Govt Debt Policy Will Make The Thai Currency 'Worthless'

[midas]

I wouldn't mind weaker baht, but somehow I don't think there would be anything near 75baht for a £

With the greater financial discipline within the UK, and the strong sense of urgency, as well as sound policies, for overcoming its current problems - far more than within the EU - there is no fundamental reason why we should not see the heady days of THB 75 to the GBP once again.

http://www.huffingtonpost.co.uk/2012/01/03/payday-loans-one-in-seven-uses-credit_n_1180839.html?1325656504&ref=uk

[Pib]

They can consult with the USA, they know how to print money at extreme fast rates. I guess the Thai Baht will race the US $ to the bottom

I agree, but since the USA is in an election year the Democrat and Republican politicians are very busy fighting each other and may be too busy to consult. But there are still of other countries such as Japan, UK, European Union, etc., which have equal expertise in money printing and should be able to provide the consulting services.

[blundaman]

awww, cmon... isn't this supposed to be called Quantative Easing ?

[geriatrickid]

"borrow more money to finance the budget deficit"...Hmmmmm...Let me think on this for a moment...Ok...NOT A GOOD IDEA ...! Look at America...Thailand taking lessons from them...?

I do not believe in carrying debt and am a proponent of balanced budgets, however it makes sense to borrow when interest rates are low. One can lock in lucrative credit facilities which may be of great benefit if and when interest rates start rising again in a few years.

The US debt crisis is driven in large part by obligations, not the debt itself. The need to pay off the expensive wars and to pay for a bloated social security system forces the government to borrow to pay these obligations. There would be no debt crisis had the US not gone to war and had it reduced expenditures on old age pensions and medical benefits to those on medicare and started charging some fees for medical services rendered to veterans (except for those injured while in service).

[KKvampire]

Typical how posters are just interested in their currency,s rate to the baht.Expat retirees no doubt.Some of us are working here and have salaries in baht so dont want the country,s currency devalued.

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[Bobinyangdor]

They can consult with the USA, they know how to print money at extreme fast rates. I guess the Thai Baht will race the US $ to the bottom

Perhaps some of the doom and gloom views might change if the respondents took into consideration the characteristics of the Thai economy. As some astute people have noted Thailand is an export driven economy. What part of 2/3 thirds of the GDP based upon exports do the negative nabobs not understand? When agriculture is a major component and when the sector provides almost 50% of the nation's employment, it reinforces the importance of protecting export markets, even if it means adjusting the value of the baht.

In respect to the unfounded comment on the USD, Perhaps one should have a look at the numbers. Rather than rely on FOX TV for information, I suggest one look to a FOX sister company, the Wall Street Journal . I love Thai Airways because I can always get a copy of the WSJ which is practically unavailable in Phuket.

WSJ reported as follows; After a year of swings, the U.S. dollar finished within roughly 3% of where it started the year against most major developed-market currencies. That included the euro, where the dollar finished up 3.3% as the long-simmering European debt crisis reached a boiling point and investors contemplated the breakup of the economic union that underpins the common currency.The main exception was the yen, which, despite a raft of troubles for Japan, rose more than 5% against the dollar. The U.S. Dollar Index, which measures the greenback's performance against a basket of currencies, rose 1.5% in 2011.

As long as the EU is in a mess that keeps getting worse, the pressure is on the Euro, not the USD. The US is most likely through the worst of its mess. This gives the Thai baht some breathing room. Keep in mind that China is undertaking direct FX pools and transactions which will assist the Thai baht, albeit in a small way. The USD is ok, provided the Republican teapot faction doesn't pull another tantrum.

Dear geriatrickid, I'm afraid your post really is laughable!. Quoting the USD index numbers for one year hardly gives the real picture. A clearer picture would be shown by quoting that the USD has fallen nearly 40% in the last ten years even considering the rally since 2008. I don't have the time to present the wealth of evidence that is there for anyone to find but the fact is the USD is in a huge downtrend and the worst is yet to come.. the USD is going to fall off a cliff.. maybe this year maybe next year but when it does it will drop like a stone US debt is second to none and guess who's manning the $$$ printing presses: Ben 'Helicopter' Bernanke! I sense a little patriotic defence in your post so please don't get me wrong there is nothing anti American in my thoughts, if you read my other post on this thread you will see that my opinion of British financial incompetency equals that of the USA.

[kutjebu]

See who has more debt Europe,US,UK or Thailand.Printing money are they doing already years in US and EU.

[daboyz1]

As long as there is enough foreign currency coming in to Thailand we can print a lot of Baht. Thailand easily lands a billion US$ a month on money sent by Thai living abroad, farang spending a foreign pension or income here and the inccidental girlfriends getting some support. This comes at virtually no expense what soever. On top of that there is, even after the floads, a lot of export that is generated at by now even lower wages than in China. Dream on about a lower Baht, this won't happen any time soon!

The amount of US currency heading to Mexico over the years hasn't caused the value of the peso to rise at all. It went from 13.5 per USD in Dec. 07 to 13.7 per USD today.

So that's a flawed analysis. Just taking a guess, but between the illegal immigrants in the US, and the USD drug money sent back to Mexico, you would think the peso would be stronger based on your analysis.

Try again.

[w11guy]

A weakening Baht by this instrument (printing) will not really lead to more B for your $, €, £ cos inflation will swallow most of the depreciation. If you want to know how to find those pound and euro symbols on a mac, just google them, like I did

That's not usually true. £UK weakened against $US around 2008-9 and there was minimal inflation in the UK. Currency can devalue quite easily even if there is low inflation. In any case, even if they print more money it won't have too much effect because their debts are low compared to US, UK, EU. UK could easily implode if Eurozone collapses, so Thai Baht could strengthen against £UK even if they print money. UK and USA and printing/creating trillions of £/$. Printing a few billion baht will have a negligible effect.

But if baht really did collapse in a year or two then now could be a bad time to buy property here. Buy a 5m baht condo (£100K) now and it could only be worth £60-70K in a year or two. But then there would be a real opportunity to stock up on property.

Edited January 5, 2012 by w11guy

[Willeyeam]

I wouldn't mind weaker baht, but somehow I don't think there would be anything near 75baht for a £

With the greater financial discipline within the UK, and the strong sense of urgency, as well as sound policies, for overcoming its current problems - far more than within the EU - there is no fundamental reason why we should not see the heady days of THB 75 to the GBP once again.

I am still waiting for the good old days of 85 Baht to the Pound!

[who]

I wouldn't mind weaker baht, but somehow I don't think there would be anything near 75baht for a £

With the greater financial discipline within the UK, and the strong sense of urgency, as well as sound policies, for overcoming its current problems - far more than within the EU - there is no fundamental reason why we should not see the heady days of THB 75 to the GBP once again.

----Yes, but what will those 75 baht buy when super inflation kicks in ?----

.

[Moruya]

They can consult with the USA, they know how to print money at extreme fast rates. I guess the Thai Baht will race the US $ to the bottom

Perhaps some of the doom and gloom views might change if the respondents took into consideration the characteristics of the Thai economy. As some astute people have noted Thailand is an export driven economy. What part of 2/3 thirds of the GDP based upon exports do the negative nabobs not understand? When agriculture is a major component and when the sector provides almost 50% of the nation's employment, it reinforces the importance of protecting export markets, even if it means adjusting the value of the baht.

In respect to the unfounded comment on the USD, Perhaps one should have a look at the numbers. Rather than rely on FOX TV for information, I suggest one look to a FOX sister company, the Wall Street Journal . I love Thai Airways because I can always get a copy of the WSJ which is practically unavailable in Phuket.

WSJ reported as follows; After a year of swings, the U.S. dollar finished within roughly 3% of where it started the year against most major developed-market currencies. That included the euro, where the dollar finished up 3.3% as the long-simmering European debt crisis reached a boiling point and investors contemplated the breakup of the economic union that underpins the common currency.The main exception was the yen, which, despite a raft of troubles for Japan, rose more than 5% against the dollar. The U.S. Dollar Index, which measures the greenback's performance against a basket of currencies, rose 1.5% in 2011.

As long as the EU is in a mess that keeps getting worse, the pressure is on the Euro, not the USD. The US is most likely through the worst of its mess. This gives the Thai baht some breathing room. Keep in mind that China is undertaking direct FX pools and transactions which will assist the Thai baht, albeit in a small way. The USD is ok, provided the Republican teapot faction doesn't pull another tantrum.

When the government hinted that they would shift the debt to the BOT, the THB experianced it's highest daily drop for several months and to the lowest the THB has been in 16 months.

When they subsequently announced that they were abandoning the idea, the THB rose 0.4% - that will tell you waht the analysts think.

To say that the USD is isolated from the EUR is a bit simplistic. I will also depend on the amount of EUR denominated instruments that are held by US financial institutions.

Thailand's major exports are cars (screwed by the floods), electronics (massively screwed by the fllods), rice (at least 10% hit by floods and remain to be seen what the price hike will do), prawns (will for sure see a hit with the stagnant flood water hitting farms south of Bangkok), tapioca and sugar (will probably see a hit of around 10%).

Post-flood redundancies currently stand at around 50,000 with a further 180,000 hanging on a knife edge as companies assess where they go from here. A lot of foreign business eyes are on the government flood prevention planning, the drop in corporation tax, the underwriting of flood insurance and the minimum wage. That's a loss of USD 200,000 in wages per annum and rising.

Tourism - a lot of eyes will be on the tourist sector in 2012. With around 6% of the GDP plus an estimated further 3% in the sex tourist industry riding (my pun) on the sector. It's one thing to say the flights are full. It's another to say that the number of flights have ropped significantly and the TAT does like to paint a very rosy picture

[TAWP]

Strange that when they are not in goverment they know how to run the country,when they are in charge they don't have a clue,not only in Thailand but also the UK and many other countrys.

That has nothing to do with how an government is elected here, or we wouldn't be seeing the current selection of clowns in the office - or even most of the MPs in the parliament!

[spidermike007]

We can only hope these policies make the currency worth something approximating it's real value. It would benefit the export sector, the tourism sector, and many others. It appears some egomaniacs have been propping up the currency in the finance ministry, or the Bank of Thailand, for some time. Foreign inflows of course, are a big factor, but there seem to be other factors at work. Thailand desperately needs their currency devalued.

[TAWP]

Typical how posters are just interested in their currency,s rate to the baht.Expat retirees no doubt.Some of us are working here and have salaries in baht so dont want the country,s currency devalued.

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Indeed - sure, the retired lot will be 'happy', since their founds will cover more locally produced beer and lap-dances, but most of us that live and work here not only would like to see that our salaries aren't gutted in the global market comparably (opens up for so much renegotiation about contracts) but also that the imported goods we purchase (of which there are a lot, both technology and food) don't have their prices shoot up through the roof.

[chooka]

I hope the Zimbabwean financial consultant they are using has his work permit in order, because if this goes pear shaped he may just get all the blame.

[chooka]

Typical how posters are just interested in their currency,s rate to the baht.Expat retirees no doubt.Some of us are working here and have salaries in baht so dont want the country,s currency devalued.

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Indeed - sure, the retired lot will be 'happy', since their founds will cover more locally produced beer and lap-dances, but most of us that live and work here not only would like to see that our salaries aren't gutted in the global market comparably (opens up for so much renegotiation about contracts) but also that the imported goods we purchase (of which there are a lot, both technology and food) don't have their prices shoot up through the roof.

Not all the expats spend thier funds on beer and bargirls, some of us have never even seen a bargirl in action and wouldn't know where to find one. Your stereotyping expats as drunken sexpats. These are generally the tourists and not the family guys in Thailand.

[templedog]

I wouldn't mind weaker baht, but somehow I don't think there would be anything near 75baht for a £

Because it will benefit you?

[templedog]

Typical how posters are just interested in their currency,s rate to the baht.Expat retirees no doubt.Some of us are working here and have salaries in baht so dont want the country,s currency devalued.

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Indeed - sure, the retired lot will be 'happy', since their founds will cover more locally produced beer and lap-dances, but most of us that live and work here not only would like to see that our salaries aren't gutted in the global market comparably (opens up for so much renegotiation about contracts) but also that the imported goods we purchase (of which there are a lot, both technology and food) don't have their prices shoot up through the roof.

Not all the expats spend thier funds on beer and bargirls, some of us have never even seen a bargirl in action and wouldn't know where to find one. Your stereotyping expats as drunken sexpats. These are generally the tourists and not the family guys in Thailand.

I second that!!

[templedog]

I wouldn't mind weaker baht, but somehow I don't think there would be anything near 75baht for a £

With the greater financial discipline within the UK, and the strong sense of urgency, as well as sound policies, for overcoming its current problems - far more than within the EU - there is no fundamental reason why we should not see the heady days of THB 75 to the GBP once again.

I am still waiting for the good old days of 85 Baht to the Pound!

Go home and spend it.

[thailand49]

Like all economist and A--, we all have one, but here all one can do is speculate as to what is going to happen? There are the Bulls and the Bears and it will always be that way. When there is a Bull market the Bears come out, when there is a Bear market the Bulls come out?

Whatever, my opinion and hope is being this Thailand they just screw it all up. From what I have seen the former finance minister was pretty good but he has been replaced and this morning I saw his picture on the Bangkok Post and he was against the current debt situation. I want and hope for a weaker weaker and real weak Baht, that might be selfish but I've live here long enough so I can feel like a Thai at times? What goes around comes around it true then its my turn? I'll get ready to ship some green backs to Thailand when it happens?

[David48]

+1 Excellent post

Can you referance for sure that they have 'dropped' the idea of transferring the debt to the BOT as I have not read that yet.

When the government hinted that they would shift the debt to the BOT, the THB experianced it's highest daily drop for several months and to the lowest the THB has been in 16 months.

When they subsequently announced that they were abandoning the idea, the THB rose 0.4% - that will tell you waht the analysts think.

To say that the USD is isolated from the EUR is a bit simplistic. I will also depend on the amount of EUR denominated instruments that are held by US financial institutions.

Thailand's major exports are cars (screwed by the floods), electronics (massively screwed by the fllods), rice (at least 10% hit by floods and remain to be seen what the price hike will do), prawns (will for sure see a hit with the stagnant flood water hitting farms south of Bangkok), tapioca and sugar (will probably see a hit of around 10%).

Post-flood redundancies currently stand at around 50,000 with a further 180,000 hanging on a knife edge as companies assess where they go from here. A lot of foreign business eyes are on the government flood prevention planning, the drop in corporation tax, the underwriting of flood insurance and the minimum wage. That's a loss of USD 200,000 in wages per annum and rising.

Tourism - a lot of eyes will be on the tourist sector in 2012. With around 6% of the GDP plus an estimated further 3% in the sex tourist industry riding (my pun) on the sector. It's one thing to say the flights are full. It's another to say that the number of flights have ropped significantly and the TAT does like to paint a very rosy picture

[khunkeith]

As long as there is enough foreign currency coming in to Thailand we can print a lot of Baht. Thailand easily lands a billion US$ a month on money sent by Thai living abroad, farang spending a foreign pension or income here and the inccidental girlfriends getting some support. This comes at virtually no expense what soever. On top of that there is, even after the floads, a lot of export that is generated at by now even lower wages than in China. Dream on about a lower Baht, this won't happen any time soon!

The amount of US currency heading to Mexico over the years hasn't caused the value of the peso to rise at all. It went from 13.5 per USD in Dec. 07 to 13.7 per USD today.

So that's a flawed analysis. Just taking a guess, but between the illegal immigrants in the US, and the USD drug money sent back to Mexico, you would think the peso would be stronger based on your analysis.

Try again.

The largest part of the Mexican GDP is dollars being sent across the border and has been for years. The Mexican peso had to be revalued hence, the Nuevo Peso.

The statement "Dream on about a lower Baht, this won't happen any time soon!" is just plain silly. There is no such thing as a sure thing. Remember the Japanese stock market crash in 1998 and currencies across Asia dropped in value across the board. the Thai economy is tied to other economies. 1/6 of the Thai economy is from tourism. a lower exchange rate for the USD or the Euro will cause a serious drop in tourism. When the Euro increased in value against the USD a few years ago, the exports from Europe dropped and hurt their economy.

Economy is world wide. No country is an island (maybe Cuba) that totally independent of other economies.

[Moruya]

+1 Excellent post

Can you referance for sure that they have 'dropped' the idea of transferring the debt to the BOT as I have not read that yet.

When the government hinted that they would shift the debt to the BOT, the THB experianced it's highest daily drop for several months and to the lowest the THB has been in 16 months.

When they subsequently announced that they were abandoning the idea, the THB rose 0.4% - that will tell you waht the analysts think.

To say that the USD is isolated from the EUR is a bit simplistic. I will also depend on the amount of EUR denominated instruments that are held by US financial institutions.

Thailand's major exports are cars (screwed by the floods), electronics (massively screwed by the fllods), rice (at least 10% hit by floods and remain to be seen what the price hike will do), prawns (will for sure see a hit with the stagnant flood water hitting farms south of Bangkok), tapioca and sugar (will probably see a hit of around 10%).

Post-flood redundancies currently stand at around 50,000 with a further 180,000 hanging on a knife edge as companies assess where they go from here. A lot of foreign business eyes are on the government flood prevention planning, the drop in corporation tax, the underwriting of flood insurance and the minimum wage. That's a loss of USD 200,000 in wages per annum and rising.

Tourism - a lot of eyes will be on the tourist sector in 2012. With around 6% of the GDP plus an estimated further 3% in the sex tourist industry riding (my pun) on the sector. It's one thing to say the flights are full. It's another to say that the number of flights have ropped significantly and the TAT does like to paint a very rosy picture

They dropped the idea but have subsequently decided to implement it!

[David48]

We can only hope these policies make the currency worth something approximating it's real value. It would benefit the export sector, the tourism sector, and many others. It appears some egomaniacs have been propping up the currency in the finance ministry, or the Bank of Thailand, for some time. Foreign inflows of course, are a big factor, but there seem to be other factors at work. Thailand desperately needs their currency devalued.

The Thai Baht is 'worth' exactly what you get as a relative exchange rate every day. Billions of Baht are traded every week and the currency’s value is determined by both he buyer and seller.

While 'your' particular currency maybe at a lower exchange rate they you think is fair value other currencies are trading near their 10 years highs vs. the Thai Baht.

For the example the Australian dollar is currently trading at 32 and a half Baht http://www.xe.com/ucc/convert/?Amount=1&From=AUD&To=THB&image.x=37&image.y=18ℑ=Submit which is close to it's 10 year high of 33.17 Baht to the AUD.

There are no 'egomaniacs have been propping up the currency in the finance ministry, or the Bank of Thailand' but government policy does influence the exchange rate by setting the local interest rate, having attractive investment policies (not implying that this or previous government have done either) and moderating the amount of currency available (quantitative easing ... or not) to name but a few policy settings available to the Government of the day.

[Gianni77]

I think economist people forget how Argentina did exactly this and went from being a world power to be a really crappy place to live. The difference is there was no flood there but President Alfonsin's policies and the Falklands (AKA Malvinas) to thank for. Also the Asian crisis was caused by Thailand's excess money borrowing for real estate development.

Economy is a complicated thing, even a household economy, once you start getting less money, things should change. Let's say you change a job that allows you to spend more time with the family, you're gaining huge having quality time, but you will have to make sacrifices, like maybe taking BTS to the office instead of car all the time, you won't borrow to cover for your extra expenditure, because it will be suicide, or you'll be in so much debt that even your kids will have to help you later.

Now let's see the government, they're getting less money in, because the populist measures, like first time car owners, but instead of taking the BTS more, they want to borrow money to buy a Hummer, that will cost even more than before to drive than the smaller car you once had. The same things here, the government has more expensive projects and the maintenance of these projects will be higher than the previous projects. If in your own house a budget doesn't make sense, probably in a bigger scale it will make even less sense.

Am I wrong?

Have a nice day everyone!

[SICHONSTEVE]

A weakening Baht by this instrument (printing) will not really lead to more B for your $, €, £ cos inflation will swallow most of the depreciation. If you want to know how to find those pound and euro symbols on a mac, just google them, like I did

Yes it will!!! It simply means that if you are domiciled in Thailand then you will have to pay more for goods, services, energy etc which will in effect, negate the depreciation aspect.

[Arkady]

The Tha baht is already overvalued.more borrowing and printing money alongside inflation will make the financial markets finally see this.

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it's not...

but am I the only to think that a weaker baht is not a bad thing?

A weaker baht would help certain sectors of the economy, notably exports and tourism but it would encourage inflation and discourage investment. Monetizing huge gobs of debt like this simply to avoid government borrowing caps is surely a road to ruin. The process is likely to get out of control and lead to a disorderly rout of the baht and galloping inflation which erodes all the advantages of the lower baht to exports and tourism. The result of that would be a virtual shut down of foreign direct investment and loan inflows. Meanwhile the government's sovereign debt ratings would be slashed to way below debt and borrowing enough just to service the interest on its foreign debt would be a constant struggle. Also remember that Thailand's exports are still relatively low value added and rely and a large component of imported imputs. For more information on how this could pan out, read the economic histories of Argentina and Brazil in the 80s.

Thailand in recent history has always been considered a stable environment for investment due to its extremely conservative fiscal policy resulting in very high savings rates due to the government component of savings. We are now moving into a new era of spend, spend, spend mainly on poorly thought out uncoordinated projects that are mainly structured to generate maximum leakage of borrowed funds into the pockets of criminals in the government and civil service.

[drdoom6996]

They can consult with the USA, they know how to print money at extreme fast rates. I guess the Thai Baht will race the US $ to the bottom

Boy you hit the nail on the head with that statement. The baht will get weaker if the BOT is forced to print money. But so will your buying power, so nobody wins. Amazing Thailand, just borrow from the US. They have printed 5 trillion in 3 years and see what it's done for them.

[BuffaloRescue]

Oooh good i do hope so. I owe 2 million on my condo will be much easier to pay off