Thai Baht Volatility

[VegasVic]

In regards to my friend Sonic dragon, I think that he is getting the U.S. national debt confused with the budget deficit. The budget deficit has indeed been shrinking every year since 2004, but there still is a deficit so the national debt does continue to climb each year albeit by a lesser ammount each year.

I am certainly not confused. The national/government debt is simply the effect of cummulative budget deficits. That the annual deficit is getting smaller is obvously better than it not getting bigger, but it is still BAD because it is not a surplus and consequently the debt (and the interest on it) continues to grow,

Sonic, your post above shows me that you understand the situation very clearly, so my question to you is why in two of your past posts here(#109 and #112) have you made misleading and false staements about the U.S. budget deficit. In post #109 you say "the budget deficit is already running away" , I go on to correct you in my post #110 thinking that you may have inadvertantly been refering to the U.S. natioal debt, then once again in post #112 you state that "the budget deficit isn't really shrinking its getting LARGER at a slower pace". The fact is (and anybody can check it out on the GAO website or on google or elsewere) that the U.S. budget deficit has been shrinking every year since 2004, despite the high cost of the U.S. involvment in Iraq. Things like the U.S. trade and budget deficits and U.S. trade policy and monetary policy have an enormous impact on how China, Japan and many other asian countries conduct their economy, and therefore have profound impact on the volitility of the Thai baht. Granted, this current round of irrational exuberance in Chinese markets and in the SET and baht is primarily due American and European hedge funds, currency speculators, and to the cheap money available and currently flowing out of Japan. To those out there who think that mentioning the U.S. budget defict or talking about the dollar in a post about the volitility of the Thai baht is somehow getting off the subject, I liken your view of the situation to someone with blinders on. A stronger U.S. dollar will be instumental in not only stabilizing the baht but in revitalizing the Thai economy and getting it back on the fast track. By the way sonic, thanks for the PM clarifying that whole moderator censorship thing.

[aznyron]

In regards to my friend Sonic dragon, I think that he is getting the U.S. national debt confused with the budget deficit. The budget deficit has indeed been shrinking every year since 2004, but there still is a deficit so the national debt does continue to climb each year albeit by a lesser ammount each year.

I am certainly not confused. The national/government debt is simply the effect of cummulative budget deficits. That the annual deficit is getting smaller is obvously better than it not getting bigger, but it is still BAD because it is not a surplus and consequently the debt (and the interest on it) continues to grow,

Sonic, your post above shows me that you understand the situation very clearly, so my question to you is why in two of your past posts here(#109 and #112) have you made misleading and false staements about the U.S. budget deficit. In post #109 you say "the budget deficit is already running away" , I go on to correct you in my post #110 thinking that you may have inadvertantly been refering to the U.S. natioal debt, then once again in post #112 you state that "the budget deficit isn't really shrinking its getting LARGER at a slower pace". The fact is (and anybody can check it out on the GAO website or on google or elsewere) that the U.S. budget deficit has been shrinking every year since 2004, despite the high cost of the U.S. involvment in Iraq. Things like the U.S. trade and budget deficits and U.S. trade policy and monetary policy have an enormous impact on how China, Japan and many other asian countries conduct their economy, and therefore have profound impact on the volitility of the Thai baht. Granted, this current round of irrational exuberance in Chinese markets and in the SET and baht is primarily due American and European hedge funds, currency speculators, and to the cheap money available and currently flowing out of Japan. To those out there who think that mentioning the U.S. budget defict or talking about the dollar in a post about the volitility of the Thai baht is somehow getting off the subject, I liken your view of the situation to someone with blinders on. A stronger U.S. dollar will be instumental in not only stabilizing the baht but in revitalizing the Thai economy and getting it back on the fast track. By the way sonic, thanks for the PM clarifying that whole moderator censorship thing.

I just want to ad some thing about the gold standard the USA has been on what is called GNP (gross national product) since I guess 1971 correct me if I am wrong. Now according to Pat Buchannan who was on the ticket for President in 2000 also a former host on crossfire (CNN) said the USA lent it gold to some country when is was 35.00 USD per ounce when it hit the high numbers that same country wanted to sell us back our own gold at the current rate of gold per ounce now with that said we lent this country the gold to stabilize there currentcy I also want to say I do not know how accurate my post is it comes from memory which is not 100% any more It is also my understanding that there is no more GOLD in Fort Knox Kentucky if that is true I would like to know who has it LOL I know I don't I also would like to ad that Soc Security is in the General Fund which is being used to finance the war in both Iraq & Afghanistan So I do not see were the budget deficit is getting smaller since the USA out sauce many high tech jobs as well as low and semi skill jobs which lose's a large portion of our Tax revenue & social security (FICA) payments which is now called payroll tax I also was told by some one that the E.U. was writing a new constitution and if one country rejected it it would fail which would weaken the euro and strenthen the USD but I guess that was all B S I will say this about the Thai baht it is scaring me to the point I might go back to the USA with that being said I am going to marry my T/G/F so I can bring her with me if I choose to leave Thailand if the baht continues to get stronger against the USD thank you thaivisa for your post and letting me post my opinion also happy 4 of July

[VegasVic]

In regards to my friend Sonic dragon, I think that he is getting the U.S. national debt confused with the budget deficit. The budget deficit has indeed been shrinking every year since 2004, but there still is a deficit so the national debt does continue to climb each year albeit by a lesser ammount each year.

I am certainly not confused. The national/government debt is simply the effect of cummulative budget deficits. That the annual deficit is getting smaller is obvously better than it not getting bigger, but it is still BAD because it is not a surplus and consequently the debt (and the interest on it) continues to grow,

Sonic, your post above shows me that you understand the situation very clearly, so my question to you is why in two of your past posts here(#109 and #112) have you made misleading and false staements about the U.S. budget deficit. In post #109 you say "the budget deficit is already running away" , I go on to correct you in my post #110 thinking that you may have inadvertantly been refering to the U.S. natioal debt, then once again in post #112 you state that "the budget deficit isn't really shrinking its getting LARGER at a slower pace". The fact is (and anybody can check it out on the GAO website or on google or elsewere) that the U.S. budget deficit has been shrinking every year since 2004, despite the high cost of the U.S. involvment in Iraq. Things like the U.S. trade and budget deficits and U.S. trade policy and monetary policy have an enormous impact on how China, Japan and many other asian countries conduct their economy, and therefore have profound impact on the volitility of the Thai baht. Granted, this current round of irrational exuberance in Chinese markets and in the SET and baht is primarily due American and European hedge funds, currency speculators, and to the cheap money available and currently flowing out of Japan. To those out there who think that mentioning the U.S. budget defict or talking about the dollar in a post about the volitility of the Thai baht is somehow getting off the subject, I liken your view of the situation to someone with blinders on. A stronger U.S. dollar will be instumental in not only stabilizing the baht but in revitalizing the Thai economy and getting it back on the fast track. By the way sonic, thanks for the PM clarifying that whole moderator censorship thing.

I just want to ad some thing about the gold standard the USA has been on what is called GNP (gross national product) since I guess 1971 correct me if I am wrong. Now according to Pat Buchannan who was on the ticket for President in 2000 also a former host on crossfire (CNN) said the USA lent it gold to some country when is was 35.00 USD per ounce when it hit the high numbers that same country wanted to sell us back our own gold at the current rate of gold per ounce now with that said we lent this country the gold to stabilize there currentcy I also want to say I do not know how accurate my post is it comes from memory which is not 100% any more It is also my understanding that there is no more GOLD in Fort Knox Kentucky if that is true I would like to know who has it LOL I know I don't I also would like to ad that Soc Security is in the General Fund which is being used to finance the war in both Iraq & Afghanistan So I do not see were the budget deficit is getting smaller since the USA out sauce many high tech jobs as well as low and semi skill jobs which lose's a large portion of our Tax revenue & social security (FICA) payments which is now called payroll tax I also was told by some one that the E.U. was writing a new constitution and if one country rejected it it would fail which would weaken the euro and strenthen the USD but I guess that was all B S I will say this about the Thai baht it is scaring me to the point I might go back to the USA with that being said I am going to marry my T/G/F so I can bring her with me if I choose to leave Thailand if the baht continues to get stronger against the USD thank you thaivisa for your post and letting me post my opinion also happy 4 of July

No one can be that misinformed, so this must be a prank post, good try!

[ray23]

It's interesting thr conflicting opinnions, seem to be just about the same as the Thai's.

On just about any given day you can find news articles saying how wonderful it or it' pure doom and gloom.

I really wonder if the governments here ever have department meeting with other agencies, cause things never seem to be on the same page.

So no wonder we as farrangs have different thoughts amongst oursleves.

Edited July 5, 2007 by ray23

[aznyron]

In regards to my friend Sonic dragon, I think that he is getting the U.S. national debt confused with the budget deficit. The budget deficit has indeed been shrinking every year since 2004, but there still is a deficit so the national debt does continue to climb each year albeit by a lesser ammount each year.

I am certainly not confused. The national/government debt is simply the effect of cummulative budget deficits. That the annual deficit is getting smaller is obvously better than it not getting bigger, but it is still BAD because it is not a surplus and consequently the debt (and the interest on it) continues to grow,

Sonic, your post above shows me that you understand the situation very clearly, so my question to you is why in two of your past posts here(#109 and #112) have you made misleading and false staements about the U.S. budget deficit. In post #109 you say "the budget deficit is already running away" , I go on to correct you in my post #110 thinking that you may have inadvertantly been refering to the U.S. natioal debt, then once again in post #112 you state that "the budget deficit isn't really shrinking its getting LARGER at a slower pace". The fact is (and anybody can check it out on the GAO website or on google or elsewere) that the U.S. budget deficit has been shrinking every year since 2004, despite the high cost of the U.S. involvment in Iraq. Things like the U.S. trade and budget deficits and U.S. trade policy and monetary policy have an enormous impact on how China, Japan and many other asian countries conduct their economy, and therefore have profound impact on the volitility of the Thai baht. Granted, this current round of irrational exuberance in Chinese markets and in the SET and baht is primarily due American and European hedge funds, currency speculators, and to the cheap money available and currently flowing out of Japan. To those out there who think that mentioning the U.S. budget defict or talking about the dollar in a post about the volitility of the Thai baht is somehow getting off the subject, I liken your view of the situation to someone with blinders on. A stronger U.S. dollar will be instumental in not only stabilizing the baht but in revitalizing the Thai economy and getting it back on the fast track. By the way sonic, thanks for the PM clarifying that whole moderator censorship thing.

I just want to ad some thing about the gold standard the USA has been on what is called GNP (gross national product) since I guess 1971 correct me if I am wrong. Now according to Pat Buchannan who was on the ticket for President in 2000 also a former host on crossfire (CNN) said the USA lent it gold to some country when is was 35.00 USD per ounce when it hit the high numbers that same country wanted to sell us back our own gold at the current rate of gold per ounce now with that said we lent this country the gold to stabilize there currentcy I also want to say I do not know how accurate my post is it comes from memory which is not 100% any more It is also my understanding that there is no more GOLD in Fort Knox Kentucky if that is true I would like to know who has it LOL I know I don't I also would like to ad that Soc Security is in the General Fund which is being used to finance the war in both Iraq & Afghanistan So I do not see were the budget deficit is getting smaller since the USA out sauce many high tech jobs as well as low and semi skill jobs which lose's a large portion of our Tax revenue & social security (FICA) payments which is now called payroll tax I also was told by some one that the E.U. was writing a new constitution and if one country rejected it it would fail which would weaken the euro and strenthen the USD but I guess that was all B S I will say this about the Thai baht it is scaring me to the point I might go back to the USA with that being said I am going to marry my T/G/F so I can bring her with me if I choose to leave Thailand if the baht continues to get stronger against the USD thank you thaivisa for your post and letting me post my opinion also happy 4 of July

No one can be that misinformed, so this must be a prank post, good try!

VegasVic exactly what are you implying

[Naam]

Now according to Pat Buchannan who was on the ticket for President in 2000 also a former host on crossfire (CNN) said the USA lent it gold to some country when is was 35.00 USD per ounce when it hit the high numbers that same country wanted to sell us back our own gold at the current rate of gold per ounce now with that said we lent this country the gold to stabilize there currentcy

Pat Buchanan is a clown. it was not only then when he talked rubbish².

[sonicdragon]

In regards to my friend Sonic dragon, I think that he is getting the U.S. national debt confused with the budget deficit. The budget deficit has indeed been shrinking every year since 2004, but there still is a deficit so the national debt does continue to climb each year albeit by a lesser ammount each year.

I am certainly not confused. The national/government debt is simply the effect of cummulative budget deficits. That the annual deficit is getting smaller is obvously better than it not getting bigger, but it is still BAD because it is not a surplus and consequently the debt (and the interest on it) continues to grow,

Sonic, your post above shows me that you understand the situation very clearly, so my question to you is why in two of your past posts here(#109 and #112) have you made misleading and false staements about the U.S. budget deficit. In post #109 you say "the budget deficit is already running away" , I go on to correct you in my post #110 thinking that you may have inadvertantly been refering to the U.S. natioal debt, then once again in post #112 you state that "the budget deficit isn't really shrinking its getting LARGER at a slower pace". The fact is (and anybody can check it out on the GAO website or on google or elsewere) that the U.S. budget deficit has been shrinking every year since 2004, despite the high cost of the U.S. involvment in Iraq. Things like the U.S. trade and budget deficits and U.S. trade policy and monetary policy have an enormous impact on how China, Japan and many other asian countries conduct their economy, and therefore have profound impact on the volitility of the Thai baht. Granted, this current round of irrational exuberance in Chinese markets and in the SET and baht is primarily due American and European hedge funds, currency speculators, and to the cheap money available and currently flowing out of Japan. To those out there who think that mentioning the U.S. budget defict or talking about the dollar in a post about the volitility of the Thai baht is somehow getting off the subject, I liken your view of the situation to someone with blinders on. A stronger U.S. dollar will be instumental in not only stabilizing the baht but in revitalizing the Thai economy and getting it back on the fast track. By the way sonic, thanks for the PM clarifying that whole moderator censorship thing.

Sorry, you are right. I was confusing the terminology.

[samran]

stupid question: What happens if some of the carry trades we see start to unwind?

What would be a the potential triggers for people to stop borrowing in cheap Yen and investing this elsewhere?

I'm guessing the effect will be that people will pull out of their THB denominated investments, forcing the baht to weaken - to the extent of investments that have been funded by carrytrade activity. I can see that much, but when money is still relatively cheap (ie JPY), it would have to be something big to stop people borrowing there.

[aznyron]

Now according to Pat Buchannan who was on the ticket for President in 2000 also a former host on crossfire (CNN) said the USA lent it gold to some country when is was 35.00 USD per ounce when it hit the high numbers that same country wanted to sell us back our own gold at the current rate of gold per ounce now with that said we lent this country the gold to stabilize there currentcy

Pat Buchanan is a clown. it was not only then when he talked rubbish².

Dr Naam I would not characterize him as a clown I did not vote for him in 2000 but I do recall him saying things like stop outsaucing jobs to forien countries and let get fair trade deals he also was a union supporter (orinized labor) which is some thing I also support he also wanted the goverment to act on illegal immigration which is another thing I support but I am getting away from the original topic and that is the Thai Baht and as a retired American living in Thailand on my pension I am getting hammered in the transfer of funds now we are losing over 15% of our pension money based on 40 to 1 USD Now I am not a greedy person but I did not set that standard of 40 to 1 so since it was set that what I want not a thai baht less or more just give me the 40 to 1 and I shut my mouth and be a happy in thailand

[sonicdragon]

In regards to my friend Sonic dragon, I think that he is getting the U.S. national debt confused with the budget deficit. The budget deficit has indeed been shrinking every year since 2004, but there still is a deficit so the national debt does continue to climb each year albeit by a lesser ammount each year.

I am certainly not confused. The national/government debt is simply the effect of cummulative budget deficits. That the annual deficit is getting smaller is obvously better than it not getting bigger, but it is still BAD because it is not a surplus and consequently the debt (and the interest on it) continues to grow,

Sonic, your post above shows me that you understand the situation very clearly, so my question to you is why in two of your past posts here(#109 and #112) have you made misleading and false staements about the U.S. budget deficit. In post #109 you say "the budget deficit is already running away" , I go on to correct you in my post #110 thinking that you may have inadvertantly been refering to the U.S. natioal debt, then once again in post #112 you state that "the budget deficit isn't really shrinking its getting LARGER at a slower pace". The fact is (and anybody can check it out on the GAO website or on google or elsewere) that the U.S. budget deficit has been shrinking every year since 2004, despite the high cost of the U.S. involvment in Iraq. Things like the U.S. trade and budget deficits and U.S. trade policy and monetary policy have an enormous impact on how China, Japan and many other asian countries conduct their economy, and therefore have profound impact on the volitility of the Thai baht. Granted, this current round of irrational exuberance in Chinese markets and in the SET and baht is primarily due American and European hedge funds, currency speculators, and to the cheap money available and currently flowing out of Japan. To those out there who think that mentioning the U.S. budget defict or talking about the dollar in a post about the volitility of the Thai baht is somehow getting off the subject, I liken your view of the situation to someone with blinders on. A stronger U.S. dollar will be instumental in not only stabilizing the baht but in revitalizing the Thai economy and getting it back on the fast track. By the way sonic, thanks for the PM clarifying that whole moderator censorship thing.

I just want to ad some thing about the gold standard the USA has been on what is called GNP (gross national product) since I guess 1971 correct me if I am wrong. Now according to Pat Buchannan who was on the ticket for President in 2000 also a former host on crossfire (CNN) said the USA lent it gold to some country when is was 35.00 USD per ounce when it hit the high numbers that same country wanted to sell us back our own gold at the current rate of gold per ounce now with that said we lent this country the gold to stabilize there currentcy I also want to say I do not know how accurate my post is it comes from memory which is not 100% any more It is also my understanding that there is no more GOLD in Fort Knox Kentucky if that is true I would like to know who has it LOL I know I don't I also would like to ad that Soc Security is in the General Fund which is being used to finance the war in both Iraq & Afghanistan So I do not see were the budget deficit is getting smaller since the USA out sauce many high tech jobs as well as low and semi skill jobs which lose's a large portion of our Tax revenue & social security (FICA) payments which is now called payroll tax I also was told by some one that the E.U. was writing a new constitution and if one country rejected it it would fail which would weaken the euro and strenthen the USD but I guess that was all B S I will say this about the Thai baht it is scaring me to the point I might go back to the USA with that being said I am going to marry my T/G/F so I can bring her with me if I choose to leave Thailand if the baht continues to get stronger against the USD thank you thaivisa for your post and letting me post my opinion also happy 4 of July

It is very common for central banks to lend out their gold reserves , as I mentioned earlier. The problem is that since the Fed is hardly accountable and don't publish reserve operations, only participants in the gold market know about this (and that's where the information comes from, as far as I know). However, the point is completely moot because the Fed and almost all other central banks have debased their currencies to such an extent that the previously know reserves are miniscule in proportion to the money-in-circulation. I can only think of Hong Kong right now, as an economy that has all its money-in-circulation backed by actual reserves, but ironically those reserves are US dollars

[sonicdragon]

stupid question: What happens if some of the carry trades we see start to unwind?

What would be a the potential triggers for people to stop borrowing in cheap Yen and investing this elsewhere?

I'm guessing the effect will be that people will pull out of their THB denominated investments, forcing the baht to weaken - to the extent of investments that have been funded by carrytrade activity. I can see that much, but when money is still relatively cheap (ie JPY), it would have to be something big to stop people borrowing there.

The last time there was a big unwinding of the yen carry trade, in 98, dollar-yen moved 10 big figures in the very short space of time. I would expect an even bigger move if it unwound in a hurry now. Even with the small unwind (or talk of it) last year there was a 7 big-figure move.

What will cause it to unwind ? A big increase in risk aversion. What will cause an increase in risk aversion - it could be lots of things - contagion from a chinese equity crash, geo-political issues, terrorism......

I'm sure the baht has benefitted from the carry trade - obviously not to the same extent as the NZD and other high yielders - so I agree, a carry trade unwind should weaken the baht.

[A_Traveller]

It is very common for central banks to lend out their gold reserves , as I mentioned earlier. The problem is that since the Fed is hardly accountable and don't publish reserve operations, only participants in the gold market know about this (and that's where the information comes from, as far as I know). However, the point is completely moot because the Fed and almost all other central banks have debased their currencies to such an extent that the previously know reserves are miniscule in proportion to the money-in-circulation. I can only think of Hong Kong right now, as an economy that has all its money-in-circulation backed by actual reserves, but ironically those reserves are US dollars

No country has money in circulation backed by tangible reserves. The central bank system uses fractional reserves, in most cases around the 1/10 mark. Since a fiat currency cannot be a true reserve, by definition, your last point, is forgive me, invalid.

Further, both The Bank of Switzerland, and The Bank of Spain have recently announced sales of gold {250 & 100 tonnes respectively} which puzzles some, are they and other central banks trying to damp down gold i.e. 700 USD and no further, or is there a more concerted and coordinated process at work here?

Regards

/edit typo//

Edited July 5, 2007 by A_Traveller

[sonicdragon]

It is very common for central banks to lend out their gold reserves , as I mentioned earlier. The problem is that since the Fed is hardly accountable and don't publish reserve operations, only participants in the gold market know about this (and that's where the information comes from, as far as I know). However, the point is completely moot because the Fed and almost all other central banks have debased their currencies to such an extent that the previously know reserves are miniscule in proportion to the money-in-circulation. I can only think of Hong Kong right now, as an economy that has all its money-in-circulation backed by actual reserves, but ironically those reserves are US dollars

No country has money in circulation backed by tangible reserves. The central bank system uses fractional reserves, in most cases around the 1/10 mark. Since a fiat currency cannot be a true reserve, by definition, your last point, is forgive me, invalid.

Further, both The Bank of Switzerland, and The Bank of Spain have recently announced sales of gold {250 & 100 tonnes respectively} which puzzles some, are they and other central banks trying to damp down gold i.e. 700 USD and no further, or is there a more concerted and coordinated process at work here?

Regards

/edit typo//

Sorry, but Hong Kong has every last cent of it's money in circulation backed by tangible reserves, althogh I suppose you will say that US dollars are not tangible reserves, since 1984 and operates what is known as a currency board.

The problem with published reserves (of gold) is that they don't tell you how much of those reserves they have lent out.

[samran]

stupid question: What happens if some of the carry trades we see start to unwind?

What would be a the potential triggers for people to stop borrowing in cheap Yen and investing this elsewhere?

I'm guessing the effect will be that people will pull out of their THB denominated investments, forcing the baht to weaken - to the extent of investments that have been funded by carrytrade activity. I can see that much, but when money is still relatively cheap (ie JPY), it would have to be something big to stop people borrowing there.

The last time there was a big unwinding of the yen carry trade, in 98, dollar-yen moved 10 big figures in the very short space of time. I would expect an even bigger move if it unwound in a hurry now. Even with the small unwind (or talk of it) last year there was a 7 big-figure move.

What will cause it to unwind ? A big increase in risk aversion. What will cause an increase in risk aversion - it could be lots of things - contagion from a chinese equity crash, geo-political issues, terrorism......

I'm sure the baht has benefitted from the carry trade - obviously not to the same extent as the NZD and other high yielders - so I agree, a carry trade unwind should weaken the baht.

cheers for that, sonic.

[A_Traveller]

It is very common for central banks to lend out their gold reserves , as I mentioned earlier. The problem is that since the Fed is hardly accountable and don't publish reserve operations, only participants in the gold market know about this (and that's where the information comes from, as far as I know). However, the point is completely moot because the Fed and almost all other central banks have debased their currencies to such an extent that the previously know reserves are miniscule in proportion to the money-in-circulation. I can only think of Hong Kong right now, as an economy that has all its money-in-circulation backed by actual reserves, but ironically those reserves are US dollars

No country has money in circulation backed by tangible reserves. The central bank system uses fractional reserves, in most cases around the 1/10 mark. Since a fiat currency cannot be a true reserve, by definition, your last point, is forgive me, invalid.

Further, both The Bank of Switzerland, and The Bank of Spain have recently announced sales of gold {250 & 100 tonnes respectively} which puzzles some, are they and other central banks trying to damp down gold i.e. 700 USD and no further, or is there a more concerted and coordinated process at work here?

Regards

/edit typo//

Sorry, but Hong Kong has every last cent of it's money in circulation backed by tangible reserves, althogh I suppose you will say that US dollars are not tangible reserves, since 1984 and operates what is known as a currency board.

The problem with published reserves (of gold) is that they don't tell you how much of those reserves they have lent out.

It is important to appreciate the reality here, technically a reserve based on a fiat currency is not a reserve as you {and to be fair government ministers} posit it.

No currency is so underpinned that is a fact. All currencies in circulation toady are based on the economic principal of fiat, they are not specie. Therefore it is not possible to use fiat to underpin fiat in any meaningful way, with the exception that the value of the underpinning currency is viewed as being secured by, for example effective taxation rates vs inevitable volatility {in the broadest definition}. I would agree that there is an element of how many angles can dance on a pin head here, but it does have relevance as to how currencies are managed and viewed.

At one time the BIS did provide a regular public central bank gold holding advisory. As to loans, again there were BIS documents on this, but they might not be in the public {non banking} domain. I'd have to rummage for it and see it is still up and running there.

Regards

[sonicdragon]

It is very common for central banks to lend out their gold reserves , as I mentioned earlier. The problem is that since the Fed is hardly accountable and don't publish reserve operations, only participants in the gold market know about this (and that's where the information comes from, as far as I know). However, the point is completely moot because the Fed and almost all other central banks have debased their currencies to such an extent that the previously know reserves are miniscule in proportion to the money-in-circulation. I can only think of Hong Kong right now, as an economy that has all its money-in-circulation backed by actual reserves, but ironically those reserves are US dollars

No country has money in circulation backed by tangible reserves. The central bank system uses fractional reserves, in most cases around the 1/10 mark. Since a fiat currency cannot be a true reserve, by definition, your last point, is forgive me, invalid.

Further, both The Bank of Switzerland, and The Bank of Spain have recently announced sales of gold {250 & 100 tonnes respectively} which puzzles some, are they and other central banks trying to damp down gold i.e. 700 USD and no further, or is there a more concerted and coordinated process at work here?

Regards

/edit typo//

Sorry, but Hong Kong has every last cent of it's money in circulation backed by tangible reserves, althogh I suppose you will say that US dollars are not tangible reserves, since 1984 and operates what is known as a currency board.

The problem with published reserves (of gold) is that they don't tell you how much of those reserves they have lent out.

It is important to appreciate the reality here, technically a reserve based on a fiat currency is not a reserve as you {and to be fair government ministers} posit it.

No currency is so underpinned that is a fact. All currencies in circulation toady are based on the economic principal of fiat, they are not specie. Therefore it is not possible to use fiat to underpin fiat in any meaningful way, with the exception that the value of the underpinning currency is viewed as being secured by, for example effective taxation rates vs inevitable volatility {in the broadest definition}. I would agree that there is an element of how many angles can dance on a pin head here, but it does have relevance as to how currencies are managed and viewed.

At one time the BIS did provide a regular public central bank gold holding advisory. As to loans, again there were BIS documents on this, but they might not be in the public {non banking} domain. I'd have to rummage for it and see it is still up and running there.

Regards

If you refer to my earlier post, which you quoted, I did say that HK's reserves ironically are US dollars. It seems my sense of irony was too subtle;) Since HK operates a very strong currency board, and not just a notional peg, the system is almost exactly equivalent to having US dollars as the local currency (which I am not saying would be a good thing). We are not talking about Argentina here, where they operated a similar scheme but politicians spent the US dollars - that cannot happen with HK system.

I'm curious about those BIS reports - to the best of my knowledge CB gold lending is completely opaque now.

Anyway, this is getting off-topic.

Edited July 5, 2007 by sonicdragon

[VegasVic]

stupid question: What happens if some of the carry trades we see start to unwind?

What would be a the potential triggers for people to stop borrowing in cheap Yen and investing this elsewhere?

I'm guessing the effect will be that people will pull out of their THB denominated investments, forcing the baht to weaken - to the extent of investments that have been funded by carrytrade activity. I can see that much, but when money is still relatively cheap (ie JPY), it would have to be something big to stop people borrowing there.

The last time there was a big unwinding of the yen carry trade, in 98, dollar-yen moved 10 big figures in the very short space of time. I would expect an even bigger move if it unwound in a hurry now. Even with the small unwind (or talk of it) last year there was a 7 big-figure move.

What will cause it to unwind ? A big increase in risk aversion. What will cause an increase in risk aversion - it could be lots of things - contagion from a chinese equity crash, geo-political issues, terrorism......

I'm sure the baht has benefitted from the carry trade - obviously not to the same extent as the NZD and other high yielders - so I agree, a carry trade unwind should weaken the baht.

Great synopsis Sonic! I would only add that this time around the yen carry trade situation is potentially far more dangerous than it was in 1998. This time around there are many more hegde funds involved and in most cases they are leveraging the cheap money from Japan by a factor of 10X or more and they are not just arbitraging this cheap money against the NZ and Aussie bonds, they are gambling with it in the equity casinos in China, India, Thailand and elsewere. If the Yen valuation were to make a quick and substantial move like in 1998 the fallout would be felt exponentially in the region and would lead to much lower levels on the SET and baht valuation, as well as causing a run on chinese equities. As far as the gold debate goes you seem to very well versed in this matter as well. The U.S. has by far the largest reserve of gold in the world (8,000 metric tons) and since going off the gold standard in 1971 they have been loaning it out (on paper of course, the gold never leaves Ft. Knox, West point or the three mints) mostly to mining companies, but in the 90's Clinton made it possible for some to loaned to his hedge fund pals. In any event this is all a moot point because even if the U.S. were to dump all of its gold on the open market and the price were to remain at $650/ounce (of course it would drop below $200/ounce very quickly but lets pretend the price would remaim unchanged) the total proceeds to the U.S. would be slightly less than 200 billion dollars, which would perhaps allow them to balance the budget for the coming year or in a better perspective they could make a one time cash payment on the annual interest of the national debt (which is over 5 trillion dollars now if memory serves correct). The Thai baht is caught up in the middle of a very intracate international balancing act as we are all intersticably joined at the hip in a world economy. Lets hope the isolationists like Pat Buhcanan (an extreme right wing republican) and the far left wing isolatioists of the democratic party which does control congress now, don't get their policies enacted, as the effect on the Thai baht as well as the world economy would be devestating.

[sonicdragon]

There are some interesting micro-economic aspects to currency movements that are often overlooked:

One of the effects of a weak currency is that it creates complacency among exporters, while a strong currency creates complacency among importers. This complacency is manifested in a lack of innovation, both technological and operational. Also, there will be less political pressure to make policy changes (such as reforming labour laws) that would otherwise benefit industry. Normally, these effects are just part of the economic cycle. For example, in a economy with a weak currency, inefficient exporters will begin to lose out to companies, both domestic and (more importantly) in other countries that innovate faster. Overall, the domestic industry will lose competitiveness technologically and operationally to the overseas industry, but this will be a masked by the weak currency. When the currency begins to strengthen, the overseas industry will have the double benefit of the currency effect and the competitiveness effect.

What this means is that when the currency is weak, exporting companies must not rest on their laurels; when it is strong, they must try to innovate and become more efficient to counter the effect of their strong currency. Thus, while the current situation in thailand might be extremely painful for many companies, the ones that are able to innovate will come out of this in a very good position.

Normally this is all just part of the usual economic cycle, but in abnormal situations - ie in the case of the yen carry trade (which results in an a weak yen) or capital controls in china (which result in a weak yuan) - the normal appreciation of those currencies that would be expected does not occur (or it occurs only slowly). The japanese are aware of this and it is one reason why, although with the yen at these levels many japanese exporters are incredible money making machines, there will be increasing pressure against further falls in the yen. And as for china, the danger is that companies do not innovate and instead simply rely on the combination of cheap labour and a weak currency and as labour gets more expensive and/or the currency appreciates in combination with other factors such as increasing cost of land, many of these companies (who are now doing very well indeed) will find life very difficult. This is one reason why the yuan will appreciate only slowly.

[Mid]

Baht 'may hit 30 to $'

Experts urge BOT to be vigilant

Fri, July 6, 2007 : Last updated 16:21 pm

A currency expert believes the baht could rise to 30 to the US dollar due to market mechanisms if the Bank of Thailand (BOT) does not intervene in the level of the currency, while exporters urged the central bank to slow the baht's appreciation.

Adisak Kammoon, vice president of KGI Securities (Thailand), said the movement of the baht would have to be closely monitored.

"The Bank of Thailand still doesn't let the baht move freely according to market forces, which is considered dangerous because it may quietly lead to another financial crisis," he said. "Thus, as long as the Bank of Thailand is not confident that the exporters will be able to compete on their own, it is unlikely that the 30 per cent capital control will be revoked. There is a possibility that there may be additional measures to prevent the baht from rising further. If the baht is allowed to move according to the market, the level of the baht should be Bt30."

Anoma Srisukkasem,

Chalida

Ekvitthayavechnukul

The Nation

[Mid]

BoT sees baht stablising

The Governor of the Bank of Thailand said the Bank is not resisting market force, but it will take steps to reduce volatility of the currency to allow the business sector to adjust.

The baht has appreciated to hit the record peak of 33.30 baht per dollar, raising alarm in many sectors.

Bank of Thailand governor Tarisa Watanagase said Thailand continued to see a strong stream of capital inflow, plus rising demand for the currency in the market. Even though the Bank has stepped in to stabilise the currency, it cannot resist the force of the market.

The Post Publishing Public Co

[lannarebirth]

Just an FYI for GBP holders. The GBP formed a "key reversal" (bearish engulfing pattern) on its weekly chart against the $USD this week.

http://stockcharts.com/h-sc/ui?s=$XBP...&a=48806132

Might mean something or nothing. Just a heads up.

[PeaceBlondie]

Five posts which included comments about moderators and moderators' personal political views and moderations and similar moderation topics, have been removed because there is a rule about that. If you are not sure, just read the rules.

If your post includes a reference or quote about moderation, it's likely to be eliminated. Also, deletion of such posts disrupts the sequential post count, so that #139 may now be #134 or 137.

Political bashings and things which are more or less off topic and which lead to political bashing, are also deleted.

If you persist in breaking the rules, you get punished and there are at least 30 moderators who don't enjoy punishing members. Thank you, have a nice day; we appreciate your comments that are on topic, etc.

[aznyron]

Five posts which included comments about moderators and moderators' personal political views and moderations and similar moderation topics, have been removed because there is a rule about that. If you are not sure, just read the rules.

If your post includes a reference or quote about moderation, it's likely to be eliminated. Also, deletion of such posts disrupts the sequential post count, so that #139 may now be #134 or 137.

Political bashings and things which are more or less off topic and which lead to political bashing, are also deleted.

If you persist in breaking the rules, you get punished and there are at least 30 moderators who don't enjoy punishing members. Thank you, have a nice day; we appreciate your comments that are on topic, etc.

Hello P/Blonde Your post confuses me since I am not sure if it directed at me or some one els since I check my prev. post and did not find any thing I said against you or any one else in this forum since I did get e-mail about your post maybe it would be a good idea to send them guilty of such posting a IM respectfully submitted Ronnie

[PeaceBlondie]

Five posts which included comments about moderators and moderators' personal political views and moderations and similar moderation topics, have been removed because there is a rule about that. If you are not sure, just read the rules.

If your post includes a reference or quote about moderation, it's likely to be eliminated. Also, deletion of such posts disrupts the sequential post count, so that #139 may now be #134 or 137.

Political bashings and things which are more or less off topic and which lead to political bashing, are also deleted.

If you persist in breaking the rules, you get punished and there are at least 30 moderators who don't enjoy punishing members. Thank you, have a nice day; we appreciate your comments that are on topic, etc.

Hello P/Blonde Your post confuses me since I am not sure if it directed at me or some one els since I check my prev. post and did not find any thing I said against you or any one else in this forum since I did get e-mail about your post maybe it would be a good idea to send them guilty of such posting a IM respectfully submitted Ronnie

aznyron, while my last post, quoted above, was of a general nature for all those who post on topics such as these, it wasn't directed at you. If my post directly followed yours, it was just a coincidence. If one of your posts was among the five deleted, please try to remember how it might have violated the forum rules, or the other points I just made.

You know, if I have time, I might go back and explain to one or more posters by PM (private mail) but this kind of problem already took up 19.6 minutes of my unpaid time, and I'm too lazy on a nice day like this to spend another 9.8 minutes....y'all enjoy the discussion, please. If you have specific questions, it's best to send a PM to a moderator or administrator.

[aznyron]

Five posts which included comments about moderators and moderators' personal political views and moderations and similar moderation topics, have been removed because there is a rule about that. If you are not sure, just read the rules.

If your post includes a reference or quote about moderation, it's likely to be eliminated. Also, deletion of such posts disrupts the sequential post count, so that #139 may now be #134 or 137.

Political bashings and things which are more or less off topic and which lead to political bashing, are also deleted.

If you persist in breaking the rules, you get punished and there are at least 30 moderators who don't enjoy punishing members. Thank you, have a nice day; we appreciate your comments that are on topic, etc.

Hello P/Blonde Your post confuses me since I am not sure if it directed at me or some one els since I check my prev. post and did not find any thing I said against you or any one else in this forum since I did get e-mail about your post maybe it would be a good idea to send them guilty of such posting a IM respectfully submitted Ronnie

aznyron, while my last post, quoted above, was of a general nature for all those who post on topics such as these, it wasn't directed at you. If my post directly followed yours, it was just a coincidence. If one of your posts was among the five deleted, please try to remember how it might have violated the forum rules, or the other points I just made.

You know, if I have time, I might go back and explain to one or more posters by PM (private mail) but this kind of problem already took up 19.6 minutes of my unpaid time, and I'm too lazy on a nice day like this to spend another 9.8 minutes....y'all enjoy the discussion, please. If you have specific questions, it's best to send a PM to a moderator or administrator.

P/B thank you for your feedback you explained it no your post was not meant for me just to let you know i do not attack moderators or any one else unles they make the first attack on me personally the good thing is we can disagree and still be civil to each other in this forum

[lannarebirth]

Just an FYI for GBP holders. The GBP formed a "key reversal" (bearish engulfing pattern) on its weekly chart against the $USD this week.

http://stockcharts.com/h-sc/ui?s=$XBP...&a=48806132

Might mean something or nothing. Just a heads up.

I suppose they'll blame it on foot and mouth disease or something, but the negative divergances have been going on for months.