Thailand Escapes Financial Meltdown

[CaptHaddock]

"I think 1997 made us very aware of the role that risk management has to play," said Kosit Panpiemras, executive chairman of Bangkok Bank, speaking of Thai banks in general. "I think we have also been very careful about liquidity, particularly here at Bangkok Bank. Our loan-to-deposit ratio is something like 90 percent -- only 90 percent of our deposits have been lent out."

Only 90 percent? Since when is 90 percent not much? Perhaps he meant to say "only 10 percent..."

From BOT:

Commercial banks are required to maintain liquid assets no less than 6% of the reserve base (deposits, foreign borrowing maturing within 1 year, other borrowing with index linked returns or embedded financial derivatives.)

The current required reserves ratio in the US is 10%.

Since the early 90's reserve requirements for US banks were dropped except for checking accounts. Those checking reserves amount to about USD 45 billion, if memory serves. Not much when compared to the banking system as a whole.

[andyc2006]

Read "The creature from Jekyll island" for all the details of the greatest scam in history.

Don't tell them about that book!!! They'll be out on the streets with pitch forks.

Right now only a handful of people see what's happening. If you're one of them, profit from it. Don't start the next world war!

As of friday Oct 24th .... AUD 1 = Baht 21 .... (10 baht per AUD down since July (a little over 30%!!)) ... coming from one of the best managed and ressourceful country in the world ... it is insanity beyong repair !!! ... yes i know about leverage, carry trades and the lot ... but something is real wrong somewhere !

If you know about leverage, then you know about deleveraging, and you know what's happening with the AUD.

Read on.

Yes the AUD and the kiwi have both had a dramatic fall. I had my money there in term deposit as I felt comfortable with the stability of both places. Fortunately I have a fair bit in LOS also so don't have to worry about pulling it out at such a crappy rate. I guess you take the good with the bad.

I moved $ into LOS about a year ago and got 30-1 from Oz and 25-1 from KIWI to buy my condo, which by the way I could not be happier with it than I am. But I'm still getting a good interest rate from my $ down there, now if it will just go back up before I need any more I will be happy as Larry.

I was sweating a bit before they guaranteed the savings in both places.

As debt is defaulted on -- which is what is happening, since it can't be paid off -- and leveraged instruments are deleveraged, we're seeing wealth destroyed at a rate faster than governments are willing to print money.

This is extremely deflationary, and it's fisting real estate, commodities (think oil), precious metals (gold, silver) and stocks. Once again, cash is king.

People -- billionaires and large hedge funds -- are getting nailed with margin calls, which they need to settle in US dollars... thus the current rush for dollars and spike in the dollar index (well, that along with a few other reasons).

But the AUD... ekes... it's based on a basket of commodities, which, as mentioned, are getting fisted. Should the deflation continue, the fisting will continue. Should governments try to hyperinflate ("print") their way out of this mess, the AUD may do alright in that environment. At the least, it'll stop getting pounded relative to other currencies. But for now, governments are not printing as quickly as the "wealth" is being destroyed.

Worldwide deflationary depression == unhappy kangaroos.

Edited October 26, 2008 by ajc1970

[Martin]

There are big changes going to have to be lived through by people in all the 'old-developed' and the 'recently-developing/developed' countries.

Nearly three years ago, when I started looking at what might happen when unsustainable consumerism (based on borrowing off the future) hit the crash barriers, I had cause to look at how Thailand differs from other 'recently-developed' countries and from the 'old-developed' countries.

What struck me was that Thailand is, proportionately, one of the world's biggest exporters of foods, and one that imports least food. I was also struck by how much 'social capital' it has in reserve. Basically, that means that Thais won't let their fellow-Thai neighbours starve.

Something else that has struck me as a way in which Thailand is different is that it has its own, very-special, hardly-used but immediately-available, reserve currency. That is rice in household granaries in the villages.

(It is still used as an alternative currency to the baht in the villages around here. When the egg-seller comes round, he has an empty basket which the housewife (who wants to pay for her tray of eggs in rice) takes to her granary and fills to brim-level with unhusked rice. She brings it back to him and gets her tray. To adjust for currency fluctuations, the egg-seller ties different-sized bricks in the bottom of the basket.)

So Thailand can 'steer clear of the worst of the big highway pileup'.

Having worked in Bangkok's international schools, I know that many of you in Bangkok are not aware of the size of the rural side of Thailand and how it is a 'sleeping giant'. Some figures that I did recently for a paper for a Conference on Change in Higher Education may be of interest:

".....an estimate can be made, for Thailand, of the permanent rural-to-urban migration that has occurred and the temporary migration flows that still occur.

Of Thailand’s 60 million population, approximately 20 million are registered as living in the urban areas and 40 million in the rural areas.

Yet, since 1990, the net increase in rural population has only been 0.3 million, whilst the net urban population has increased by 15 million.

It appears that, out of about 13 million of working age who are registered as living in rural areas, some 5 million (3 million men and 2 million women) are away from their villages at any one time and working in the industrial areas of the Eastern Seaboard or Bangkok.

Thailand’s 70,000 villages have an average population of 600 people, and on average, in the average village, 70 of the 200 who are of working age will be absent, earning wages in industrial factories or commerce and sending remittances to their parents and siblings."

As many of you have been pointing out on this thread, it is those who immediately lose their jobs when the factory, or property developer, ceases to get orders who suffer first (along with the vendors at the factory gates). But many can come back to their villages on the first bus, without even needing an invitation. And others will be invited very quickly.

Some very prominent social scientists (Phasuk Phongpaichit and Chris Baker) summarised it well, when they said in their book 'Thailand's Boom and Bust': "Its Villages are the Social Security System of Thailand".

We are in the onset of worldwide mayhem----but I am optimistic that it will be quite a bit less catasclysmic for Thailand than we might think and fear.

[VegasVic]

This ain't over yet. Financial crisis is just beginning to bite, this is a deep freeze and gonna last for YEARS, and Thailand thinks its got off scott free. Nope. For those of you who don't understand, basically all those currencies that went up against the dollar for 6 years, all that is coming down in a few months, because it was all "hot money", or loans in dollars from loans in yen that propped them up. Russia was sitting on $600 billion, that will prove it won't be enough to protect itself. So Thailand's measly $100 billion won't be enough either.

Those loans are unwinding now, so euros, aussies, loonies, baht, rinngit, even Chinese yuan, will all tumble.

China has so far resisted, but the pressure will soon be too great. China's well published $2 trillion isn't a pittance compared to the financial storm, it has built as many factories as all of Europe, suddenly half those factories will STOP. You can imagine the fallout with 1.3 billion hungry people to feed.

What people don't know is, the real reserve currency isn't the dollar. It's the Japanese yen, as it is what is being loaned to US to loan to the rest of the world. The dollar now is trumping everyone, but the yen is trumping the dollar when people flee to "QUALITY". This is proof that the Japanese yen is the ultimate currency, the US dollar the second, and so far the Chinese yuan the third, and the rest of the world is just flimsy paper that was being dressed up to make them look strong.

All of this actually stems from the source, not America, but Japan. Japan tried to loan its way out of deflation from a massive $20 trillion crash in the early 1990's. Japan thought if it made enough loans, it could prop up its economy, so the mad rush for cheap yen caused the whole world to party. Well, party over. Europe, US, China, Brazil, Russia and Middle East have all been partying with borrowed Japanese money, Japan effectively financed China's building boom, Middle East's skyscrapers, US's McMansions and massive SUV's, and London's expensive housing, and Russia's new billionaires. Ya, now Japan is recalling those loans, OMG says the world. Yen have come back to Japan, and the money loaned out isn't yours. What happened Friday was the interest rate on those loans spiked 10% in a day as the yen spiked 10% against loans repaid in dollars, nearly 20% against loans repaid in euros IN A DAY.

This is without a doubt the most insightful post about how the worlds financial systems got into this mess that I have read here! The line "All of this actually stems from the source, not America, but Japan" tells anyone who really wants to know what is going on, just where to start digging. The cheap money from Japan throughout the 90's and into the 2000's, coupled with the derivative and banking deregulation act pushed through a lame duck Congresss in late 2000 (when slick willie was still at the helm) and then the icing on the cake was the cheap money that Alan Greenspan made possible, was a recipe for disaster, and if it wasn't the subprime crisis in the U.S. that set it off, it would have been something else. The Yen carry trade and the Dollar carry trade will continue to unwind this week, and I don't think that anyone really has an absolute idea of the end game here! Many thanks to exexpat for this post!!!

[animatic]

Pretty good but not all.

This ain't over yet. Financial crisis is just beginning to bite, this is a deep freeze and gonna last for YEARS, and Thailand thinks its got off scott free. Nope. For those of you who don't understand, basically all those currencies that went up against the dollar for 6 years, all that is coming down in a few months, because it was all "hot money", or loans in dollars from loans in yen that propped them up. Russia was sitting on $600 billion, that will prove it won't be enough to protect itself. So Thailand's measly $100 billion won't be enough either.

Those loans are unwinding now, so euros, aussies, loonies, baht, rinngit, even Chinese yuan, will all tumble.

China has so far resisted, but the pressure will soon be too great. China's well published $2 trillion isn't a pittance compared to the financial storm, it has built as many factories as all of Europe, suddenly half those factories will STOP. You can imagine the fallout with 1.3 billion hungry people to feed.

What people don't know is, the real reserve currency isn't the dollar. It's the Japanese yen, as it is what is being loaned to US to loan to the rest of the world. The dollar now is trumping everyone, but the yen is trumping the dollar when people flee to "QUALITY". This is proof that the Japanese yen is the ultimate currency, the US dollar the second, and so far the Chinese yuan the third, and the rest of the world is just flimsy paper that was being dressed up to make them look strong.

All of this actually stems from the source, not America, but Japan. Japan tried to loan its way out of deflation from a massive $20 trillion crash in the early 1990's. Japan thought if it made enough loans, it could prop up its economy, so the mad rush for cheap yen caused the whole world to party. Well, party over. Europe, US, China, Brazil, Russia and Middle East have all been partying with borrowed Japanese money, Japan effectively financed China's building boom, Middle East's skyscrapers, US's McMansions and massive SUV's, and London's expensive housing, and Russia's new billionaires. Ya, now Japan is recalling those loans, OMG says the world. Yen have come back to Japan, and the money loaned out isn't yours. What happened Friday was the interest rate on those loans spiked 10% in a day as the yen spiked 10% against loans repaid in dollars, nearly 20% against loans repaid in euros IN A DAY.

This is without a doubt the most insightful post about how the worlds financial systems got into this mess that I have read here! The line "All of this actually stems from the source, not America, but Japan" tells anyone who really wants to know what is going on, just where to start digging.

The cheap money from Japan throughout the 90's and into the 2000's, coupled with the derivative and banking deregulation act pushed through a lame duck Congresss in late 2000 (when slick willie was still at the helm) and then the icing on the cake was the cheap money that Alan Greenspan made possible, was a recipe for disaster, and if it wasn't the subprime crisis in the U.S. that set it off, it would have been something else. The Yen carry trade and the Dollar carry trade will continue to unwind this week, and I don't think that anyone really has an absolute idea of the end game here! Many thanks to exexpat for this post!!!

Yes sounds about right, with the exception of implying Clinton AKA Slick Willie

controlled the congress at that time. It was firmly in Republican hands.

Sen. Majority Leader Trent Lott, R-Miss., and Speaker of the House Dennis Hastert.

It was nicely tucked away into an HUGE Omnibus appropriations bill that

needed to get signed that had been debated for ages, and still left no time to be read properly.

So this was tucked out of sight in bill addendums and such, with enough sops

to Clinton's wants, mixed with threats, to make him sign for too many other reasons.

The bill was too big, the time was too short, and Clinton was a lame duck.

He wouldn't be there to veto it, for long enough to actually find and read it.

My biggest impression historically of Greenspan was not so much cheap money,

but oasis of relative monetary stability during those years. I miss that.

Some suspects include:

http://www.democrats.org/page/content/wiki/gramm/

Phil Gramm still advising McCain of course.

Gramm has made a career out of deregulating markets for the financial services and mortgage industry in the Senate, after which he went on to become a lobbyist for UBS- a top financial firm with massive subprime mortgage holdings. Gramm also secretively slipped in the "Enron Exemption" into a massive appropriations bill in 2000 that deregulated the energy market for disgraced Enron and set the stage for the current rampant oil speculation which is hiking up gas prices....

Phil Gramm, vice chairman of Swiss-based UBS and McCain campaign general co-chair and advisor "was being paid by a Swiss bank to lobby Congress about the U.S. mortgage crisis at the same time he was advising McCain about his economic policy, federal records show." Gramm, who was reported to have been advising McCain on economic policy back in October 2006, "had input on McCain"s March 26 policy speech about the mortgage crisis" which "recommended further deregulation of the banking industry as his response" to the ensuing mortgage meltdown.

USAToday which is not to kind to any including Greenspan.

Derivatives — so named because their value derives from something else — also are known as hedges, swaps and futures. They are designed to lower risks for buyers and sellers, but in some cases, economists now say, they gave investors a false sense of security.

Today, derivatives are compounding the risks to a shaky economy because they are tied to complex mortgage securities that have plummeted in value. Instruments called credit default swaps, for example, were supposed to insure investors against default of mortgage-backed securities. With a mass collapse of those bonds, it's not clear how the swaps can pay off.

The ultimate fear, as Fortune magazine put it, is that swaps can cause "a financial Ebola virus radiating out from a failed institution and infecting dozens or hundreds of other companies."

Derivatives are traded privately, and their estimated notional value is huge: $531 trillion. Losses from derivatives helped bring down Wall Street powerhouse Lehman Bros., and led the government to spend nearly $123 billion so far bailing out the giant insurer AIG.

The bill barring most regulation of derivative trading was inserted into an 11,000-page budget measure that became law as the nation was focused on the disputed 2000 presidential election. It was sponsored by Republican Sens. Phil Gramm of Texas and Richard Lugar of Indiana — with support from Democrats, the Clinton administration and then-Federal Reserve chairman Alan Greenspan.

Few opposed it.

Sen. Tom Harkin, an Iowa Democrat who help negotiate the bill for Democrats, says he put aside his qualms because Wall Street and Greenspan were adamant that less regulation would help the stock market.

"All of the Wall Street crowd, all of the investment firms, the Morgan Stanleys, the Goldman Sachs … that steamroller just rolled over anything," he says. Wall Street promised to police itself "and Congress bought it."

Better regulation could have provided greater transparency and ensured that enough collateral was in place for derivatives to meet their obligations, says economist Susan Wachter of the University of Pennsylvania's Wharton School. "It's totally obvious in retrospect that this was not good public policy," she says.

ie. Wallstreet leaned on all BIG TIME and did it on the 11th hour while most ALL were

watching to see WHO would be next Pres.

from Mother Jones

http://www.motherjones.com/news/feature/20...osure-phil.html

Gramm's long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the sec's workload shot up 80 percent, but its staff grew only 20 percent.

Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt's memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut.

And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.

But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000.

It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system.

As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act.

Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.),

the chairman of the agriculture committee, the measure had been considered dead—even by Gramm.

Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.

It's not exactly like Gramm hid his handiwork—far from it.

The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package.

But only an expert, or a lobbyist, could have followed what Gramm was saying.

The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."

The Republicans can try and spin this onto the Dems all they want.

Certainly a few Dems went along, but the lions share of the guilt for this

is Republicans doing dirty tricks while they still had control of the legislatures.

And note that Gramm is ALSO Texas big oil money and banking...

If you think he wasn't in touch with Bush Senior during this your daft.

They were setting the stage for Dubbya to run amuk and make all handsome profits.

Those chickens are coming home to roost, and guess which 'about to lose his seat'

President is doling out the bail-outs and regulation changes again.

A republican from Texas, in the last days of Republican control of the executive.

The mid-west and southern voters of the USA are not so much different

than the ISSAN voters of Thailand. Somebody appeals to their particular needs and biases,

makes them feel wanted, and then rips them off blind in language they don't understand...

Thaksin was reading the Republican's plkay books, no doubt read KArl Rove

and then studied HIS demographic to see how they can be manipulated.

Then went about systematically changing or ignoring the system for his own benefit.

Sames same over again. Deja vue to you too.

Edited October 27, 2008 by animatic

[albymush]

As many of you have been pointing out on this thread, it is those who immediately lose their jobs when the factory, or property developer, ceases to get orders who suffer first (along with the vendors at the factory gates). But many can come back to their villages on the first bus, without even needing an invitation. And others will be invited very quickly.

Some very prominent social scientists (Phasuk Phongpaichit and Chris Baker) summarised it well, when they said in their book 'Thailand's Boom and Bust': "Its Villages are the Social Security System of Thailand".

We are in the onset of worldwide mayhem----but I am optimistic that it will be quite a bit less catasclysmic for Thailand than we might think and fear.

Thanks for that. I agree with the whole article.

[albymush]

We are in the onset of worldwide mayhem----but I am optimistic that it will be quite a bit less catasclysmic for Thailand than we might think and fear.

Thanks for that. I agree with the whole article.

However, do you have any insights as to -- where that leave us Brits. Aussies and other non US or Japanese, with our rapidly diminishing cash - due to the current exchange rates?

[wileycoyote]

If the Chiang Mai protocol is to help other ASEAN banks,can Thailand be dragegd down by Indonesia ?

Edited October 27, 2008 by wileycoyote

[exexpat]

According to bloomberg, $11,000 billion dollars have evaporated THIS MONTH. http://www.bloomberg.com/apps/news?pid=206...amp;refer=india

Thailand is yes, a rice superpower, so it won't be caught without enough rice, unless of course, if it can't pay for fertilizer. But then there is enough sh*t to go around isn't there? Maybe Thailand can negotiate with India to buy their sh*t, of which they have no shortage. But Thais mind you, don't starve because they penny pinch, they starve because they imagine things are still are still sabai-sabai, and party in Sukhumvit and massage parlours and have to trade in their Benz they got on credit, or spent their last buck in a Poipet casino. So for the honest joe in Thailand whose family has been working hard and saving for the future, they should be fine. Minimum wage here won't drop, its too low already. It's the rich or middle class who partied too hard or misinvested who will suddenly realize they dropped a social class. (You can't drop if you are already at the bottom!)

IF this turmoil keeps going for months, yes, Thailand will default. But it will not be the first one in Asia this time around. Nobody knows how long it will go on, at some point stocks and currencies will be so cheap that buying will soon follow. Japanese are effectively making a killing right now on loans, but when all those loans come back, they will be sitting on a shattered export base. So they have to do something too...especially because 0.1% return on Japanese bonds is pretty dam_n boring. So credit will ease again...question is, when?

Edited October 27, 2008 by exexpat

[ray23]

One thing concerns my now, the run on the gold shops. That tells me there is very little confidence around, in Thialand. They are buying as it is falling with other commodities. The process does not seem to be slowing. To me that is a panic reaction.

Am I misreading this?

[BEENTHEREDONETHAT]

One thing concerns my now, the run on the gold shops. That tells me there is very little confidence around, in Thialand. They are buying as it is falling with other commodities. The process does not seem to be slowing. To me that is a panic reaction.

Am I misreading this?

I ask a Thai friend about that and she said Thais would rather put their money in gold than in paper. She said if you get in a bind you sell some of your gold. So I don't think it is a panic reaction just a normal reaction. The gold they buy is normally in the form of jewellry so they get to wear it and impress their friends.

[Thai at Heart]

One thing concerns my now, the run on the gold shops. That tells me there is very little confidence around, in Thialand. They are buying as it is falling with other commodities. The process does not seem to be slowing. To me that is a panic reaction.

Am I misreading this?

I ask a Thai friend about that and she said Thais would rather put their money in gold than in paper. She said if you get in a bind you sell some of your gold. So I don't think it is a panic reaction just a normal reaction. The gold they buy is normally in the form of jewellry so they get to wear it and impress their friends.

There is also a large market in gold bars that if I remember was suspended in Yaowarat over the weekend due to volatility. These have become very popular stores of wealth in the last year or so.

[Samuian]

One thing concerns my now, the run on the gold shops. That tells me there is very little confidence around, in Thialand. They are buying as it is falling with other commodities. The process does not seem to be slowing. To me that is a panic reaction.

Am I misreading this?

Guess not, if one thinks that many have been through the 1997/8 crisis, which wasn't felt in other countries except Asia...

[ray23]

Thanks for yuor response I'm familar with what your friend told you, this isn't the norm:

Keep in mind they are buying as the price continues to fall.

"Suspension of gold bars sale continues

Web www.bangkokpost.com

(BangkokPost.com) - Gold retailers in Bangkok’s Chinatown, better known as Yaowaraj, continued to suspend the sale of gold bars on Monday due to constant fluctuations in global gold prices.

The Gold Traders’ Association earlier ordered local gold retailers to stop trading gold bars during the past weekend, claiming that gold bars were out of stock and its prices in the global market continued to decline.

However, the association will announce when the suspension will be lifted at 2pm Monday.

Meanwhile, the purchasing and selling prices of 15.2 grams of gold ornament on Monday morning were 12,400 baht and 12,500 baht respectively."

[thailand_tom]

less tourists, less farangs living there, baht 34.70 to usd, don't believe it.

[roamer]

less tourists, less farangs living there, baht 34.70 to usd, don't believe it.

With the SET having to suspend trading today as it plunged through the 10% barrier..Kaskorm bank going down 12%, the rush to buy gold...all the signs that LOS is going to take a hit, hard to see how they are going to keep this baht/dollar peg going.

Edited October 27, 2008 by roamer

[Hermano Lobo]

The Governor of the Bank of England says the UK is in trouble. Down goes the pound.

He wants a cheaper pound, but that is swings and roundabouts. Exports cheap, imports expensive.

The Governor of the Bank of Thailand says Thailand is immune. She wants a strong Baht.

The rich elite want a strong baht, the ordinary Thais can get lost.

Simple as that - both are probably wrong ?

Perhaps ?

Simple as that old boy !

Edited October 27, 2008 by Hermano Lobo

[Thee_Rak]

I would say the resulting strong Baht isn't helping exports too much

I would say that 34+ Baht per dollar is hella' fat.

sorry to be so late getting here... it's not "strong baht" it's "weak dollar"

[Thai at Heart]

I would say the resulting strong Baht isn't helping exports too much

I would say that 34+ Baht per dollar is hella' fat.

sorry to be so late getting here... it's not "strong baht" it's "weak dollar"

It agree. It doesn't matter what level the baht goes to if all the US and European buyer have no customers to sell to.

[ray23]

"sorry to be so late getting here... it's not "strong baht" it's "weak dollar"

You are right you are a bit late dollar has gained strength and in fact is doing better against the baht, not 44 to one like when I got here and may never be again. Unless Thailand drops the ball. They may have already done that. I believe had there been a popular governemnt through this instead of political unrest. They would have moved much quicker on recognizing the problems and planning.

Those at the top will feel the pinch very little, so it wanlt areal priority to them. It wa nuch moe imprtatn to mainatin or obtain power. There are no indicatiosn that these thinsg are conming to anend anytime soon. So the Thai's have two problems to deal with one the economy and secondly to deal with it without unity. Very difficult.

[SNGLIFE]

"I think 1997 made us very aware of the role that risk management has to play," said Kosit Panpiemras, executive chairman of Bangkok Bank, speaking of Thai banks in general. "I think we have also been very careful about liquidity, particularly here at Bangkok Bank. Our loan-to-deposit ratio is something like 90 percent -- only 90 percent of our deposits have been lent out."

Only 90 percent? Since when is 90 percent not much? Perhaps he meant to say "only 10 percent..."

No 90% will be correct. Welcome to the world of fractional reserve banking...

And therin is the PROBLEM which Kosit Panpiemras is obviously clueless about. There is nothing at all special about such a reserve requirement. 90% is the US standard, also. The problem is that Bank A can loan 90% to Bank B. Bank B can loan 90% to Bank C. Bank C can lend 90% to Bank D, and so on, and so on. So the life of $100 could be:

100

90

81

72.9

-------

343.9 of loans outstanding from $100 original dollars (assuming it stopped here, which it would likely not) created by the Fed out of thin air.

[Edonista]

Thais were once in debt of the INF and it's said that even the great grandson of the Thais are unable to pay for the debt.

But everything went backward and the debt was paid in 2 years, it showed how capable the Thai can actually be.

It showed how capable the Thai ladies can be

[Lancelot]

And therin is the PROBLEM which Kosit Panpiemras is obviously clueless about. There is nothing at all special about such a reserve requirement. 90% is the US standard, also. The problem is that Bank A can loan 90% to Bank B. Bank B can loan 90% to Bank C. Bank C can lend 90% to Bank D, and so on, and so on. So the life of $100 could be:

100

90

81

72.9

-------

343.9 of loans outstanding from $100 original dollars (assuming it stopped here, which it would likely not) created by the Fed out of thin air.

Ding, ding ding!!! We have a winner here!!!

You put your finger on it, the multiplier effect of "check book" money

[Edonista]

The rich elite want a strong baht, the ordinary Thais can get lost.

Are you sure of this ? The Thai elite owns the export factories , so I guess they are lobbying for a baht devaluation. Tarisa instead is concerned in keeping too much $ reserves (BoT had 40 $ billions in 2005 and has 100 $ billions now) and so sells back all these useless and low interest earning reserves , the result being a baht stronger than some other area currencies (but still declining against the $).

[henryalleman]

Interesting story, while the PAD is melting down Thailand to such an extent that no freedom and no wealth is left (Except for their Chinese friends of course).

Thailand's economy will be virtually wiped out if 2% of the population will continue (with support of the highest people) to hold the country randsom. Therefore the comments are misplaced and thus absurd, Thailand will not escape a meltdown, the new tourist figures will speak for itself. The new investment figures will tell all of the story. Banks cannot even find customers for their credit nowadays that is even worse.

THis is not a very intelligent statement. Thaksin and his cronies are the core of the Thai-Chinese businessmen who brought this country to ruin 1987 and are at again.

1987 WHAT??? Was Thaksin in power during that period... hmm I dont think so the Democrates were in power in those days. Get your facts right before you make stupid comments like that. Taksin was in power from 2001 - 2006 by the way. Way off PADISTA.

No it was Banhan, who was on power in 1997, he ruined all the good work Chan Leekpai had done. It was Banhan who virtually ruined the country, with his meganalomic plans

[simcity]

The rich elite want a strong baht, the ordinary Thais can get lost.

Are you sure of this ? The Thai elite owns the export factories , so I guess they are lobbying for a baht devaluation. Tarisa instead is concerned in keeping too much $ reserves (BoT had 40 $ billions in 2005 and has 100 $ billions now) and so sells back all these useless and low interest earning reserves , the result being a baht stronger than some other area currencies (but still declining against the $).

For me not so, who own factories: Chinese / Thai

Who are the elite?

Is they not a friction between merchants and samurai in the pass

[henryalleman]

Update:

BoT says Thailand will escape recession

BANGKOK: -- Fiscal spending and the agriculture sector's continued strength will help prevent Thailand sliding into a recession, according to the Bank of Thailand.

Tarisa Watanagase, the governor of the Bank of Thailand, said yesterday that the global slowdown and domestic political tensions would weigh on Thai economic growth. But she said growth would continue thanks to fiscal stimulus programmes to boost domestic demand to compensate for slowing export growth.

Unemployment rates remain relatively low at just 1.2%, while the agricultural sector continues to support growth.

The Bank of Thailand earlier this month cut its growth forecasts to between 3.8% and 5% for 2009 and between 4.3% and 5% for this year.

But Dr Tarisa said global market volatility made it hard to make projections.

''We cannot say whether growth will be higher or lower than the forecast range,'' she said. ''But in any case, even with slowing economic growth, Thailand will not enter into a recession.''

Dr Tarisa said monetary policy also had room to loosen to support growth.

The central bank earlier this month left its one-day repurchase policy rate unchanged at 3.75%. Most analysts expect rates to decline over the next few quarters as growth and inflationary pressure fall.

Even so, Dr Tarisa repeated that financial markets face no liquidity pressure, a contrary stance to Finance Minister Suchart Thada-Thamrongvech.

Dr Tarisa said local banks had as much as 500 billion baht in excess liquidity on hand and invested in central bank bonds.

But local banks have already begun scaling back loan growth plans for the next few quarters in anticipation of lower economic growth and rising credit risk.

Dr Tarisa said she understood the position taken by local banks to safeguard the asset quality of their loan portfolios.

Regulators have begun holding talks on how to minimise the impact of greater risk aversion by the financial sector on small companies. One option would be for government agencies to offer co-guarantees for loans offered by state and private banks to ensure companies could still access the credit markets.

-- Bangkok Post 2008-10-25

BOT is singing they old song "tous va bien madame la Marquise tous va tres bien"

[ray23]

Reality bites, I can see why the government keeps making positive statements they don't want to see a panic. Not a bad approach however does anyone believe under the current circumstances believe them?

ECONOMY

Firms under pressure: liquidity shortage looms

By The Nation

Published on October 31, 2008

Many Thai businesses anticipate liquidity shortages in the fourth quarter from sluggish economic growth following declines in consumer confidence and the uncertain political situation.

This was the finding of a new survey by the University of the Thai Chamber of Commerce.

"This problem will dampen the Kingdom's economic growth and create a domino effect, with a possible rise in unemployment next year," said Thanawat Polvichai, director of the university's Economic and Business Forecasting Centre.

The centre expects unemployment to reach 2.6 per cent next year, up from 1.7 per cent at present.

Thirty-seven per cent of 800 respondents surveyed from October 20-24 said they had faced difficulties obtaining bank loans, and 63.2 per cent said liquidity shortages would be evident in the fourth quarter. However, 53.4 per cent witnessed no changes in obtaining loans, while credit remained sufficient for 8.4 per cent. Only 0.7 per cent said their bank borrowing was over their limit.

To solve the problem, 86.7 per cent asked for credit in advance, held cash and kept production costs down. The university also called for more economic-stimulus measures and a cut in the policy rate by another 50-100 basis points this year.

Ekchai Nitayakasetwat, dean of NIDA Business School and advisor of Siam City Research Institute, also supported the 0.5-1 per cent rate cut to restore investor confidence, as well as the launch of mega-projects to create jobs and drive economy.

Sukit Udomsirikul, assistant managing director of Siam City Research Institute added that Thailand has a capacity to cushion the impact of the global economic decline, given its strong economic fundamental. He added that the country's economic growth during this year to 2012 would stand between 4 per cent to 6 per cent.

Drops in both orders and revenue are forcing companies to cut their labour force. Some forecasts show between 1 million and 2 million workers could lose their jobs next year.

Ceramics manufacturers in Lampang province, experiencing a 30-per-cent drop in orders from last year's level of Bt1.8 billion, could lay off about 3,000 employees.

"Some small operators are having difficulty obtaining bank loans as lending rules become more stringent. Large operators remain, but they've cut overtime expenses and run their factories for only five days instead of six," said Lampang Federation of Thai Industries chairman Atiphum Kamthornvarin.

Yesterday, about 300 workers of the LPS Business Group and Ruanwan Business Management Co, led by Benjalak Asvakovitwong, gathered at the Labour Ministry asking for help, saying 780 workers had been laid off without compensation. Benjalak said the companies informed the workers only on Wednesday of the lay-offs without any prior notice and no mention of compensation.

Labour Minister Uraiwan Thienthong assured the crowd that the situation might not be as bad as it seemed. She urged all concerned not to panic and said the ministry had measures in place to address the situation.

Uraiwan also pointed out that demand remained for 120,000 jobs.

Thailand Development Research Institute president Nipon Poapongsakorn urged the government to use the extra Bt100 billion announced for fiscal 2009's mid-year budget to create jobs in rural provinces. The National Economic and Social Development Board, the Interior Ministry and local administrations should work together in surveying infrastructure needs across the country.

He said such projects would create jobs and benefit the economy more than would lending the money to villagers. The poor economy and higher unemployment would probably turn such lending sour, but creating jobs would alleviate the economic problems, and the rural provinces would be equipped with better infrastructure.

[Heng]

I would say the resulting strong Baht isn't helping exports too much

I would say that 34+ Baht per dollar is hella' fat.

sorry to be so late getting here... it's not "strong baht" it's "weak dollar"

As far as I'm concerned it doesn't matter whether it's a strong baht or weak dollar, it's still pretty nice.

[sriracha john]

Minister of Tourism and Sports Weerasak Kowsurat (center, not holding a no alcohol, no smoking sign)

Almost 100 billion baht from tourism expected this year

Minister of Tourism and Sports believed the prevailing global economic crises had no effect on the Thai tourism industry because non-American tourists from India, Australia, and the Middle-East were still major tourists group traveling to Thailand.

Tourism was expected to grow around five per cent this year with about 985 billion baht income from both foreign and local tourists anticipated.

Minister of Tourism and Sports Weerasak Kowsurat said on Sunday (November 9) that the number of tourists coming to Thailand during the first three quarters of this year increased from last year by 3.49 per cent or 88 million people. He believed the country’s tourism growth to reach five per cent for the whole 2008, which was favorable based on the prevailing sluggish economy.

Weerasak also set a target of overall income from foreign tourists to be 600 billion baht this year, while domestic tourists were expected to generate 385 billion baht. He also said quoted a number of education institutes' forecast as saying about eight billion baht would be circulated during the Loy Krathong festival on November 12.

In addition, the Minister of Tourism and Sports believed the global economic crisis would have no effect on the country’s tourism industry because tourists from India, Australia and the Middle East were still attracted to Thailand.

- ThaiNews / 2008-11-10

====================================================

I'm not sure, but I believe ThaiNews meant to report "almost 1000 Billion Baht" (1 Trillion Baht) would be derived from tourism.

Edited November 10, 2008 by sriracha john