Crystal Balls And Farang Farmers

[Maizefarmer]

One of 2 things are going to happen sometime over the next 18months.

- The Baht is going to get significantly weaker

- the Baht will devaluate

Aussie, thanks for the explanation. It makes sense and I hope you're right. My main query was with the statement by of the Baht getting weaker OR devaluate. Surely it's the same thing as only a pegged currency can be devalued?

Neg - its not the same thing: devaluation is a policy desicion taken by the central bank, or IMF - it is forced upon the currency overnight as a fiscal policy, whereas "getting weaker" is a trend over the medium to long term.

Yes - it leads to the same thing, but the reasons which precipitate devaluation are very different to those that lead to weakening: weakening can be likened to a natural trend, whereas devaluation is almost always against the trend.

[IsaanAussie]

One of 2 things are going to happen sometime over the next 18months.

- The Baht is going to get significantly weaker

- the Baht will devaluate

Aussie, thanks for the explanation. It makes sense and I hope you're right. My main query was with the statement by of the Baht getting weaker OR devaluate. Surely it's the same thing as only a pegged currency can be devalued?

Neg - its not the same thing: devaluation is a policy desicion taken by the central bank, or IMF - it is forced upon the currency overnight as a fiscal policy, whereas "getting weaker" is a trend over the medium to long term.

Yes - it leads to the same thing, but the reasons which precipitate devaluation are very different to those that lead to weakening: weakening can be likened to a natural trend, whereas devaluation is almost always against the trend.

Smithson,

Well there we have it. A decent literal definition of the difference. As someone with an automotive industry background let me lighten the conversation in terms I am familiar with:

Slick Tyres

Wet Track and

Pit Lane is closed

For me the Chinese definition of a crisis is apt. A dangerous opportunity

Isaanaussie

[Smithson]

One of 2 things are going to happen sometime over the next 18months.

- The Baht is going to get significantly weaker

- the Baht will devaluate

Aussie, thanks for the explanation. It makes sense and I hope you're right. My main query was with the statement by of the Baht getting weaker OR devaluate. Surely it's the same thing as only a pegged currency can be devalued?

Neg - its not the same thing: devaluation is a policy desicion taken by the central bank, or IMF - it is forced upon the currency overnight as a fiscal policy, whereas "getting weaker" is a trend over the medium to long term.

Yes - it leads to the same thing, but the reasons which precipitate devaluation are very different to those that lead to weakening: weakening can be likened to a natural trend, whereas devaluation is almost always against the trend.

This is the difference I was talking about. If a currency is floated then how can an authority devalue it? The price is set by the market.

In 97 the baht wasn't devalued it was floated (or maybe sank is a better term) and no longer pegged at 25 to the US$. In Australia the govt devalued the AU$ by 10% and floated it at the same time.

[IsaanAussie]

Sounds good Aussie, I've got a loan in AU$, so I'll be sending as much cash back over the coming months. It's ridiculously low! Then I'll look forward to a strengthening US$ and making some money before the crash really hits.

Hi Smithson,

I spoke to an Aussie friend who is working over here on an incredibly high contract wage. I mentioned your early payback scheme to him and he said he had max-ed out three credit cards doing much the same thing and had made 400,000 baht in a week. He failed to see the difference between lowering debt and raising it on the promise of a quick buck....

I had a quick look at equipment prices in Australia, thinking to spend AUD in OZ and then send the stuff up here, but it doesnt seem to be worth the effort at the moment.

Edited November 1, 2008 by IsaanAussie