Baht Strengthens Significantly On Foreign Capital

[usatrader]

Maybe I am all wet here but knowing for years the Yuan has been complained about as being undervalued meaning it is less in parity to other currency. It seems it needs to increase per USD to have parity. Likewise the Thai Bhat.

I think you have this backwards. If the yuan is undervalued against the dollar at 8.06 yuan per USD, then the yuan needs to move towards a lower number per dollar to achieve equilibrium.

My reading of the Big Mac index is that if the cost of a Big Mac should be equivalent around the world, then the $3.15 that a Big Mac costs in the US should be equivalent to the approximately 10.5 RMB that the same Big Mac costs in China (in other words, 3.15 USD equals 10.5 RMB). Therefore, the yuan should be valued at 3.33 to the dollar.

Using the baht, if a $3.15 Big Mac costs roughly 60 THB ($1.51 at 39.8 THB/USD), then the value of the baht against the dollar should be 19.05 THB/USD.

But the Big Mac index can be very misleading due to many local factors that do not get taken into account in such a rough measure. The Economist freely admits this.

Anybody else have a different interpretation?

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Ustrader-

If I have this arse backwards then the Euro would need to be 1.35 and the Bhat around 20 per USD. Which is counter intuitive to what I have read.

Ovenman-

I think you have this backwards.

Hmm! Looking at it now, I see that what you are saying makes some sense.

I went back and read how the Yuan changed downward, in number, from somewhere around 8.26 Yuan/USD to the 8.06 range and everyone was saying it was a positive step in the right direction towards balancing the Yuan to a more fairly priced level against other currency. Particularly the USD and the Euro.

So given this, would you also assume the opposite is true of the EURO? It should be around 1.35 Euro's per USD or $.7407 USD per Euro, making European products and services much more expense to the world and providing European’s an extra ability to “consume” the rest of the worlds cheaper products?

Likewise, I agree currency is far more multi-dimensional in the factors that affect it than the Big Mac Index. But Mac Index is, in a simple way, a near notion of what true parity in currencies would be like if there was such a thing.

Interesting proposition though. I think this currency parity supposition would go a long way in cutting the US trade deficits as both Asian and Europe’s products and services would be increasingly cost prohibitive to US buyers as well as those of other nation’s. Likewise, making US and the rest of the worlds products more price competitive as well.

Not to mention it’s likelihood of cutting the US standard of living per se. “Its ability to afford imported products and thusly its traditionally high trade deficits”.

Likewise, as well, this supposed currency parity would be increasing the EU/ non-EU European and maybe Japanese standard of living ability. At least in terms of their ability to afford or consume more lower cost imported products and services.

Yet, in a counter weight way, like the US today, this newly created parity wealth would make those nation’s products and services, like the US today, more expensive and less price competitive in the export markets. Thereby, impacting potentially and eventually their trade deficits, not to mention equally impacting and not so unsubstantially, their market competitiveness, growth, national income and job creation or loss.

The question, in my often backwards mind, would be, could or would the European and Japanese markets adapt to this increased ability for a higher standard of living and step up their level of consuming and or absorbing the world’s flow of goods and service, by “consuming” enough of the now cheaper products and services so as to not effect a world economic impact of lost growth, decreasing employment and export opportunities.

While, similarly, at the same time, trying to maintain a competitive export position and balanced trade deficit. Especially given this new parity’s induced export price disadvantaged and the likelihood of their facing maybe as innovative and effective product and or services competition from the US and other nations, whose products would then be more competitively priced.

Just a whimsical thought for discussion?

[massein]

Maybe I am all wet here but knowing for years the Yuan has been complained about as being undervalued meaning it is less in parity to other currency. It seems it needs to increase per USD to have parity. Likewise the Thai Bhat.

I think you have this backwards. If the yuan is undervalued against the dollar at 8.06 yuan per USD, then the yuan needs to move towards a lower number per dollar to achieve equilibrium.

My reading of the Big Mac index is that if the cost of a Big Mac should be equivalent around the world, then the $3.15 that a Big Mac costs in the US should be equivalent to the approximately 10.5 RMB that the same Big Mac costs in China (in other words, 3.15 USD equals 10.5 RMB). Therefore, the yuan should be valued at 3.33 to the dollar.

Using the baht, if a $3.15 Big Mac costs roughly 60 THB ($1.51 at 39.8 THB/USD), then the value of the baht against the dollar should be 19.05 THB/USD.

But the Big Mac index can be very misleading due to many local factors that do not get taken into account in such a rough measure. The Economist freely admits this.

Anybody else have a different interpretation?

-------------

Ustrader-

If I have this arse backwards then the Euro would need to be 1.35 and the Bhat around 20 per USD. Which is counter intuitive to what I have read.

Ovenman-

I think you have this backwards.

Hmm! Looking at it now, I see that what you are saying makes some sense.

I went back and read how the Yuan changed downward, in number, from somewhere around 8.26 Yuan/USD to the 8.06 range and everyone was saying it was a positive step in the right direction towards balancing the Yuan to a more fairly priced level against other currency. Particularly the USD and the Euro.

So given this, would you also assume the opposite is true of the EURO? It should be around 1.35 Euro's per USD or $.7407 USD per Euro, making European products and services much more expense to the world and providing European’s an extra ability to “consume” the rest of the worlds cheaper products?

Likewise, I agree currency is far more multi-dimensional in the factors that affect it than the Big Mac Index. But Mac Index is, in a simple way, a near notion of what true parity in currencies would be like if there was such a thing.

Interesting proposition though. I think this currency parity supposition would go a long way in cutting the US trade deficits as both Asian and Europe’s products and services would be increasingly cost prohibitive to US buyers as well as those of other nation’s. Likewise, making US and the rest of the worlds products more price competitive as well.

Not to mention it’s likelihood of cutting the US standard of living per se. “Its ability to afford imported products and thusly its traditionally high trade deficits”.

Likewise, as well, this supposed currency parity would be increasing the EU/ non-EU European and maybe Japanese standard of living ability. At least in terms of their ability to afford or consume more lower cost imported products and services.

Yet, in a counter weight way, like the US today, this newly created parity wealth would make those nation’s products and services, like the US today, more expensive and less price competitive in the export markets. Thereby, impacting potentially and eventually their trade deficits, not to mention equally impacting and not so unsubstantially, their market competitiveness, growth, national income and job creation or loss.

The question, in my often backwards mind, would be, could or would the European and Japanese markets adapt to this increased ability for a higher standard of living and step up their level of consuming and or absorbing the world’s flow of goods and service, by “consuming” enough of the now cheaper products and services so as to not effect a world economic impact of lost growth, decreasing employment and export opportunities.

While, similarly, at the same time, trying to maintain a competitive export position and balanced trade deficit. Especially given this new parity’s induced export price disadvantaged and the likelihood of their facing maybe as innovative and effective product and or services competition from the US and other nations, whose products would then be more competitively priced.

Just a whimsical thought for discussion?

As a happy expat living in Thailand, The saving we get here is in delievery of services cost. if you don't believe this go to the rim ping market and see how much higher the products that are gear to western tastes. a pound of bacan should cost the same throughout thailand , but thhs does not hold true

[usatrader]

As a happy expat living in Thailand, The saving we get here is in delievery of services cost. if you don't believe this go to the rim ping market and see how much higher the products that are gear to western tastes. a pound of bacan should cost the same throughout thailand , but thhs does not hold true

As to the latter, could not agree more. The price should be the same for all. But it is not in most of the world were tourist and or forigners or travelers are present . They always pay more just about everywhere one goes.

In the 27 years I have been coming to Thailand, there has always been a dual pricing system. Nary one close to the other in any purchase 99.9% of the time. There has always been the Farang price and the Thai price on everything.

I never buy anything I want directly. When I and my wife built our homes outside Chiang Mai and in Bangkok, I never was visable nor negotiated anything myself. Even in stores or markets I shop and then send others in my Thai family to negotiate and buy what I want.

This has worked for me all these years and I can say has saved me lots of money.

Look at the price of the same things in Phuket and Patty beach verse Rayong or say Chiang Mai verse Lamphun. Where in one place there are many farang and the prices are higher. Were in the other place there are fewer to few farang and if a thai buys it, the prices are less.

[Martin]

Yes, 'usatrader', we do the same.

My wife suffers periodic attacks of mansion-expansion-itis (though this winter it is the building of a monk's cabin at a little temple in the forest ready for our eldest to go and do his 'monk for a month').

My role is to drive her to building merchants' premises. If it is the first time we have patronised that one, I am commanded to park half a block away from the premises. She goes and makes the purchases and then calls me to drive up and collect them.

My reward is to see their faces, when they realise she is 'mia farang', but they have given the prices appropriate to 'mia thai'.

However, she reads thoughts and tells them "Same prices next time, or no sale" and sometimes I catch a glimpse of a look of guilt.

She has an assertive spiel that she uses on any (usually Chinese) who try overcharging.

She points out how that will cause farangs to get brassed off with Thailand and stop coming, and then their bit of greed will make everybody worse off.

She also gives any cop, who tries holding his hand out, a real flea in his ear about spoiling the image of Thailand.

"We'll take the ticket and pay the fine at your Police HQ", she tells them.

They never give us the ticket, though, as they don't want the big boss hearing about their little try-on.

And yet there are those who post on here and reckon all from Issaan are thick, just because their parents couldn't afford to send them to be schooled.

I have come to the conclusion that my wife did better than go to school, where all that aquisition of knowledge impairs access to learning opportunities.

[JimsKnight]

Yes, 'usatrader', we do the same.

My wife suffers periodic attacks of mansion-expansion-itis (though this winter it is the building of a monk's cabin at a little temple in the forest ready for our eldest to go and do his 'monk for a month').

My role is to drive her to building merchants' premises. If it is the first time we have patronised that one, I am commanded to park half a block away from the premises. She goes and makes the purchases and then calls me to drive up and collect them.

My reward is to see their faces, when they realise she is 'mia farang', but they have given the prices appropriate to 'mia thai'.

However, she reads thoughts and tells them "Same prices next time, or no sale" and sometimes I catch a glimpse of a look of guilt.

She has an assertive spiel that she uses on any (usually Chinese) who try overcharging.

She points out how that will cause farangs to get brassed off with Thailand and stop coming, and then their bit of greed will make everybody worse off.

She also gives any cop, who tries holding his hand out, a real flea in his ear about spoiling the image of Thailand.

"We'll take the ticket and pay the fine at your Police HQ", she tells them.

They never give us the ticket, though, as they don't want the big boss hearing about their little try-on.

And yet there are those who post on here and reckon all from Issaan are thick, just because their parents couldn't afford to send them to be schooled.

I have come to the conclusion that my wife did better than go to school, where all that aquisition of knowledge impairs access to learning opportunities.

Not all, but a certain number are. From the sound of your wife it would be helpful for the good of all expats here if there were more like her!

And yes you do have a strong argument on the Over education stunts common sense/learning lifes lesson theory.

A thai worker at our company had education and degrees. but was thick as sht when it came to business and his english was worse (despite being an english teacher!!!!) than a typical half year bar girl!

[usatrader]

Not all, but a certain number are. From the sound of your wife it would be helpful for the good of all expats here if there were more like her!

And yes you do have a strong argument on the Over education stunts common sense/learning lifes lesson theory.

A thai worker at our company had education and degrees. but was thick as sht when it came to business and his english was worse (despite being an english teacher!!!!) than a typical half year bar girl!

Given the reality of individual differences verse group difference, I would take exception to such broad generalities as is implied in the above statement though well intend I am sure.

I have found that the inability of foreigners, be they Europeans working in the US or visa versa or otherwise through out the world, to grasp the way of thinking and conduct of the native populations is often, in the 95 percentile range, biased towards their native ways of thinking, behaving and conducting all manners of things. Nearly always assuming, as is natural, to be more effectual, more rational and as implied, more intelligent, in all manner of things.

As academic degrees do to not measure de facto accomplish neither does being more affluent or from a more affluent or privileged society measure de facto success and accomplishment without question or exception.

A runner in a 100 meter race who starts at 50 meters surely arrives at the finish line first and quicker but this accomplishment is no measure of the lad who needed to start the run at 150 meters to eventually accomplishes the feat hey!

As to the topic of dual standards in pricing for foreigners/Tourist vs. natives, I thing any person who honestly examines the subject fairly would find the practice is as prevalent equally in America, Europe, Asia, The Pacific nations and Africa.

Taking advantage of the unawares, weak and unknowing is as humanly common as the traits of greed, egotism and feelings of native self superiority. hey?