kate.

This one paragraph makes her entire article look silly.

Thaksin the free trader? Only if he and his cronies could benefit.

Thaksin the economic liberal? He wrapped himself in the Thai flag at every opportunity, and sacked anyone at independent watchdogs who didn't agree with him. Does the name Jurawan ring a bell?

Agressive economic policies? Dear leader was presented a raft of good economic policies that would have freeded up the economy and made it more competitive, including a constitutionally mandated Telecoms regulator. What did he do? He stacked it with his own buddies and made it next to useless.

Thaksin's genuious was to actually throw the poor people a scrap or two making him look good, while actually selling them up the river on most other issues.

[Heng]

slightly off topic, but can a Farang work in the money management industry in Thailand or is this a restricted job?

You mean for GE Capital or Goldman Sachs? Of course you can.

[tomyamg00ng]

The interest rate rising period for about 18 months by the FED caused a rise in the dollar. Now since the pause and other countries raising rates it has weakened again. The carry trade is no longer as favourable, apart from against the YEN where the dollar is at 120 circa.

As for a bubble in the Thai economy. Of course there will be a crash. I m 99% sure of this. No economy is immune to this. Just the reasons that bring them about change, but the dynamics are always similar. There have been crashes for 3 centuries in nations. The tulip bulb bubble in the 17th century, railways in 18th, and nearly a crash every 10 to 15/20 years now. We have had 10 years since 1997. Another crash will come with maybe the ealry warning sides and sub plots starting to play out now. I would say within the next 5 years we are looking, but maybe in 2 years. Who knows for sure...?

But with all crashes there is alot of money to be made, and the economies will slowly recover again. History shows this. Argentina has come along way since their default, Russia, Asia since 1997, Western econmies since 2001. Footsie 100 already near its all time highs, Dow made new highs, S&P coming along nicely. DAx has been very strong. Bubbles and crashes are a fact of life and we never learn from them.

There is no better investment in a country that hits rock bottom. A great book to read on this Market Panic or another is Popular Delusions and the Madness of Crowds.

[younghusband]

When we're talking about numbers, you might think they're real, accurate numbers. Someone's already said you can't trust the govt.'s figures on inflation; the real increase in consumer prices might be double what they say (here, in the USA, and elsewhere). As for national debt, it isn't 9 trillion in the USA: using proper accounting methods, it's more like 49 trillion, and nobody's really counting it right.

We have no accurate financial statistics for this lovely kingdom. We see lots of new vehicles, we see mobiles that were bought on credit, etc. As Heng states, maybe only 20% of the population knows how to save real money.

We mistakenly focus too much on the single "superpower" as if the USA were half of the entire world. It's an economy which still owes money it borrowed to fight world war one, ww two, Korea, Vietnam, etc. An economy which has borrowed far too much from China and other countries' central treasuries or moneyed elites. Not a smart move.

The article by the Bloomberg columnist, William Pesek, was interesting. The ASEAN meeting, in his opinion, was just so much hot air that he came to Thailand instead, where he was not encouraged by what he saw. He describes the "Asian tigers" as pussycats. Which raises the question: aren't most of Thailand's exports made to fellow members of ASEAN, rather than to the USA?

Re your last para most Thai exports are in fact to the US,EU and Japan and not Asean.