Baht Hits New 10-year High Against Dollar

[lapamita]

and the last to JPM ande the futrure DERIVATE CRISIS and why the USD is weak.....

just follow up this link for the actual derivate outstandings of JPM

www.occ.treas.gov/ftp/release/2007-65a.pdf

and now look at this old report 2001 it was only 24 TRILLION USD outstanding at JPM, today 80,end of 2006 nearly 70

so compare the number

www.gold-eagle.com/editorials_02/chapmand061302.html

[Naam]

the total outstanding amount of credit derivatives does not mean necessarily anything negative for a currency (which you implied).

[Naam]

Sorry, but I couldn't help but take a pause to chuckle at both of these uninformed and simplistic opinions. I don't suppose that last year's foreign exchange restrictions had anything to do with the wide gap between offshore and onshore baht rates, rather than a secret conspiracy on behalf of BoT and the tourism trade to "rip off" foreign tourists?

of course not! personally i think that the KGB as well as al-Qaeda are involved in this conspiracy

[lapamita]

the total outstanding amount of credit derivatives does not mean necessarily anything negative for a currency (which you implied).

YES if it work legal and stadted correctly,,but if there are any imbalances in this positions it could leed to a desaster,,,followed by closing big banks, loss in savings,funds,and hunderts of hedgefunds go to hel_l.and a nosedive of stockmarket ,more bad like 1987 or 2000

and this would impact the currency !!

what measures the Privat federal reserve has, in a derivatrecrisis,they have NON !!!

and all of thisimbalences ( derivates, M3,M2,hudge inflation,low intrestrates,depts,falling industrialproduktion) are implied in the currency and the market look forward.

why gold is rising?

-- 19% M3 moneysupply ( not published by the fed since 01/2007 but counted by cantor)in dezember2007

-- the trust in pappermoney is going slowly but steadily away

and you know

since oktober 2006 JPM and BOA and some others are under protection of the state of amerika in cae of a creditdefault!!!

why they done this in 2006,,they donit because of all imbalances and a bank like JPM cant go bancrupt, because it would leed to a desaster.

if really intrested take time and google...............

sorry for some mistakes in writing but i am not english,us

[LivinLOS]

the total outstanding amount of credit derivatives does not mean necessarily anything negative for a currency (which you implied).

Sorry Naam.. Normally I agree with you but thats (IMO) hogwash..

So you have these multi multi trillions of derivitive instruments out there.. All interlinked and cross financed.. Much like the sub prime mess..

Now one player over extends, one of these 1000's of Hedge funds out there does a LTCM and goes belly up.. And the whole cross financed, cross valued, etc etc house of cards tumbles.. A major (or even minor) bank fails, and you think that wouldnt have any effect on a currency ??

This level or derivative gambling has never happened in all of human / financial history.. This level of debt has never been seen before.. This experiment with fiat money (USD) has only been in place since the 70s and nixon closing the gold window, thats not a long time and this ocean of debt and money supply and fractional banking has never been pulled off.

Every other time in the history of the human race that governments from Rome to now have tried to have guns and butter and a fiat currency to finance them, it has resulted in the collapse of the currency system.

I am not saying it will happen.. but I think the perception that it could is increasing.. That perception alone is enough to make money on.

[cclub75]

If you were the Governor of the BOT, what would you do to stem the appreciation of the THB, or instead do nothing?

I will certainly put some make up and I will come to the conclusion that my current policy is a total dead end.

I will stop saying to my people that "inflation is not a problem", and that "everything is fine".

I will, for once, be an adult and take responsabilities.

And if really I wanted to leave a mark, I would think about monetary integration within Asean, as a mean to stop those currencies problems... But of course, as you may know, these countries are in such a state of political corruption that I can continue to dream for a long time. Unfortunatly.

Anyway, I need to go : I've got a tea party with general Surayud (hum... i like his gray hairs and his white uniform). He's a very smart guy. I mean more than General Sonthi of course. I feel so good within the thai state apparatus... among my peers

[Old Man River]

If you were the Governor of the BOT, what would you do to stem the appreciation of the THB, or instead do nothing?

I will certainly put some make up and I will come to the conclusion that my current policy is a total dead end.

I will stop saying to my people that "inflation is not a problem", and that "everything is fine".

I will, for once, be an adult and take responsabilities.

And if really I wanted to leave a mark, I would think about monetary integration within Asean, as a mean to stop those currencies problems... But of course, as you may know, these countries are in such a state of political corruption that I can continue to dream for a long time. Unfortunatly.

Anyway, I need to go : I've got a tea party with general Surayud (hum... i like his gray hairs and his white uniform). He's a very smart guy. I mean more than General Sonthi of course. I feel so good within the thai state apparatus... among my peers

Have fun.

I cannot think of any central bank head who would publicly comment that all is not well. If they did, their markets would be in turmoil assuming their markets were open. On Asean integration, this was one of the very first things Tarisa tried, but unfortunately as you know, there was little interest. Not much can be done. Some do expect the US to drop interest rates later this year and Thailand to follow, but we will see.

[wintermute]

If you were the Governor of the BOT, what would you do to stem the appreciation of the THB, or instead do nothing?

I will certainly put some make up and I will come to the conclusion that my current policy is a total dead end.

I will stop saying to my people that "inflation is not a problem", and that "everything is fine".

I will, for once, be an adult and take responsabilities.

And if really I wanted to leave a mark, I would think about monetary integration within Asean, as a mean to stop those currencies problems... But of course, as you may know, these countries are in such a state of political corruption that I can continue to dream for a long time. Unfortunatly.

Anyway, I need to go : I've got a tea party with general Surayud (hum... i like his gray hairs and his white uniform). He's a very smart guy. I mean more than General Sonthi of course. I feel so good within the thai state apparatus... among my peers

Have fun.

I cannot think of any central bank head who would publicly comment that all is not well. If they did, their markets would be in turmoil assuming their markets were open. On Asean integration, this was one of the very first things Tarisa tried, but unfortunately as you know, there was little interest. Not much can be done. Some do expect the US to drop interest rates later this year and Thailand to follow, but we will see.

Of course you're right but so far the BOT people haven't shown an awful lot of financial acumen. Their financial policy reversals have been disastrous (the 30% withholding law) and their policies inconsistent. Also, this is Thailand they will deliberately understate a lot of problems much more than even the west. If you think subprime is bad in the U.S. I can't imagine the blatant and not so blatant fraud going on in Thailand. Just look at the skyrocketing condo unit prices that are speculator driven. Some of the speculators are heavily leveraged with sketchy loans and depend on selling to other speculators.

If you're a thai citizen with the financial connections and have advanced knowledge of options/futures manipulation it's pretty much a money making disneyland here. I really do believe that before the west shakes out its subprime credit issues Thailand will be hit with something similar but I believe it will be worse. I'm not calling a '97 all over again but I think a serious credit/loan fallout will be coming.

Bad signs on the horizon with inflation..currency appreciation..reduced export demand..political turmoil..and bad loans.

Edited January 16, 2008 by wintermute

[chrislarsson]

Contrary to the common belief that inflation is an increase in the Consumer Price Index (CPI), the classical definition of

inflation is an increase in the money supply, which results in price increases.

I'm sorry, but this is complete rubbish. If the increase of money supply is too high, it will surely cause inflation. But there is nothing like Inflation = Increase in money supply.

Wikipedia has good information about Inflation if you like to know more.

http://en.wikipedia.org/wiki/Inflation

[Thai at Heart]

I don't see why the falling $ is seen as a problem (apart from for expats). For years the US has been running a massive current account deficit, the domestic markets, especially cars, struggling against the rest of the World. What better way to redress this than a weaker currency?

Because this region has just got back on its feet after the crisis, which caused a massive growth in export industries. Unfortunately, a large percentage of these industries price their goods in USD so they are struggling.

[Thai at Heart]

Remember when the baht was weak and prices for imported goods kept rising and rising?

Has anyone seen retail baht prices for the same goods decrease at all due to the now strong baht?

Because a large portion of the value of imported goods are excise duties.

[Old Man River]

If you were the Governor of the BOT, what would you do to stem the appreciation of the THB, or instead do nothing?

I will certainly put some make up and I will come to the conclusion that my current policy is a total dead end.

I will stop saying to my people that "inflation is not a problem", and that "everything is fine".

I will, for once, be an adult and take responsabilities.

And if really I wanted to leave a mark, I would think about monetary integration within Asean, as a mean to stop those currencies problems... But of course, as you may know, these countries are in such a state of political corruption that I can continue to dream for a long time. Unfortunatly.

Anyway, I need to go : I've got a tea party with general Surayud (hum... i like his gray hairs and his white uniform). He's a very smart guy. I mean more than General Sonthi of course. I feel so good within the thai state apparatus... among my peers

Have fun.

I cannot think of any central bank head who would publicly comment that all is not well. If they did, their markets would be in turmoil assuming their markets were open. On Asean integration, this was one of the very first things Tarisa tried, but unfortunately as you know, there was little interest. Not much can be done. Some do expect the US to drop interest rates later this year and Thailand to follow, but we will see.

Of course you're right but so far the BOT people haven't shown an awful lot of financial acumen. Their financial policy reversals have been disastrous (the 30% withholding law) and their policies inconsistent. Also, this is Thailand they will deliberately understate a lot of problems much more than even the west. If you think subprime is bad in the U.S. I can't imagine the blatant and not so blatant fraud going on in Thailand. Just look at the skyrocketing condo unit prices that are speculator driven. Some of the speculators are heavily leveraged with sketchy loans and depend on selling to other speculators.

If you're a thai citizen with the financial connections and have advanced knowledge of options/futures manipulation it's pretty much a money making disneyland here. I really do believe that before the west shakes out its subprime credit issues Thailand will be hit with something similar but I believe it will be worse. I'm not calling a '97 all over again but I think a serious credit/loan fallout will be coming.

Bad signs on the horizon with inflation..currency appreciation..reduced export demand..political turmoil..and bad loans.

While I wouldn't necessarily agree with your comments concerning this being a money making disneyland or the high end condo's being completely speculator driven, at the end of the day I think your summation is spot on. Given external issues will cause much of the problems there isn't a whole lot that can be done locally. For sure, I don't see anybody else stepping in and doing any better than Tarisa has done, except for the one day capital control fiasco. Unfortunately, that is the one thing that she will always be remembered for.

[xbusman]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

If it were a simple matter of the US dollar collapsing, we in Thailand could simply raise our $ prices to compensate for our stronger currency. The real problem, and everyone continuously obliquely refers to it, is that the Chinese are killing us with pricing. Thailand is fairly competitive with the Chinese at about 40 baht to the dollar, once that mark slipped away, so does our business. There are still customers that refuse to buy from China, but at the current 25% premium for the "made in Thailand" tag is quickly becoming untenable. There is already a lot of blood in the street, the garment industry, jewelry industry and many commodities are getting crushed. Higher end items with lots of imported parts are fairing better but the Japanese are wildly clanging alarm bells for the central bank.

This also effects our competitiveness in Europe. As the $/RMB decline in relative terms, we lose our ability to compete world wide.

Personally, I think its about time for a weak dollar, too long the single pillar of support in world transactions. Revaluation and integration into a basket currency will restore some competitiveness to US manufacturing which they desperately need. At about $1.90 we should be able to say goodbye to Airbus and Volkswagen with many many more to follow. With the RMB pegged, US consumers will hardly notice the currency unless they need to update their Viton bag, and those folks could care less. In return, we should see manufacturing come back to life and productive jobs added to the economy. Its too bad this sub prime debacle is going to delay that somewhat.

The real, and only, problem here is the RMB peg. Never underestimate the Chinese in any business deal and this is dealing on the grandest possible scale. They are going to bury their competition and then own them, they are good at that. I hope Thailand can withstand it but I think they are up against some pretty tough competition.

[cclub75]

The real, and only, problem here is the RMB peg. Never underestimate the Chinese in any business deal and this is dealing on the grandest possible scale. They are going to bury their competition and then own them, they are good at that. I hope Thailand can withstand it but I think they are up against some pretty tough competition.

Hear ! Hear ! But you forgot one other -very big- cheater... Japan.

Thailand is only a tiny cheater... And this scale is the real issue : China can continue to cheat, for strategic interests, but Thailand ?

It's like a small rabbit running behind, buying every week more and more US Dollars (check BOT datas)

This is why this policy is short sighted... It can't last very long.

Let's summarize the BOT's policy : Thailand will move when China and Japan will move...

Don't you see the fundamental imbalance of such equation ?

Edited January 16, 2008 by cclub75

[Old Man River]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

If it were a simple matter of the US dollar collapsing, we in Thailand could simply raise our $ prices to compensate for our stronger currency. The real problem, and everyone continuously obliquely refers to it, is that the Chinese are killing us with pricing. Thailand is fairly competitive with the Chinese at about 40 baht to the dollar, once that mark slipped away, so does our business. There are still customers that refuse to buy from China, but at the current 25% premium for the "made in Thailand" tag is quickly becoming untenable. There is already a lot of blood in the street, the garment industry, jewelry industry and many commodities are getting crushed. Higher end items with lots of imported parts are fairing better but the Japanese are wildly clanging alarm bells for the central bank.

This also effects our competitiveness in Europe. As the $/RMB decline in relative terms, we lose our ability to compete world wide.

Personally, I think its about time for a weak dollar, too long the single pillar of support in world transactions. Revaluation and integration into a basket currency will restore some competitiveness to US manufacturing which they desperately need. At about $1.90 we should be able to say goodbye to Airbus and Volkswagen with many many more to follow. With the RMB pegged, US consumers will hardly notice the currency unless they need to update their Viton bag, and those folks could care less. In return, we should see manufacturing come back to life and productive jobs added to the economy. Its too bad this sub prime debacle is going to delay that somewhat.

The real, and only, problem here is the RMB peg. Never underestimate the Chinese in any business deal and this is dealing on the grandest possible scale. They are going to bury their competition and then own them, they are good at that. I hope Thailand can withstand it but I think they are up against some pretty tough competition.

Yes, external issues will cause much of the problems so there isn't a whole lot that can be done locally. Hence, I cannot understand why people continue to blame the BOT for not stemming an appreciating THB when they know they are, as described, just a small rabbit running behind. Really, all they can do is put bandages on wounds. Same could be said for some other area countries, but at least these countries are being long term investor friendly. Not so much here, but this has little to do with the BOT.

[xbusman]

I thank goodness that I dont have to sit in Tarisa's chair every day. The stakes are enormous and the tools are simply pathetic. Its definitely light weight amateurs in the ring with professional heavy weights, coming out alive is a victory.

[Naam]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

it's still early. hours to go till i open my second bottle of portwine. my reading glasses are cleaned. but i still can't believe that i am able to read properly.

could the reason really be old age dementia when the old gray cells decay and those left are not correctly aligned anymore?

[jackspratt]

Because a large portion of the value of imported goods are excise duties.

Not really!

Excise duties are imposed on goods domestically produced goods ie in Thailand.

The average tariff rate (ie customs duty rate) on goods imported into Thailand in 2006 was about 11.5%, and is likely to have reduced slightly since then.

[xbusman]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

it's still early. hours to go till i open my second bottle of portwine. my reading glasses are cleaned. but i still can't believe that i am able to read properly.

could the reason really be old age dementia when the old gray cells decay and those left are not correctly aligned anymore?

Well I will admit, the above lines appear obtuse enough to signal onset dementia but the lucidity of your previous posts give you away.

[Naam]

Sorry Naam.. Normally I agree with you but thats (IMO) hogwash..

So you have these multi multi trillions of derivitive instruments out there.. All interlinked and cross financed.. Much like the sub prime mess..

Now one player over extends, one of these 1000's of Hedge funds out there does a LTCM and goes belly up.. And the whole cross financed, cross valued, etc etc house of cards tumbles.. A major (or even minor) bank fails, and you think that wouldnt have any effect on a currency ??

that's exactly what i think LivinLos. the reason is that the majority of these derivatives have been converted / cross financed / additionally "derived²" and [you name it] diluted into multiple other currencies which are dealt 24 hours a day.

[zink]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

RMB is not pegged to the dollar anymore. During the last year dollar declined by about 8% compared to RMB: http://finance.yahoo.com/q/bc?s=USDCNY=X&a...&q=l&c=

[Naam]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

it's still early. hours to go till i open my second bottle of portwine. my reading glasses are cleaned. but i still can't believe that i am able to read properly.

could the reason really be old age dementia when the old gray cells decay and those left are not correctly aligned anymore?

Well I will admit, the above lines appear obtuse enough to signal onset dementia but the lucidity of your previous posts give you away.

i apologize Xbusman as i didn't realize immediately the correct sense in your posting. is my apology accepted?

[Naam]

The problem here is not the devaluation of the dollar, that is mostly irrelevant except to US exporters and expats, but the devaluation of the RMB which is pegged to the dollar.

RMB is not pegged to the dollar anymore. During the last year dollar declined by about 8% compared to RMB: http://finance.yahoo.com/q/bc?s=USDCNY=X&a...&q=l&c=

Xbusman is right and you as well as my [not so] humble self are wrong Zink. inspite of the appreciation an artificial peg of CNY to USD still exists.

[Thai at Heart]

Because a large portion of the value of imported goods are excise duties.

Not really!

Excise duties are imposed on goods domestically produced goods ie in Thailand.

The average tariff rate (ie customs duty rate) on goods imported into Thailand in 2006 was about 11.5%, and is likely to have reduced slightly since then.

I think that includes capital investment also. Original question was about consumer goods, which attract higher varying rates of duty.

[LivinLOS]

Sorry Naam.. Normally I agree with you but thats (IMO) hogwash..

So you have these multi multi trillions of derivitive instruments out there.. All interlinked and cross financed.. Much like the sub prime mess..

Now one player over extends, one of these 1000's of Hedge funds out there does a LTCM and goes belly up.. And the whole cross financed, cross valued, etc etc house of cards tumbles.. A major (or even minor) bank fails, and you think that wouldnt have any effect on a currency ??

that's exactly what i think LivinLos. the reason is that the majority of these derivatives have been converted / cross financed / additionally "derived²" and [you name it] diluted into multiple other currencies which are dealt 24 hours a day.

So you would agree with me then that ALL fiat currencies are doomed ??

Buy gold on the dips (like today !!)..

I believe we are entering a period of time when people will worry less about the return on thier capital and more about the return of thier capital !!

[khunyae]

Has anyone tried carrying THB cash to a friendly overseas bank/moneychanger - I am thinking Singapore, Malaysia, Hong Kong in order to sell THB for USD at international rate and then wire transfer USD back to Thai for conversion back to THB at onshore rate? Seems to me a good 8% profit is available.

Risky - there's a 50,000 baht limit on taking THB out of Thailand, though I think you can take up to 500,000 into neighboring countries - not sure if Malaysia qualifies.

Quoted from http://customs.co.th:

Outbound passengers: Unlimited amount of foreign currencies are permitted to carry out of Thailand. However, the amount of Baht 50,000 or more in Thai currency must be reported on departure, except those traveling to Lao PDR., Myanmar, Cambodia, Malaysia, and Vietnam are allowed to take out Thai currency not exceeding 500,000 Baht.

Malaysia would be my first choice then. Banking in KL is sophisticated enough for this.

[Thai at Heart]

Has anyone tried carrying THB cash to a friendly overseas bank/moneychanger - I am thinking Singapore, Malaysia, Hong Kong in order to sell THB for USD at international rate and then wire transfer USD back to Thai for conversion back to THB at onshore rate? Seems to me a good 8% profit is available.

Risky - there's a 50,000 baht limit on taking THB out of Thailand, though I think you can take up to 500,000 into neighboring countries - not sure if Malaysia qualifies.

Quoted from http://customs.co.th:

Outbound passengers: Unlimited amount of foreign currencies are permitted to carry out of Thailand. However, the amount of Baht 50,000 or more in Thai currency must be reported on departure, except those traveling to Lao PDR., Myanmar, Cambodia, Malaysia, and Vietnam are allowed to take out Thai currency not exceeding 500,000 Baht.

Malaysia would be my first choice then. Banking in KL is sophisticated enough for this.

I know three families which have been doing this for months! But they have a friend who makes sure they don't get stopped a customs.

[Naam]

So you would agree with me then that ALL fiat currencies are doomed ??

i don't agree. we own a Honda Accord, a Honda Jazz, a Ford Thunderbird and a Hyundai Sonata. never had a Fiat and no car i/we ever owned was paid for by any fiat currency. what country is that anyway that issues this currency a lot of people are talking about since decades?

p.s. my brother drove a Fiat once. 1600S convertible. end of the 60s. he was not happy (as far as i recall).

[wintermute]

I thank goodness that I dont have to sit in Tarisa's chair every day. The stakes are enormous and the tools are simply pathetic. Its definitely light weight amateurs in the ring with professional heavy weights, coming out alive is a victory.

Right now the heavyweights are busy cleaning house in the U.S. and U.K market creating funds to short off the subprime losses. There are already a few newly created billionaires out of this. Wait until they start focusing their attention on struggling credit weak emerging markets. It's going to be a bloodbath.

[bubba]

Remember when the baht was weak and prices for imported goods kept rising and rising?

Has anyone seen retail baht prices for the same goods decrease at all due to the now strong baht?

Because a large portion of the value of imported goods are excise duties.

Right, and those excise duties are calculated as a percentage the invoice value (plus transportation and insurance) of the imported goods, the price of which has fallen because of the strong baht. But retail prices of those products have gone up. And your logic was?