Sigh Of Relief As The U S Avoids Fiscal Cliff: Thai Economy

[webfact]

Sigh of relief as the US avoids fiscal cliff

Sucheera Pinijparakarn,

Nongnapas Maipanich,

Suphannee Pootpisut

The Nation

Deal expected to benefit Thai exports through greater demand, more stable greenback

BANGKOK: -- The US lawmakers' decision to avert the "fiscal cliff" has given the Thai economy short-term relief, as this can foster export demand and return some stability to the global financial markets.

Boonchai Charassangsomboon, executive director of the macroeconomic policy bureau at the Finance Ministry, said as the US could avert the "fiscal cliff" its economic recovery would continue, and that as the US was the world's largest economy it would contribute to global growth.

If there is no renewed shock in Europe, the global economy is expected to expand 3.9 per cent this year, up from an estimated 3.5 per cent growth last year. In this situation, Thailand's exports in US dollar terms are expected to expand by 10 per cent this year, up from 3.9 per cent in 2012.

"However, we still have to watch how US politicians will negotiate on spending cuts in the next two months," he said.

The Finance Ministry has projected that the Thai economy will expand 5 per cent in 2013, decelerating from an estimated growth of 5.7 per cent last year. Last year's growth was largely driven by a substantial rise in domestic consumption.

Kulaya Tantitemit, senior expert on macroeconomic policy at the Fiscal Policy Office, expects further capital inflows to Asia, including Thailand.

"The baht will slightly edge up against the US dollar. It should be 30.7 per dollar on average this year," she said.

Charl Kengchon, managing director of Kasikorn Research Centre, said that the approval of the bill gave a big boost to the global economy. The centre anticipates 10- to 15-per-cent growth in exports this year, allowing the Thai economy to expand 5 per cent.

"The resolution of the 'fiscal cliff' issue also eases the volatility of the US dollar, which will benefit exporters," Charl said, adding that this approval is a good sign that US lawmakers will be able to reach a deal on the debt ceiling and spending cuts in the next two months.

In 2011, the world's largest economy imported goods worth $27 billion (Bt819 billion) from Thailand, 11.8 per cent of the Kingdom's exports.The baht yesterday reached the strongest level in 10 months. After gaining 3.1 per cent in 2012, the currency rallied 0.7 per cent to 30.38 per dollar in Bangkok from 30.60 on December 28, a level not seen since February, according to data compiled by Bloomberg.

Thai stocks yesterday joined the global rally. While European stocks rallied to a 19-month high, the Stock Exchange of Thailand Index on its first trading day in 2013 rose 1.11 per cent to 1,407.45 points, a level unseen in 16 years and 11 months. While saying that the market was boosted by the US lawmakers' decision, SET president Charamporn Jotikasthira warned investors to beware of risks as the market's price to earnings ratio was as high as 18.25 times.

Analysts previously were concerned that an automatic tax rise and spending cuts as austerity measures could lead the US economy to a 0.5-per-cent contraction. It was forecast that the fiscal cliff would spike unemployment to 9.1 per cent from its current level of 7.9 per cent. If all policies are extended, the economy will grow 2.4 per cent.

The US Senate, in the first hours of January 1, approved the proposals to head off more than $600 billion in tax increases and spending cuts set to start taking effect yesterday. Just an hour before the policies would take effect, the US House of Representatives passed the budget legislation, breaking a year-long impasse. President Barack Obama said he would sign the bill after the 257-167 vote.

The bill will delay by two months automatic spending cuts scheduled to start this month as Republican lawmakers abandoned their effort to add further reductions to the deal. It reinstates tax cuts that expired on December 31 on taxable income of individuals up to $400,000 and of married couples of up to $450,000, leaving top earners with a marginal tax rate of 39.6 per cent, up from 35 per cent last year.

Why the 'fiscal cliff' matters

- Under the January 1 deal, taxes will remain the same for the middle class and only be increased for individuals earning more than US$400,000 (Bt12.15 million) and couples earning more than $450,000 a year. Spending cuts totalling $24 billion over two months aimed at the Pentagon and domestic programmes will be deferred.

- The White House and lawmakers will plunge into a new round of budget brinkmanship, which is certain to revolve around Republican calls to rein in the cost of Medicare and other benefit programmes.

- Without a deal, $600 billion (in the form of spending cuts and tax increases) would be sucked out of the economy, plunging the United States into recession.

- In 2011, the world's largest economy imported goods worth $27 billion from Thailand, or 11.8 per cent of the total.

- KResearch forecasts 10- to 15-per-cent export growth for Thailand thanks to the January 1 deal, allowing Thailand to register 5-per-cent economic growth in 2013.

-- The Nation 2013-01-03

[theblether]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

[rotary]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

Thats a great idea. We need to cut out all of these cash donations to other countries and wenshould be in good shape.

[kblaze]

Cut spending??? Are you crazy?? How will we pay for entitlements? Bloated government agencies? Useless social programs that tell US families how to raise their kids?

Thats an evil proposition Blether, no no we need to raise taxes on these evil rich people. How dare they be rich! The only way they got rich was through evil means! Economic success will definitely come from taking money from the rich and giving it the not rich.

[bkk_mike]

They've not even properly avoided the fiscal cliff yet.

They're already hitting the debt ceiling (again), so expect, in a month or twos time, when they can't shuffle figures around to avoid it any more, another "debate" on increasing the debt ceiling that, again, goes to the wire.

The politicians on the right don't seem to realise that there's no choice in raising the debt ceiling when you hit it, as you need to borrow enough to continue paying interest on the money you've already borrowed. If you don't raise it, you default on your bonds, and turn into Argentina...

It would be a different matter obviously if the US was running a fiscal surplus..., but it's not...

[RogueLeader]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

That's a brilliant idea. Almost everyone in economics agrees that slack demand forms the main downward pressure on growth, so removing more spending from the economy is sure to help.

Where will the demand come from if governments stop spending? Do you imagine that there are vast reserves of private cash just waiting to be spent if only the government would stop putting money into circulation?

[RogueLeader]

They've not even properly avoided the fiscal cliff yet.

The 'fiscal cliff' does not exist except as a terrifying story of the type that parents tell their children when they want them to behave and shut up:

http://www.nakedcapitalism.com/2012/12/fiscal-cliff-propaganda-watch-business-owner-says-the-fiscal-cliff-made-him-fire-his-son.html

Don't believe the hype.

[MrRealDeal]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

That's a brilliant idea. Almost everyone in economics agrees that slack demand forms the main downward pressure on growth, so removing more spending from the economy is sure to help.

Where will the demand come from if governments stop spending? Do you imagine that there are vast reserves of private cash just waiting to be spent if only the government would stop putting money into circulation?

That would make sense only if government spending didn't come from the pockets of the people AND not produce much of anything ..... government spending just takes from 1 person and gives to another it doesnt create wealth

[theblether]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

That's a brilliant idea. Almost everyone in economics agrees that slack demand forms the main downward pressure on growth, so removing more spending from the economy is sure to help.

Where will the demand come from if governments stop spending? Do you imagine that there are vast reserves of private cash just waiting to be spent if only the government would stop putting money into circulation?

See.....that's the Alice in Wonderland crap that caused this problem in the first place.

Governments spending money they don't have to create false "demand" and a false sense of prosperity......and kick the debt down the road.

It's Mad Hatter economics.........spending money you don't have in the hope of what??? The Tooth Fairy leaving $16 trillion below the pillow???

Madness.....Gordon Gecko said greed is good......the USA soared after the Great Depression, the American public 100% financed the War Debt, the US relied upon nobody for help.

It would be bettet to let companies go boom than write checks you can't cash.......Gecko was correct, greed is good......but the fear of being broke is a fabulous motivator.

[MrRealDeal]

You would think a spending freeze would be a no brainer at this point.

[djayz]

They've not even properly avoided the fiscal cliff yet.

They're already hitting the debt ceiling (again), so expect, in a month or twos time, when they can't shuffle figures around to avoid it any more, another "debate" on increasing the debt ceiling that, again, goes to the wire.

The politicians on the right don't seem to realise that there's no choice in raising the debt ceiling when you hit it, as you need to borrow enough to continue paying interest on the money you've already borrowed. If you don't raise it, you default on your bonds, and turn into Argentina...

It would be a different matter obviously if the US was running a fiscal surplus..., but it's not...

From what I've read, Argentina isn't doing too bad now...

[smedly]

it seems the Thai baht is still following the dollar

euro and sterling took a serious dip

[RogueLeader]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

That's a brilliant idea. Almost everyone in economics agrees that slack demand forms the main downward pressure on growth, so removing more spending from the economy is sure to help.

Where will the demand come from if governments stop spending? Do you imagine that there are vast reserves of private cash just waiting to be spent if only the government would stop putting money into circulation?

See.....that's the Alice in Wonderland crap that caused this problem in the first place.

Governments spending money they don't have to create false "demand" and a false sense of prosperity......and kick the debt down the road.

It's Mad Hatter economics.........spending money you don't have in the hope of what??? The Tooth Fairy leaving $16 trillion below the pillow???

Madness.....Gordon Gecko said greed is good......the USA soared after the Great Depression, the American public 100% financed the War Debt, the US relied upon nobody for help.

It would be bettet to let companies go boom than write checks you can't cash.......Gecko was correct, greed is good......but the fear of being broke is a fabulous motivator.

The USA soared after the great depression largely due to Kenynesian counter-cyclical spending. It also helped that they didn't need to spend much on rebuilding. The US made fortunes from the war and suddenly had more money than they knew how to spend.

Thailand does strange things to people. Perhaps it'd be good for you to consider whether you'd rather have a treatable life-threatening condition in Bangkok or Stockholm.

[RogueLeader]

That would make sense only if government spending didn't come from the pockets of the people AND not produce much of anything ..... government spending just takes from 1 person and gives to another it doesnt create wealth

Are you going to explain what it is about private spending that magically makes it better than government spending? The propaganda you've been listening to hasn't really helped.

[mccw]

That would make sense only if government spending didn't come from the pockets of the people AND not produce much of anything ..... government spending just takes from 1 person and gives to another it doesnt create wealth

Are you going to explain what it is about private spending that magically makes it better than government spending? The propaganda you've been listening to hasn't really helped.

There's productive government spending, even of through debt like the marshal plan or New Deal to build roads, ports, houses, power plants and such....... And then there's mortgage backed securities ......... and war where you don't even get any spoils like the good ol days of empire.

In theory- The difference between private and public spending is private spending must be self financing and there fore productive since if it is not it goes bust, which is what should happen so new productive biz can emerge and continue leading to ever greater and stronger productivity. Where as government spending / propping up failed/ failing buisinesses can just go on and on unproductively because its financed by the public through taxes until the tax burden becomes so greate people revolt or by money printing so great that the whole countries money system collapses. If the governments of such spending are not too bold with the unproductivity then they can just trudge along for decades not really going anywhere. But I'd say adding 15trillion in debt in just a few years is pretty dam_n bold!

[Naam]

They've not even properly avoided the fiscal cliff yet.

They're already hitting the debt ceiling (again), so expect, in a month or twos time, when they can't shuffle figures around to avoid it any more, another "debate" on increasing the debt ceiling that, again, goes to the wire.

The politicians on the right don't seem to realise that there's no choice in raising the debt ceiling when you hit it, as you need to borrow enough to continue paying interest on the money you've already borrowed. If you don't raise it, you default on your bonds, and turn into Argentina...

It would be a different matter obviously if the US was running a fiscal surplus..., but it's not...

From what I've read, Argentina isn't doing too bad now...

that depends on the perspective. i wouldn't call 28% inflation "not too bad" and that ten years after defaulting and getting rid of ~$80 billion by restructuring its debt with a 75% "haircut".

[Naam]

It's only delaying the inevitable......the US will need to cut spending. I remember George Bush senior introducing a hiring freeze back in 89 / 90......anyone else remember that? To me the US has to introduce a spending freeze, as some of the figures being bandied about are staggering.

So don't cut, just freeze and allow inflation to wipe out the excess spending in departments........department chiefs won't be long getting rid of the wasteful spending when they are forced to.

Thats a great idea. We need to cut out all of these cash donations to other countries and wenshould be in good shape.

what's needed to cut out are the "donations" to other countries in form of cluster bombs, hellfire rockets, depleted uranium ammunition, bunker busters and GI tourism to far away places.

[kblaze]

That would make sense only if government spending didn't come from the pockets of the people AND not produce much of anything ..... government spending just takes from 1 person and gives to another it doesnt create wealth

Are you going to explain what it is about private spending that magically makes it better than government spending? The propaganda you've been listening to hasn't really helped.

There's productive government spending, even of through debt like the marshal plan or New Deal to build roads, ports, houses, power plants and such....... And then there's mortgage backed securities ......... and war where you don't even get any spoils like the good ol days of empire.

In theory- The difference between private and public spending is private spending must be self financing and there fore productive since if it is not it goes bust, which is what should happen so new productive biz can emerge and continue leading to ever greater and stronger productivity. Where as government spending / propping up failed/ failing buisinesses can just go on and on unproductively because its financed by the public through taxes until the tax burden becomes so greate people revolt or by money printing so great that the whole countries money system collapses. If the governments of such spending are not too bold with the unproductivity then they can just trudge along for decades not really going anywhere. But I'd say adding 15trillion in debt in just a few years is pretty dam_n bold!

mccw is right on the money here in the second paragraph.

Rogue - have you every worked for or with the government in any capacity?

They say experience is the greatest teacher and my small experience working "for" the govt when I was 18 taught me a lot. I worked for a moving company in California that specialized in office moves. My hourly rate as a "helper" was 11 dollars an hour. The work wasn't easy, but not that bad and I (and most my coworkers) were fine with the pay rate. 2 months into the job we got a gig working for a govt agency near the capital in Sacramento. Just a standard office move, chairs, desks, breakaway walls. Well lo and behold I am informed that I will be paid 23 dollars an hour for this work as that was the "prevailing wage" at the time (apparently unions that work with govt set these). I couldn't believe it, wow how awesome I thought. 18 years old and pretty naive. Lo and behold a couple of the drivers (i was only a "helper") knew the lady from the govt agency that contracted us and had partied with her before.

What happened in the end? Well from what I remember we worked for about 2 weeks, starting 9 and finishing around 2 pm. But because the lady liked us so much she put down our finishing time as 6pm. How nice. I made more money than I ever had before. After those two weeks I remember thinking...wow I wish I worked for the govt...

There are many conclusions that can be drawn from this experience, but the one that has stuck with me is that govt agencies will never, ever be as efficient and productive as private business. You work harder and better when there is something on the line, when you have a stake in the game..e.g. private business competition. But government employees don't have that (unless you consider "helping the nation" their stake in the game)

My experience as an 18 year old kid getting paid more than double his normal pay rate and getting free hours because the lady had no stake in the game except to make us happy has always stuck with me.

So yeah there is a difference between govt spending and private spending. One is better than the other.

Edited January 4, 2013 by kblaze

[Rancid]

The US has agreed to entend their deficit another 3 trillion dollars, that certainly is good news as the money printing presses have now been changed to water cooled models. Can't possibly see how that could end up badly, stock markets will rise, HFT will make a killing, what else is there to an economy except making a percentage off other peoples work?

[mccw]

The US has agreed to entend their deficit another 3 trillion dollars, that certainly is good news as the money printing presses have now been changed to water cooled models. Can't possibly see how that could end up badly, stock markets will rise, HFT will make a killing, what else is there to an economy except making a percentage off other peoples work?

Link please

[Rancid]

The US has agreed to entend their deficit another 3 trillion dollars, that certainly is good news as the money printing presses have now been changed to water cooled models. Can't possibly see how that could end up badly, stock markets will rise, HFT will make a killing, what else is there to an economy except making a percentage off other peoples work?

Link please

I believe the number was 3 trillion over the nect 10 years, recall I read on Zerohedge, but hey what is a trillion here or there when already buried so deep in debt? That excludes of course the debt they will run up at the next cliff, and the one after...

Regardless the bankers that own the government will make zillions, just have to wait for the trickle down effect then everything will be be fine, Ben told me so.

[mccw]

The US has agreed to entend their deficit another 3 trillion dollars, that certainly is good news as the money printing presses have now been changed to water cooled models. Can't possibly see how that could end up badly, stock markets will rise, HFT will make a killing, what else is there to an economy except making a percentage off other peoples work?

Link please

I believe the number was 3 trillion over the nect 10 years, recall I read on Zerohedge, but hey what is a trillion here or there when already buried so deep in debt? That excludes of course the debt they will run up at the next cliff, and the one after...

Regardless the bankers that own the government will make zillions, just have to wait for the trickle down effect then everything will be be fine, Ben told me so.

I think what your talking about is the estimated increase of national debt over the next 10years under the recently agreed budget; but the legal "debt ceiling" has been reached already, only by some accounting tricks is the debate given a few weeks for congress to legalise an extention / increase in the amount allowed to be borrowed by the government. This extention is what I thought you were talking about but I couldn't was sure it hadn't happened yet- seems I just mistook your comment about the budget for one about the debt ceiling.

[MrRealDeal]

That would make sense only if government spending didn't come from the pockets of the people AND not produce much of anything ..... government spending just takes from 1 person and gives to another it doesnt create wealth

Are you going to explain what it is about private spending that magically makes it better than government spending? The propaganda you've been listening to hasn't really helped.

There's productive government spending, even of through debt like the marshal plan or New Deal to build roads, ports, houses, power plants and such....... And then there's mortgage backed securities ......... and war where you don't even get any spoils like the good ol days of empire.

In theory- The difference between private and public spending is private spending must be self financing and there fore productive since if it is not it goes bust, which is what should happen so new productive biz can emerge and continue leading to ever greater and stronger productivity. Where as government spending / propping up failed/ failing buisinesses can just go on and on unproductively because its financed by the public through taxes until the tax burden becomes so greate people revolt or by money printing so great that the whole countries money system collapses. If the governments of such spending are not too bold with the unproductivity then they can just trudge along for decades not really going anywhere. But I'd say adding 15trillion in debt in just a few years is pretty dam_n bold!

mccw is right on the money here in the second paragraph.

Rogue - have you every worked for or with the government in any capacity?

They say experience is the greatest teacher and my small experience working "for" the govt when I was 18 taught me a lot. I worked for a moving company in California that specialized in office moves. My hourly rate as a "helper" was 11 dollars an hour. The work wasn't easy, but not that bad and I (and most my coworkers) were fine with the pay rate. 2 months into the job we got a gig working for a govt agency near the capital in Sacramento. Just a standard office move, chairs, desks, breakaway walls. Well lo and behold I am informed that I will be paid 23 dollars an hour for this work as that was the "prevailing wage" at the time (apparently unions that work with govt set these). I couldn't believe it, wow how awesome I thought. 18 years old and pretty naive. Lo and behold a couple of the drivers (i was only a "helper") knew the lady from the govt agency that contracted us and had partied with her before.

What happened in the end? Well from what I remember we worked for about 2 weeks, starting 9 and finishing around 2 pm. But because the lady liked us so much she put down our finishing time as 6pm. How nice. I made more money than I ever had before. After those two weeks I remember thinking...wow I wish I worked for the govt...

There are many conclusions that can be drawn from this experience, but the one that has stuck with me is that govt agencies will never, ever be as efficient and productive as private business. You work harder and better when there is something on the line, when you have a stake in the game..e.g. private business competition. But government employees don't have that (unless you consider "helping the nation" their stake in the game)

My experience as an 18 year old kid getting paid more than double his normal pay rate and getting free hours because the lady had no stake in the game except to make us happy has always stuck with me.

So yeah there is a difference between govt spending and private spending. One is better than the other.

I wasn't even going to try and explain it to him but your point is where I was going to try ..... it's not a union set wage . it's called Davis Bacon wages ..... One of the main reasons gov building and spending is so mush less efficent than private spending ..... In the private sector you would negoitate for the best price you can as your trying to turn a profit and you want to spend as little as possible ..... In the government world their are Laws in place such as the Davis Bacon laws that require you to pay more than the work is worth ..... so obviously when you pay to much to have things done it's not as good of an expendature as when you don't.

Davis Bacon wages are a federal Law that may have started with a Union lawsuit but I say they are not union because everyone has to be paid those wages weather they are in a union or not when working on Federal property. Like you when I was a kid I got 11 per hour as a painter , we got a contract to paint a Wall owned by the Federal Gov and poof 27.50 per hour to paint the same kind of wall I was painting the day before.

Edited January 5, 2013 by MrRealDeal

[MrRealDeal]

As a side note this trillion dollar coin scam has got to be pushing the limits of what the world will tolerate ...... It's pretty funny for now but if it actually happens god only knows what comes next.