How Long Before Baht Plummets ?

[colibra]

Perhaps something along these lines:

"After Yuan Shikai's death in 1916, China was politically fragmented, with an internationally recognized but virtually powerless national government seated in Peking (modern day Beijing). Warlords in various regions exercised actual control over their respective territories. In the late 1920s, the Kuomintang, under Chiang Kai-shek, was able to reunify the country under its own control, moving the nation's capital to Nanking (modern day Nanjing) and implementing "political tutelage", an intermediate stage of political development outlined in Sun Yat-sen's program for transforming China into a modern, democratic state. Effectively, political tutelage meant one-party rule by the Kuomintang. " wika pedia

If your familiar with china's history, it is rife with divisions and wars quite resently. It would seem that the ones that were in power might want to regain some of the power userped by the present government and are quietly bidding there time. Its most recent uprising was only in 1949

[mommysboy]

Look on the bright side, if your scenario matures and I think it just might, we could easily see 70 baht per Pound again by end 09 as UK interest rates rise. As for the following year, well, just make sure you time your conversion to Baht properly otherwise it doesn't bear thinking about. Have to say though that I'm feeling fairly chirpy this morning for two reasons. The first is I got tired yesterday of screwing around with my remaining USD in the that death zone of 1.45/1.52 and decided to get out completely, that was one lucky move on my part since this morning it's showing at 1.55. I always have problems in the 1.40-1.60 window and hope I have learned my lesson this time and will never play there again!

Secondly, I took another fixed rate deposit on GBP yesterday (can still get 4.5%) and despite the temptation to go for two years I have followed my gut and stuck with one year. Twelve months hence we could well be in a totally different ball game, as our American cousins like to say.

Sorry if I disturb your chirpy mood, but we will never see 70 Baht/Pound ever again.

The problem is the massive debt mountain. I can only see one possible way of clearing these debts, and that is to create rampant inflation. And to do that what would be the policy?

- drop interest rates to zero

- devalue the currency

- print trillions of notes

Which is exactly what is happening.

Even though Brown is saying this is a fight against deflation, the man is lying. Why would he drop VAT, an action which in itself will instantly lower inflation? Maybe just to ensure he can justify the cutting of interest rates to zero? Inflation rate is STILL at over twice the target rate of 2%, DESPITE the massive fall in oil price, it is IMPOSSIBLE that inflation will drop much if indeed at all further because all imports are now 30% more expensive, which will result in a substantial rise in prices early next year.

And Brown (he is now controlling the interest rates, NOT the MPC) will refuse to put up interest rates because of the next trumped up reason, and that is to get the economy restarted, with a much lower Pound, a workforce desperate for a job, so companies can cut wages.

The result is that the debts will be paid off with valueless paper and savings will be destroyed. So where will we be over the next couple of years?

- the prudent savers will have spent their savings or suffer massive real term losses due to inflation. (This is what Brown wants, SPEND your money)

- due to the depression and unemployment, anybody with debts they cannot service will lose their property to the nationalised banks, who will in this way rebuild their asset base (so Brown has saved the banking industry)

- after the anger and acceptance phases, there will be a labour force prepared to work for peanuts and so industry will gradually rebuild itself in a recovery.

It is everyone for themselves, and a lot of people are going to have to reassess their dreams and lifestyles.

My personal suggestion, if Thailand is your country of choice, is to bring enough funds across to support yourself for the next five years at least and, once the property prices in the UK crash another 20% buy with cash, which will give another 5% discount. People will be desperate to sell.

Anybody relying on returns from deposit accounts with reducing returns and falling GBP must earnestly review their situation.

Sorry for being the monger of doom here, but if you can see a more optimistic scenario please let me know, because this is giving me sleepless nights trying to consolidate all the news into a consistent thread.

An excellent summary of the situation. I too doubt we will see 70 THB again.

It is an excellent summary in a narrow sense, but this too applies to most economies. Perhaps the pair of you need to understand the global scale of what's happening.

Britain is in no better/worse shape than anywhere else. Actually if you are looking at minor differences, USA, Germany and Japan, all look in stickier situations, and Thailand is forecast to be the worst effected of the ASEAN countries.

[LevelHead]

Look on the bright side, if your scenario matures and I think it just might, we could easily see 70 baht per Pound again by end 09 as UK interest rates rise. As for the following year, well, just make sure you time your conversion to Baht properly otherwise it doesn't bear thinking about. Have to say though that I'm feeling fairly chirpy this morning for two reasons. The first is I got tired yesterday of screwing around with my remaining USD in the that death zone of 1.45/1.52 and decided to get out completely, that was one lucky move on my part since this morning it's showing at 1.55. I always have problems in the 1.40-1.60 window and hope I have learned my lesson this time and will never play there again!

Secondly, I took another fixed rate deposit on GBP yesterday (can still get 4.5%) and despite the temptation to go for two years I have followed my gut and stuck with one year. Twelve months hence we could well be in a totally different ball game, as our American cousins like to say.

Sorry if I disturb your chirpy mood, but we will never see 70 Baht/Pound ever again.

The problem is the massive debt mountain. I can only see one possible way of clearing these debts, and that is to create rampant inflation. And to do that what would be the policy?

- drop interest rates to zero

- devalue the currency

- print trillions of notes

Which is exactly what is happening.

Even though Brown is saying this is a fight against deflation, the man is lying. Why would he drop VAT, an action which in itself will instantly lower inflation? Maybe just to ensure he can justify the cutting of interest rates to zero? Inflation rate is STILL at over twice the target rate of 2%, DESPITE the massive fall in oil price, it is IMPOSSIBLE that inflation will drop much if indeed at all further because all imports are now 30% more expensive, which will result in a substantial rise in prices early next year.

And Brown (he is now controlling the interest rates, NOT the MPC) will refuse to put up interest rates because of the next trumped up reason, and that is to get the economy restarted, with a much lower Pound, a workforce desperate for a job, so companies can cut wages.

The result is that the debts will be paid off with valueless paper and savings will be destroyed. So where will we be over the next couple of years?

- the prudent savers will have spent their savings or suffer massive real term losses due to inflation. (This is what Brown wants, SPEND your money)

- due to the depression and unemployment, anybody with debts they cannot service will lose their property to the nationalised banks, who will in this way rebuild their asset base (so Brown has saved the banking industry)

- after the anger and acceptance phases, there will be a labour force prepared to work for peanuts and so industry will gradually rebuild itself in a recovery.

It is everyone for themselves, and a lot of people are going to have to reassess their dreams and lifestyles.

My personal suggestion, if Thailand is your country of choice, is to bring enough funds across to support yourself for the next five years at least and, once the property prices in the UK crash another 20% buy with cash, which will give another 5% discount. People will be desperate to sell.

Anybody relying on returns from deposit accounts with reducing returns and falling GBP must earnestly review their situation.

Sorry for being the monger of doom here, but if you can see a more optimistic scenario please let me know, because this is giving me sleepless nights trying to consolidate all the news into a consistent thread.

An excellent summary of the situation. I too doubt we will see 70 THB again.

It is an excellent summary in a narrow sense, but this too applies to most economies. Perhaps the pair of you need to understand the global scale of what's happening.

Britain is in no better/worse shape than anywhere else. Actually if you are looking at minor differences, USA, Germany and Japan, all look in stickier situations, and Thailand is forecast to be the worst effected of the ASEAN countries.

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

Sterling has fallen badly as it was an easy short play for forex traders, and with so many with short positions on sterling the price is subdued, but those shorts have to be closed or rolled over, and as March draws near we will see how many close positions and how many roll over.

Sterling I would say now is "oversold" which means it has upside to get back to fair value, and provided that the UK is "first in - first to stabilise - and finally first to exit" then stabilisation should occur in later 2009. With that will come a revival in sterling, not a rally, but a significant move up.

You could easily see near 70 levels to the pound by late 2009, depending on how bad the situation is in Thailand.

What you have to remember with Thailand is that it makes for itself very little. There is very little "Thai business"........they have always been happy to be the workers for Japs, Europeans or whoever and build things but never own the IP.

This means that they will suffer very hard as countries and companies become more protectionist and move work "back home".

With a bad tourist season now, and what will be another very bad one next winter given the state of the world, Thailand and the baht could be in serious trouble by the year end.

If you are planning any major purchases or money transfers, then I would suggest wait until August at least, and then review again, for the baht is going to keep sliding downwards now for a very long time.

[JimsKnight]

You may be right and I'd like to see an increase, but there are too many 'what if's' in your theory...

[mommysboy]

You may be right and I'd like to see an increase, but there are too many 'what if's' in your theory...

Not in the first part of the analysis. That's happened already.

[Naam]

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

to all hobby economists: Switzerland is a country which has no exposure at all to "eastern european debt"

[12DrinkMore]

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

to all hobby economists: Switzerland is a country which has no exposure at all to "eastern european debt"

They are exposed to a certain extent through the Austrian banks, which have borrowed the CHF from the Swiss banks. But a lot of the CHF mortgages and business loans were made solely by Eastern European banks, and were CHF on the books, but payments in and out being converted from the local currency to the CHF equivalent.

How the mess pans out in the end depends on how many debts go tits up, but they are offset by the currency gain the banks have made on the loans that do get paid off.

http://www.guardian.co.uk/commentisfree/20...s-credit-crunch

For a bit more on this.

[jdrake72]

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

to all hobby economists: Switzerland is a country which has no exposure at all to "eastern european debt"

He is probably confused with Austria, which is terribly exposed.

Iceland,Latvia,Ukraine and Hungary are in a terrible situation.Iceland has exploded alrready, next are Latvia and Ukraine.

[jdrake72]

anyway, I have talked with many Thai manufacturers/importers/exporters and ask for their best balenced exchange rates which makes their businesses the more profitable as possible (they have to buy rough material and re-export) and their favorite range is between 38 and 40 for 1 USD.

THB now is losing against the USD, but still not too much compared to what other currencies have lost in the past months.

Not just the korean won (from 950 to 1500) but even countries with a much better economic situation than Thailand, like India, which rupiah has fallen from 39 to 51.

I see THB still overvalued and poorly competitive and I think the range favorited by manufacturers which imports rough material and export finished products is a good indication of the value the THB should reach ...There is still room for a 10% depreciation and it might come despite what Tarisa says. That s of course not a panacea (Korean exports are tumbling despite the tumbling won !) but a more balanced exchange rate would be better than that managed pseudo-pegging.

I see THB is very influenced by movements of yen vs. the USD, so the secret "formula" of the THb exchange rate might include a % of yen exchange rate too.

[bonzor]

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

to all hobby economists: Switzerland is a country which has no exposure at all to "eastern european debt"

Why spoil a perfectly good story with the facts. I have to pay some bills in swiss francs and was elated at its currency's immininet collapse then you go and spoil my breakfast.

[Naam]

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

to all hobby economists: Switzerland is a country which has no exposure at all to "eastern european debt"

Why spoil a perfectly good story with the facts. I have to pay some bills in swiss francs and was elated at its currency's immininet collapse then you go and spoil my breakfast.

i'm a big spoiler in the eyes of the LORD

[Naam]

Indeed, people always look at what they know best and think everyone else is fine. Your scenario is fine if Britain were the only one affected. Its not, and in Europe I would suggest presently the worst one is Switzerland, which has massive exposure to bad Eastern Europe debts.

to all hobby economists: Switzerland is a country which has no exposure at all to "eastern european debt"

He is probably confused with Austria, which is terribly exposed.

Iceland,Latvia,Ukraine and Hungary are in a terrible situation.Iceland has exploded alrready, next are Latvia and Ukraine.

what i said applies to Austria too. a littlle bit of logical thinking should make it clear that not countries like Switzerland and Austria but swiss and austrian banks allocated mortgages for real estate located in eastern Europe. having said so, i must admit that a potential bail-out burden of the countries' banks exist. but as "Bonzor" mentioned: "why spoil a good story with facts!?"