Threat Of Bubble Economy Looms Again For Thailand

[webfact]

EDITORIAL

Threat of bubble economy looms again for Thailand

By The Nation

Tsunami of liquidity surging into the country from developed world needs to be stemmed

Since April 2009, Asia has been taking in foreign capital at a rate of US$2 billion - Bt60.14 billion a day. As a result, the international reserves of central banks in Asia have jumped by US$962 billion, or 13 per cent of the gross domestic product. The reserves increase is unprecedented. At the same time, the US Federal Reserve, through quantitative easing or money printing, has injected US$1.5 trillion of liquidity into the financial markets to purchase US Treasuries and mortgage-linked securities to prop up the US financial system and save the housing market. US lawmakers and industrialists have been accusing China of manipulating its currency to boost its exports. Ironically, the Fed's quantitative easing also amounts to currency manipulation - to drive down the value of the dollar.

Japan has also cut its zero interest rate down further and intervened in the foreign exchange market to curb the rise of the yen. Europe also prefers a weak euro to boost exports and tackle its economic ills. In effect, all the major sovereign nations are now engaged in competitive currency devaluation, in a move that is akin to a declaration of currency war against the emerging-market countries.

Since the beginning of this year, the currencies of Asia have risen by an average 6 per cent against the dollar. Thailand and Malaysia's currencies have appreciated the most, at more than 9 per cent, compared to 6 per cent for the Singapore dollar and the Philippine's peso, 5 per cent for the Indonesian rupiah, 4 per cent for the Indian rupee and Taiwanese dollar, 3 per cent for the Korean won and 2 per cent for the yuan.

Brazil has already slapped higher withholding tax on foreign capital invested in its fixed-income securities. South Korea is also pondering measures to curb the capital inflow.

The situation in Thailand is equally tense, as the baht has broken through the Bt30 mark against the US dollar to Bt29.86, a level unheard of in the past 13 years. The authorities are grappling with a huge capital inflow, which is seemingly acting as a one-way bet on baht appreciation. The foreign money moves into fixed-income securities and also, to a lesser extent, the equity market. It helps drive up the value of the baht and also of the SET index. It appears that the cycle is moving back around again. When Thailand suffered from the crisis in 1997, the baht collapsed from Bt25-Bt26 to the US dollar to Bt56. Now the tide of the currency market is heading for a reverse.

The situation on the currency front will worsen when the Fed embarks on its next round of quantitative easing, expected to be to the tune of US$1 trillion. Some analysts, including Zerohedge.com, believe that the US quantitative easing could top US$3 trillion. If the Fed continues this desperate mode of money printing to prop up the US financial system, it will flood the whole world with liquidity. For the Fed's liquidity will not go into propping up the US economy but instead make its way to the emerging-market economies, where returns are much higher.

The danger is that the liquidity from the developed economies will create bubbles in the emerging-market economies, including Thailand. The situation is reminiscent of the early 1990s period when bubbles began to form in the Thai economy, before bursting in 1997.

With The tsunami of liquidity coming from the developed countries, Thailand will have no choice but to erect barriers, one way or another, to stem the inflow. It will have to continue to focus on combating inflation by raising interest rates back to normal levels. Strangely enough, several economists and officials have called for a delay in raising interest rates for fear that higher rates would fuel further capital inflow. The point, however, is that the money would flow in regardless, and the policy-makers will have to find a way to cope with this huge inflow and also to prevent the advent of another era of economic and financial bubbles. We suffered through the 1997 crisis. Do we need another reminder?

-- The Nation 2010-10-09

[jayjayjayjay]

<deleted>. What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere. The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls, ridiculous accommodation, massage parlors or just plain phallic symbols to their owners. Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

[MJP]

<deleted>.  What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere.  The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls,  ridiculous accommodation, massage parlors or just plain phallic symbols to their owners.  Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

Sounds like somewhere we know. 

[katasyd]

The U.S want the USD to be weak.

Then they compete again in manufacturing thus creating jobs so economy will pick itself up in a few decades.

It's just a cycle and the now it's Thailand's turn for exports and industry to hurt.

[kuffki]

Finally someone with brain has realized what is going to happen in the next 12 months. The only problem is its the wrong person who understands it

BOT does not seem to grasp the concept and most likely driving it down that path with extra speed because in the end, they are(the Thai elite and ministers, including CEO's etc) the ones who will double if not triple their wealth.

The only thing article does not mention is how Thailand would pull out of it this time around, and also considering that the entire world has gone through recession and some parts of it still in it, this time round it will hit Thailand twice as hard.

[trogers]

<deleted>. What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere. The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls, ridiculous accommodation, massage parlors or just plain phallic symbols to their owners. Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

Whatever the fundamentals, the danger will be the same when long term obligations are funded by short term debts.

[furyrider]

Now Now everybody just relax

In all of the news lately the Thai government has stated that they are taking action to watch all this unfold.

With them watching it happen we can all carry on with out worry.

[jayjayjayjay]

<deleted>. What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere. The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls, ridiculous accommodation, massage parlors or just plain phallic symbols to their owners. Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

Whatever the fundamentals, the danger will be the same when long term obligations are funded by short term debts.

If we end up with the financial sector full of short term instruments then I would agree, however we are nowhere near the 25% of GDP required to service that debt (as was circa '96). This is the tripping point, miles off today. Foregin reserves are not being used to support a floored system as was in place in the 90's.

[jayjayjayjay]

<deleted>. What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere. The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls, ridiculous accommodation, massage parlors or just plain phallic symbols to their owners. Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

Sounds like somewhere we know.

one unhappy uncle Sam

[MJP]

<deleted>.  What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere.  The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls,  ridiculous accommodation, massage parlors or just plain phallic symbols to their owners.  Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

Sounds like somewhere we know.

one unhappy uncle Sam

Yup, I was thinking of a dour yet bonkers Scot shortly followed by a pleasantly dotty and confused Etonian.

Quite why China wants to exchange it's environmental quality for bits of paper of increasingly dubious value is beyond me.

[asiawatcher]

The U.S want the USD to be weak.

Then they compete again in manufacturing thus creating jobs so economy will pick itself up in a few decades.

It's just a cycle and the now it's Thailand's turn for exports and industry to hurt.

Disagree completely - the introduction of the Euro at 86 cents to USD was designed as a parody to prop up the inevitable but no-one in the money markets thought it would break even the soar past the USD. Now USD Euro is miles apart and the Euro remains the stronger currency.

US has been indebted by fiscal mismanagement beyond all reason for more than 20 years with wars and Wall Street and banks manipulating the markets for gains, the secondary mortgage markets and derivatives it has all been a crap shoot controlled by greedy bankers and then when they failed, the Govt bailed them out! Sheer stupidity. If any American business starts to fail, the vultures step in, break up the assets sell it off and then sue for losses. Not the banks and the Govt.

The USD has not finished its plunge and the Fed has not stopped printing money to pay debt it continues to escalate. Like all 'empires' it will fall and history will repeat itself. Right now I just would not want to be an American or have a bank full of USD. Fresh ink and worth zip.

[passon]

<deleted>. What we are seeing today is miles apart from the build up to the 90's bubble. The influx of capital is going into generally mature projects unlike the pre-bubble era when anyone including foreigners could walk in and secure a 40 million baht loan by mortgaging a rai of land 500 km upcountry in Nakorn Nowhere. The bubble started as early as 91/92. In 95 standing on a 15 story building in Sukhumvit you could see over 300 construction cranes building surplus, useless, shopping malls, ridiculous accommodation, massage parlors or just plain phallic symbols to their owners. Some of these white elephants buried entire generations in debt. Stupid is as stupid does!

There is a very different set of fundamentals on the table today.

From my balcony I can see about that many cranes up now building an endless sea of condominium projects. The one across the street from me has been some 60% vacant for over 1.5 years since it first opened. The same could be said for shopping malls; they appear to be going up everywhere in Bangkok. Considering the cost of a lot of these condominiums, the average (Thai) income scale, along with runaway baht appreciation, it makes me wonder how many other condominium projects and shopping malls will be completed with scarce resources to support the cost of building them.

[passon]

Finally someone with brain has realized what is going to happen in the next 12 months. The only problem is its the wrong person who understands it

BOT does not seem to grasp the concept and most likely driving it down that path with extra speed because in the end, they are(the Thai elite and ministers, including CEO's etc) the ones who will double if not triple their wealth.

The only thing article does not mention is how Thailand would pull out of it this time around, and also considering that the entire world has gone through recession and some parts of it still in it, this time round it will hit Thailand twice as hard.

Well said. I've brought this issue up several times with my friends, that the only ones who could reasonably be profiting from this windfall are the small percentage of financial aristocrats who have enough money and influence to manipulate the market. One of the excuses used to justify the appreciation of the baht was the lower cost of imports for things such as fuel and raw materials, yet Shell just raised the cost of gasohol by 40 satong (no savings there), and TMB just published an article in the BP showing the formula used that determines the value of the baht, and concluding that capital controls do not normally work and usually have the opposite effect of increasing foreign investment; therefore suggesting that there would probably be no changes in monetary policy by this year's end. There is an old economic theory, as you prescribed, that what goes up, must come down. The higher it climbs, the farther it falls. Therefore the choice is to land softly or to crash land. Unfortunately a reversal of fortune has no effect on the ones who were flying the economy, but impacts everyone else who gets caught in its wake.

[spacemand]

I gave up on understand the USD/THB exchange rate and how it worked when people were shooting at each other in the capital and with government buildings been burnt down all over the country and yet still the stock market rose and the THB got stronger against the USD.

Defies my logic so know being paid in USD I just watch the exchange rate with a tear in my eye hoping for the best.

[Englander]

Well said. I've brought this issue up several times with my friends, that the only ones who could reasonably be profiting from this windfall are the small percentage of financial aristocrats who have enough money and influence to manipulate the market.

Why risk your money trying to manipulate the markets, when you can get tip offs to exactly which way it will go from Central Banks or the politicians/banksters that run them weeks in advance.

[mommysboy]

I gave up on understand the USD/THB exchange rate and how it worked when people were shooting at each other in the capital and with government buildings been burnt down all over the country and yet still the stock market rose and the THB got stronger against the USD.

Defies my logic so know being paid in USD I just watch the exchange rate with a tear in my eye hoping for the best.

2 strands at work: the awful stae of US finances, and so called investment money pouring in to Thailand.

[Unwisemonkey]

Well said. I've brought this issue up several times with my friends, that the only ones who could reasonably be profiting from this windfall are the small percentage of financial aristocrats who have enough money and influence to manipulate the market.

Why risk your money trying to manipulate the markets, when you can get tip offs to exactly which way it will go from Central Banks or the politicians/banksters that run them weeks in advance.

Months even. Foreign investment from corporations are moving out of Thailand and into Vietnam Cambodia and Laos, where labor is cheap, I recall an article about Ford Motor Company building a factory in Cambodia I think, and Thai Financial Guru's recommending Thai investors put their money into stocks of companies operating in neighboring countries. If you got every red shirt a brokerage account and a little financial education perhaps Thailand would end up with a huge voting middle class an a new bourgeois.

Cheaper cars and bull market stock portfolios would be enough buffer for a short while from any currency bubbles but how long would that last? It's too soon yet to make and solid predictions, currency devaluation will continue around the world, until the infrastructures that support NAFTA and EUFTA are fully equipped and ready for competition, ASEAN members are limping behind and don't seem to have many options at the moment. I'd steer clear of borrowing money from China to fuel competition as they already have a lot of U.S. Debt on their balance sheets. It may be worthwhile to consider changing immigration laws and citizenship requirements in the kingdom if for nothing else then the exchange of ideas and knowledge. Let the western worlds disenfranchised come in and help prop up a larger middle class [tongue in cheek].

[jcbangkok]

I have to believe the strong confidence in Thailand is partly because investors believe even with serious possible government turmoil that a reasonable person ( in their needs) will still be running the country even a another coup was to occur. Other than that is just boggles the mind to see this kind of confidence given it would not be surprising to see bombs and assassination attempts going off in the capital again any day.

Edited October 10, 2010 by jcbangkok

[jcbangkok]

Anyone have any insight as to how low the dollar will go vs. the baht? Earlier in the year the government said they expected it to stay around 31 through the end of the year. Now it sounds like 25 might not be unrealistic.

Any input on if us Americans spending our money in Thailand should be very concerned of how bad this will get?

Edited October 10, 2010 by jcbangkok

[michaeljordan]

Of course the American dollar is weaker against the Baht. America is a wreck.

The question is how strong will the Baht get against all major currencies.

Obviously there is outside manipulation being used to strengthen the baht. Super rich hedge funds from all over the planet look for weak spots where they can do their games. Thailand being so weak politically is wide open to the pump and dump.

The huge hedge funds buy the baht at 2 billion dollars a per Day?

How long before they drive the baht to 25 then 22 then 20 against the US dollar and similarly move it stronger against all other major currencies?

I know we all remember 1997.

The bigger the bubble, the bigger the crash correction.

We could see another whipsaw from 20 back down to 50 or worse against the US dollar. I fear we could get it into the 70s as happened in Indonesia before.

Oh well.

2 billion a day buying Baht.

Those hedge funds are loyal to nothing but greed. They would laugh as they sold and crashed Thailand into chaos if not stopped. They then would laugh and more to the next nation.

Today's free market capitalism we see is being run by robbers and thieves who laugh as people die.

Thailand needs to stop this now.

How much can the poor peoplr of Thailand take?

Freeze the currency Thailand.

[whybother]

Of course the American dollar is weaker against the Baht. America is a wreck.

The question is how strong will the Baht get against all major currencies.

Obviously there is outside manipulation being used to strengthen the baht. Super rich hedge funds from all over the planet look for weak spots where they can do their games. Thailand being so weak politically is wide open to the pump and dump.

The huge hedge funds buy the baht at 2 billion dollars a per Day?

How long before they drive the baht to 25 then 22 then 20 against the US dollar and similarly move it stronger against all other major currencies?

<snip>

It's amazing how this outside manipulation affects the Australian dollar against the $US too.

[crusader79]

Another factor in the strengthening of the baht is China, which in resisting U.S. pressure to more rapidly strengthen the yuan, wants to ensure that the currencies of its Asian trading partners/rivals also remain strong. Consequently it is buying other Asian currencies and financial assets. At least that is what I have read are the rumors in the markets.

Edited October 11, 2010 by crusader79

[Unwisemonkey]

I'm still getting my financial feet wet in the Thai money pool, so I'm curious, as to how these funds are buying up Thai Baht? Thailand is if I am not mistaken unique in that they have two currencies the local Baht which we all have and use, but for the forex markets they have the Thai Offshore Baht. What values are we seeing that are being reported? Does the government back up the TOB with interior Baht? And which value is being reported?

[Spee]

Right now I just would not want to be an American or have a bank full of USD. Fresh ink and worth zip.

You make a lot of valid points but I don't understand this one because this is precisely what the Fed and the major banks have done. The Fed has printed and continues to print currency like it's going out of style. The propaganda line is the banks will use this cash to ease the lending crunch, but the exact opposite has occured. The banks are not lending but they have to be doing something with the money ..... and they are ..... dumping it out into the international currency markets.

In any case, your main point is well said. There is no problem with the US economy or US productivity. There is a problem of historical consequences with excessive government spending, disasterous government manipulation of the US housing market, and disasterous stewardship of the national currency by the Fed.

Governments going into debt is nothing new, and it is not necessarily a bad thing. Most regional and local governments do it all the time for basic civil infrastructure improvements like roads, new fire trucks and other basic services that one expects from a normally functioning government. The current overspending is abhorrently abnormal, a combination of purposeful manipulation and crony capitalism (totally different than free market capitalism) to please the needs of a select few at the expense of the many.

Without getting into political debate, there are solutions out there. For the US, the first step would be a resounding November election defeat of the grossly incompetent House in 3 weeks times, and all reputable polls indicate that this is precisely what will happen. The next step is to establish some control over the Fed stewardship of the national currency, stop monetizing the debt and "take our medicine" which is inevitably in the form of inflation. The longer it takes to make this happen, the worse the inflationary period will be. Today's circumstances and fiscal irresponsibility are certainly unprecented in US history and the future of the nation will likely hinge on the 2010 and 2012 elections.

[jcbangkok]

Finally someone with brain has realized what is going to happen in the next 12 months. The only problem is its the wrong person who understands it

BOT does not seem to grasp the concept and most likely driving it down that path with extra speed because in the end, they are(the Thai elite and ministers, including CEO's etc) the ones who will double if not triple their wealth.

The only thing article does not mention is how Thailand would pull out of it this time around, and also considering that the entire world has gone through recession and some parts of it still in it, this time round it will hit Thailand twice as hard.

Well said. I've brought this issue up several times with my friends, that the only ones who could reasonably be profiting from this windfall are the small percentage of financial aristocrats who have enough money and influence to manipulate the market. One of the excuses used to justify the appreciation of the baht was the lower cost of imports for things such as fuel and raw materials, yet Shell just raised the cost of gasohol by 40 satong (no savings there), and TMB just published an article in the BP showing the formula used that determines the value of the baht, and concluding that capital controls do not normally work and usually have the opposite effect of increasing foreign investment; therefore suggesting that there would probably be no changes in monetary policy by this year's end. There is an old economic theory, as you prescribed, that what goes up, must come down. The higher it climbs, the farther it falls. Therefore the choice is to land softly or to crash land. Unfortunately a reversal of fortune has no effect on the ones who were flying the economy, but impacts everyone else who gets caught in its wake.

Don't forget the power of the US Dollar and its government. Lowering the value of the dollar helps the US when it comes to things related to being able to increases exports of goods.

[rafish]

Right now I just would not want to be an American or have a bank full of USD. Fresh ink and worth zip.

You make a lot of valid points but I don't understand this one because this is precisely what the Fed and the major banks have done. The Fed has printed and continues to print currency like it's going out of style. The propaganda line is the banks will use this cash to ease the lending crunch, but the exact opposite has occured. The banks are not lending but they have to be doing something with the money ..... and they are ..... dumping it out into the international currency markets.

In any case, your main point is well said. There is no problem with the US economy or US productivity. There is a problem of historical consequences with excessive government spending, disasterous government manipulation of the US housing market, and disasterous stewardship of the national currency by the Fed.

Governments going into debt is nothing new, and it is not necessarily a bad thing. Most regional and local governments do it all the time for basic civil infrastructure improvements like roads, new fire trucks and other basic services that one expects from a normally functioning government. The current overspending is abhorrently abnormal, a combination of purposeful manipulation and crony capitalism (totally different than free market capitalism) to please the needs of a select few at the expense of the many.

Without getting into political debate, there are solutions out there. For the US, the first step would be a resounding November election defeat of the grossly incompetent House in 3 weeks times, and all reputable polls indicate that this is precisely what will happen. The next step is to establish some control over the Fed stewardship of the national currency, stop monetizing the debt and "take our medicine" which is inevitably in the form of inflation. The longer it takes to make this happen, the worse the inflationary period will be. Today's circumstances and fiscal irresponsibility are certainly unprecented in US history and the future of the nation will likely hinge on the 2010 and 2012 elections.

I would suggest that those bailed out banks are using the funds offered by the Fed for bailouts as offshore investments to repay the Feds loans, while keeping the dollar value depressed thus assisting the export value of US goods and services and enhancing the current trade contracts with such countries like Thailand and other small export nations. Once the Fed loans are paid back, and the money tree of easy interest rates fall, those banks and offshore investors will run back to their holes in their own western country and watch the bubble in Asia burst.

[Robby nz]

As I have to bring cash here from NZ I keep a close watch on the Baht, NZ$ exchange rate and it has not changed a lot in recent times.

I believe the OZ$ is much the same.

So as I see it the Baht has not risen but the US $ has dropped.

Every $ the Feds print must devalue all the others and there seems to be no end in sight.

Fhe whole financial crap heap was started by the greed of the US bankers followed by their European counterparts.

Now the world is paying for that greed.

Unfortunatly some who got us into this mess are not.

[mommysboy]

As I have to bring cash here from NZ I keep a close watch on the Baht, NZ$ exchange rate and it has not changed a lot in recent times.

I believe the OZ$ is much the same.

So as I see it the Baht has not risen but the US $ has dropped.

Every $ the Feds print must devalue all the others and there seems to be no end in sight.

Fhe whole financial crap heap was started by the greed of the US bankers followed by their European counterparts.

Now the world is paying for that greed.

Unfortunatly some who got us into this mess are not.

Fair point.

This thread though is really about the fact that Thailand is now really up against it, and you'd best be prepared for the fall out.

It's in the nature of things that these things don't explode overnight but for sure this country is now in trouble.

The problem is it never did sort out its domestic economy.

Globally, I'm not sure the good guys can be so easily separated from the bad guys.

I would agree though that US is making no attempt to put its house in order, as opposed to UK for instance.

[SergeiY]

Any input on if us Americans spending our money in Thailand should be very concerned of how bad this will get?

It isn't bad - it's good.

[mommysboy]

Right now I just would not want to be an American or have a bank full of USD. Fresh ink and worth zip.

You make a lot of valid points but I don't understand this one because this is precisely what the Fed and the major banks have done. The Fed has printed and continues to print currency like it's going out of style. The propaganda line is the banks will use this cash to ease the lending crunch, but the exact opposite has occured. The banks are not lending but they have to be doing something with the money ..... and they are ..... dumping it out into the international currency markets.

In any case, your main point is well said. There is no problem with the US economy or US productivity. There is a problem of historical consequences with excessive government spending, disasterous government manipulation of the US housing market, and disasterous stewardship of the national currency by the Fed.

Governments going into debt is nothing new, and it is not necessarily a bad thing. Most regional and local governments do it all the time for basic civil infrastructure improvements like roads, new fire trucks and other basic services that one expects from a normally functioning government. The current overspending is abhorrently abnormal, a combination of purposeful manipulation and crony capitalism (totally different than free market capitalism) to please the needs of a select few at the expense of the many.

Without getting into political debate, there are solutions out there. For the US, the first step would be a resounding November election defeat of the grossly incompetent House in 3 weeks times, and all reputable polls indicate that this is precisely what will happen. The next step is to establish some control over the Fed stewardship of the national currency, stop monetizing the debt and "take our medicine" which is inevitably in the form of inflation. The longer it takes to make this happen, the worse the inflationary period will be. Today's circumstances and fiscal irresponsibility are certainly unprecented in US history and the future of the nation will likely hinge on the 2010 and 2012 elections.

I would suggest that those bailed out banks are using the funds offered by the Fed for bailouts as offshore investments to repay the Feds loans, while keeping the dollar value depressed thus assisting the export value of US goods and services and enhancing the current trade contracts with such countries like Thailand and other small export nations. Once the Fed loans are paid back, and the money tree of easy interest rates fall, those banks and offshore investors will run back to their holes in their own western country and watch the bubble in Asia burst.

Yes true- it's a very dirty world isn't it?

That is exactly what is going to happen.

But not before US devalues via QE.- offloads a lot of dollar debt and makes US imports (Chinese, Thai exports) very unattractive.