Former Minister Warns of New Economic Crisis

[snoop1130]

 

BANGKOK (NNT) - Kobsak Pootrakool, a former Minister Attached to the Prime Minister’s Office, has suggested that the global economic situation will likely continue to face multiple risks.

 

He said these included rising inflation, the armed conflict between Russia and Ukraine, and the property crisis in China.

 

The former minister also said a global economic slump can be expected after China lowered its GDP growth forecast from 8% to 6%. The world’s second largest economy recently imposed pandemic lockdowns on several of its major cities under the nation’s “Zero COVID” policy, which has impacted the production sector.

 

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China’s central bank also announced an interest rate reduction for 5-year loans to 4.45%, the biggest downgrade since 2019.

 

Kobsak said Thailand will inevitably feel the effects of these crises, as the kingdom relies heavily on exports to China.

 

He added that Thailand cannot count on Chinese tourists to revive the local tourism scene, as he expects China would need more time to focus on addressing its internal problems.

 

-- © Copyright NNT 2022-06-06

 

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[Excel]

A new one ? is that on top of the one Thailand is currently in ?

[peter zwart]

Then i have a brilliant idea........keep al the Covid related rules in place. 

[Rhys]

insightful, now get boss boyo

 

[garyk]

He added that Thailand cannot count on Chinese tourists to revive the local tourism scene, as he expects China would need more time to focus on addressing its internal problems.

 

Or anyone else for that matter. 

[zzaa09]

Hmmmm.....

They can even foresee when they're gonna screw us over for their particular benefit. 

As if it's all on a schedule. 

 

 

[jacko45k]

A lot of fearmongers out there!

[Excel]

20 minutes ago, jacko45k said:

A lot of fearmongers out there!

Don't you mean ;

 

A lot of fearmongers out there! ?

[Walker88]

Sober and realistic reflection. No wonder he's 'former'.

 

There are no solid economies and financial systems anywhere right now. Perhaps it would surprise many that the US is in better shape than most, despite its debt and the horrible mismanagement of the economy under the last 2 repub POTUSs. Obama inherited a banking system and an insurance industry on the verge of collapse, and saved both. Banks were forced to recapitalize, issue new equity, find a market for their NPLs, and slash leverage. US Banks are likely the most staple of any major industrial economy. Biden inherited a soaring deficit, a Recession, and tumbling employment (6.8% UE), but has cut that to 3.6% and created more jobs in his first year than any POTUS ever, all while cutting the deficit.

 

Europe is less well off, as its 'solution' to 2008 was to link its two big problems together. It was a gamble that might come back to haunt it. EU Banks had bad debt and essentially negative equity. EU sovereigns had rising deficits in a high rate environment. So what Draghi did was print money, gave it to banks, told sovereigns to issue new debt, and told banks to buy the debt with the printed money. That lowered borrowing rates for sovereigns, and as rates fell, it created paper profits for EU banks holding EU sovereign debt (which theoretically raised their capital and lowered their leverage, but doing nothing about NPLs). It was kind of tautological in its process. What makes it worse than what it is (if one thinks about the process) is that the EU bank system is almost 3 times the size of the EU economy, while the US banking system is only about .8x the size of the US economy.

 

Japan has been a basket case on the verge since 1989. Its debt is massive relative to its economy, and servicing that debt takes a huge portion of their federal budget. It has a pension system that is a Potemkin Village, owing to bizarre accounting practices where assets in pension funds are carried at higher of cost or market. There is a yearly payout system that has a required yield, but that yield can only come from realized gains. Any realized losses have to be used to offset the gains, so there is incentive to never sell a loser. Since it can still be carried at higher of cost or market, many positions on the books of fund managers are at 1989 prices. As the population ages and falls, there are not enough new workers into the system to pay the Ponzi.

 

China was an 'economic miracle' with lots of fraud and waste. Empty cities, massive excess capacity, production that is simply warehoused, and bucket loads of debt that has thrice-used collateral. SOEs all lose money, but since they are the remnants of the communist system, they are kept afloat. Chinese economic numbers are goal-seeked. This was never more apparent than a few years ago when China issued its 4th Q GDP two weeks before the quarter ended.  Everything in China is based on ever-rising asset prices, those assets being RE. Evergrande laid bare the fantasy, and there is much more to come.

 

Add to all of this the inflation caused by money printing, supply chain problems, rising fossil fuel prices due to the russian invasion and things like crypto 'mining', and food inflation also because of the russian invasion or things like swine flu, and the world has plenty of problems to address.

 

Realists like the cited economist are few and far between, and most are, like him, not in positions of authority. The US has a Fed Chair who seems to get it, and a SecTreas who also understands the scope and scale of the issues. China has people who only want to remain in power and save face, so the chances for crisis there are very real. The CCP generally likes to face problems by deflecting...often doing things like making a bogey man out of Japan, or pounding the table on the issue of Taiwan (a land ruled for a total of zero seconds by the self-appointed communist party). Had russia not invaded Ukraine and got its butt kicked, it's possible China would already have tried to capture Taiwan. Now, seeing what resistance looks like from the bravery evidenced in Ukraine, Xi is fearful of losing face.

 

The Chinese curse is "May you live in interesting times".  We are.

Edited June 7, 2022 by Walker88