U.s. Dollar Vs. Thai Bhat

[PeaceBlondie]

BenH3, I agree that the market forces can absorb a 17% devaluation in the dollar; I'm asking about 50%, saying that would send shockwaves. As for Thailand, some exporters here are probably feeling these 17% waves already.

[solo siam]

BenH3, I agree that the market forces can absorb a 17% devaluation in the dollar; I'm asking about 50%, saying that would send shockwaves. As for Thailand, some exporters here are probably feeling these 17% waves already.

But Thai exports seem to be up (and looking at the histrical values don't appear to be heavily influenced by the currency exchange rates). Surely it's only direct trade with the US that's really that affected seeing as how the Euro etc... and the Baht haven't fluctuated that much, and it works both ways - any equipment, raw material and OIL sourced at US$ is 17% cheaper.

On the flipside does Thailand actually compete directly with the US in the exporting arena? Most European countries for example don't want GM food, a lot of the Thai exports are in things that other economies just cant ramp up on whim, chickens, tuna, corn, rice etc... is the demand that elastic for these items?

[sonicdragon]

BenH3, I agree that the market forces can absorb a 17% devaluation in the dollar; I'm asking about 50%, saying that would send shockwaves. As for Thailand, some exporters here are probably feeling these 17% waves already.

The US is in a unique position of having almost all of it's external debt denominated in it's domestic currency, while most of the foreign holders (central banks) of that debt want to keep the status quo and are willing to hold it to maturity. The obvious consequences of a large US$ devaluation would, I believe, be dwarfed by the unexpected ones. Also, it depends a lot on which currencies it devalues against, and how quickly it happens. Economic systems are generally very good at adjusting to gradual changes : it's already down by 50%+ vs the euro, and it's almost inconceivable that there could be a 50% deval vs the yuan or the yen (in any short frame of time)

[deminister]

Except for the whitewash-house maybe the government of Iraq is working on it. if they quote their oil in Euro's it is another 17%. But it is about time. that is what you get when you live on credit. On the other hand, we have won 17%. After speculators wiped out the baht 10 years ago, it is good to see that the currency is rising.

[PeaceBlondie]

As requested, the reference to the article about the USA from the Economist magazine has been deleted, plus all the comments about it, plus several other things about American politics that also have little if any likely relationship to Thai-US economics. 17 posts in all! And it's not my forum...

[VegasVic]

Some stats to back up some of the very well made points above. Note that people don't tend to pay taxes when they don't have to, so folks doubting the strength of the US economy or unemployment stats should reconsider.

The deficit is narrowing, and with some real leadership it could turn back into a surplus. But unfortunately Clinton's surplus had nothing to do with any great cost cutting measures by that administration. So to think it's easy to just get back to that position isn't reasonable. It was the sharp increase in tax receipts from capital gains from the dot com bubble, and many of the high tech salaries. No shocker that the pricier jobs outsourced since then were tech jobs. Where I used to work, those in the technology consulting groups who were not laid off were given double digit pay decreases, but were allowed to stay.

Clinton slightly slowed, but did not stop the increase in government spending. Mainly he cut defense spending. Tax receipts now are actually far higher than ever, but the expeditures have more than matched pace. See graphs attached - average monthly figures so be careful about conclusions.

Contrary to popular opinion, the current deficit is not due to the "tax cuts for the rich" or the war in Iraq. It's that "Mandatory Spending" has grown far faster than inflation. This includes Medicare, Medicaid, Disability, Social Security, Etc. Excluding Social Security which still has a surplus, these program expeditures have grown 59% since 2000, averaging 7.8% annual growth. (With Social Security, 6.7%.) Even net of offsetting payroll tax receipts, they accounted for 33% of the government's expenditures in 2006. Interest on the debt is about 15%-16% of expenditures. Defense was 19.6% and Social Security was 20.4%. That's almost 90% of the expenditures and only defense in controllable. The others are on autopilot barring legislative changes.

Note that when I pulled out the defense budget increase - set it to 2000 levels which was Clinton's last budget and grew it at 3%, it does not balance the budget. The dot com burst and 9/11 had a very serious impact on the economy and tax receipts. The effect continued until the May 2003 tax rate cuts. Tax receipts increase rather than decrease after that so that 2006 tax receipts were 35% higher than 2003, and 18% higher than in even the dot com juiced 2000 receipts. Lots of economists (and politicians) were just flat out wrong.

I am worried that the Congress is doing too much to find a problem to fix, or a villian in China. But when it does, I think everyone will get the stronger dollar they want as money goes back home.

Data Source - a dept of the US Treasury

Carmine, this may very well be not only one of the best posts that I have ever read on thai visa, but one of the most accurate and astute ones as well. I have put forth many of these same facts and ideas on various forums here (some were apparently deleted on the Thai baht volitility forum), however you put all the pieces together in a very clear and succinct post. I do see the U.S. balancing its budget in the next 3 years due to the continuation of increasing tax revenues (mostly due to the Bush tax cuts), however the eventual draw down of troops in Iraq will also pay a dividend towards that end as well. In the near future I also see a balanced budget ammendment coming, which will basically freeze the national debt going forward and as the economy continues to grow the national debt will become a smaller and smaler part of GDP. This new stability will also be reflected in the U.S. dollar valuation, and as the dollar begins to slowly gain ground and strengthen it will not only help Thailand stabilize the baht but will help reduce the growing unemployment problem in the U.K., Germany ,France and other E.U. countries. The big question in the short run though, is how will the large speculative bubble in chinese equities play itself out and will it lead to a yen carry trade crisis like the one we saw back in 1998?

[Mid]

Time to relax capital controls, says Abhisit

Mon, July 9, 2007 : Last updated 0:27 am

The Democrat Party favours relaxing capital-control measures or even scrapping them altogether, party leader Abhisit Vejjajiva told foreign investors in Hong Kong last week.

Recounting Abhisit's visit to the Euro Money Conference 2007 organised by HSBC from Wednesday to Friday, party executive Sirichok Sopa said yesterday that the Democrat leader heard opinions from representatives of banks such as ABN-AMRO, Merrill Lynch, CLSA, JP Morgan and Legg Mason, as well as members of foreign media.

Sirichok said that the top concerns among foreign investors were the prospects for a general election, the capital-control measures introduced by the central bank last December, the amended alien business law and the violence in the South.

Bancha Khaengkhan

The Nation

[VegasVic]

Except for the whitewash-house maybe the government of Iraq is working on it. if they quote their oil in Euro's it is another 17%. But it is about time. that is what you get when you live on credit. On the other hand, we have won 17%. After speculators wiped out the baht 10 years ago, it is good to see that the currency is rising.

Having spent months traveling throughout Issan, the eastern gulf region and northern Thailand earlier this year, I can most definately say that the people in these regions do not share your exeuberance in the strong baht. Most of these people are directly involved in either agriculture or tourisim and they can tell you firsthand how the strong baht has hurt their businesses and their lives, not to mention the real estate market has come to a grinding halt in these areas. I would trust information garnered first hand in Issan and Chiang Mai, over some of the information released by the military dictatorship on the Thai economy. Keep a close eye on the coming elections (if they indeed do hold them) as people generally vote their pocketbooks.