Thailand To Avoid Currency Fight As Shadow Of 1997 Crisis Looms

[hellodolly]

that was a totally different situation than today

YEP - Obama's good friend George Soros was then manipulating Asian currency - today, it is European and American currency...

welcome to the fox news viewer for the day.

And what would have been the US federal deficit if George junior bush hadn't written everyone a cheque on being elected and gone to war in iraq?

I'll give you a clue. Its between minus one usd and plus one usd.

Soros ruined the world. My god. As though the politicians didn't do anything.

Its good to know there are economically illiterate people all over the world, not just confined to Thailand.

Not to mention recent papers that were released that show Bush knew that a recession was coming and chose to do nothing.

You won't get that on fox.

[MAJIC]

Thailand has been doing a very good job of controlling the Baht since 1997,what has happened now to change that?

[submaniac]

^^ That they forgot what happened in 1997. Seriously, that's what I think. They completely forgot about what happened in 1997 so they're doing it again. There is a short memory span. In 1997, the Western currencies weren't doing badly back then. Now the Euro is in crisis and the U.S. currency got tanked because of the real estate mess. The instability in the West made the Thai currency appear relatively stable, or else there would have been signs of the problem with the Thai baht earlier. And now there is a 300 baht minimum wage, which will mean that Thai products will be more expensive. And there is constant construction of condos, offices, etc, with plenty of the units being empty. I just can't see how this can keep out without a crash to "normalize" things to where they should be.

[Robby nz]

Seems to me there is a lot of debt out there both personal and national.

I see a load of new vehicles, no just Govt sponsored 100k jobs but bigger SUV types and wonder how many have been bought on some kind of loan.

In the little place I live 2 loan Co's have turned up and opened offices in the last couple of months so there must be business for them even in competition with all the banks, or are they giving loans to people who have been refused by the banks?

Even here there are new places being built while older ones remain empty. just yesterday the Mrs came home and told me she had been offered first option on a couple of houses, one quite new house where the renters hadnt paid for a few months and the owner has given them 2 months to pay or leave, Price 400kb

The other a new house not yet complete on 200Sq wa of land where the person building it has run out of money and wants to sell to get their money back, Price 700kb.

On the national side the 300b thing has yet to show just what it will do but assuming tax is on a % of earnings it should return the Govt more income tax, but then I hear they have given the rich some tax breaks so possibly that will ballance out. What that increase is spent on will also have an influance.

If I understand correctly the 100kb on new cars has yet to be paid out, I doubt all the 'tablets' have been paid for, then there is the increasing rice mountain, etc.

We are told the Govt will borrow another 2.2 trillion B and the lady in charge (on Tele with a big smile) said the national debt was not as big as some countries and was 'manageable' whatever that means. And not as big as some countries like the USA for instance?

We are also told that investment is pouring in to the country because of good returnes but the interest rates on TD.s have dropped in the last few months from (SCB) 3.85% for 22 months to 2.75% for 5 months, Interst rates are much higher in other much safer countries like NZ and OZ so why come here?

So where are the good returnes or is this all speculation type short term investment, stock market etc. Yea I know Toyota are building here but what incentives have they been offered?

Found out many years ago that being in debt is not a good thing but I suspect an increasing number of people are doing just that, and the country also.

[chiang mai]

^^ That they forgot what happened in 1997. Seriously, that's what I think. They completely forgot about what happened in 1997 so they're doing it again. There is a short memory span. In 1997, the Western currencies weren't doing badly back then. Now the Euro is in crisis and the U.S. currency got tanked because of the real estate mess. The instability in the West made the Thai currency appear relatively stable, or else there would have been signs of the problem with the Thai baht earlier. And now there is a 300 baht minimum wage, which will mean that Thai products will be more expensive. And there is constant construction of condos, offices, etc, with plenty of the units being empty. I just can't see how this can keep out without a crash to "normalize" things to where they should be.

Today is nothing like 1997, the bad debt ratio is far far lower and lending ratio's are managed/monitored by the BOT. The problem many people are having with the current boom is they still can't understand that a "third world" country like Thailand, complete with its bad sidewalks and poor policing levels, can actually have a vibrant eceonomy when many/most of the western ones are decaying.

[Thai at Heart]

^^ That they forgot what happened in 1997. Seriously, that's what I think. They completely forgot about what happened in 1997 so they're doing it again. There is a short memory span. In 1997, the Western currencies weren't doing badly back then. Now the Euro is in crisis and the U.S. currency got tanked because of the real estate mess. The instability in the West made the Thai currency appear relatively stable, or else there would have been signs of the problem with the Thai baht earlier. And now there is a 300 baht minimum wage, which will mean that Thai products will be more expensive. And there is constant construction of condos, offices, etc, with plenty of the units being empty. I just can't see how this can keep out without a crash to "normalize" things to where they should be.

Precisely what will enable them to avoid a crash is allowing the exchange rate to move in line with the market.

In a way, greeces crisis has been caused by a currency problem. They have been allowed to borrow at Euro rates whilst being a 2nd world economy.

The crash happens when you distort the market mechanism. Allow the exchange rate to move and you don't store up the pressure to make the pot boil over.

[submaniac]

Sorry i disagree. Bad debt ratio is ok now because people have not defaulted yet. When I say this I am thinking of the United States, and if it can happen to the USA it can happen in Thailand. The United States had the mortgage meltdown. People were being approved for loans based upon very little proof of income. The interest rate was low and people were buying on variable rate interest. Since anyone could get a loan and essentially didn't have to prove they had any money...the home prices went up. People who could legitimately make mortgage payments were competing with people who could not. The people who should have not been loaned money in the first place defaulted and homes went in foreclosure. The foreclosures caused home prices to drop (because the banks were auctioning them off just to recoup any money) so the people who could afford the loans and make the payments were now stuck with payments for a home worth much less. Then they started walking away. The effect snowballed. The united stated is still not fully recovered. The Thai baht was once tied to the US dollar. And not so many years ago the us exchange rate was higher in Thailand as well as the rest of the world. Why did he dollar to down? Largely due to the mortgage crisis.

The way it is in Thailand is that anyone can get a loan. My cousin got one. 2 million baht requires little verification these days. It's all fine and well when everyone makes payments. However a lot of these people should never have got loans. Then they will default. Then you will have a glut of condos on the market as the banks try to recover. This will cause the price of other condos to go down. Right now there is no shortage of condos or new developments in Thailand. Certain places will always be immune to sudden price drops just because there is little land available. Think New York, Tokyo, or Hong Kong. Thailand is not like those places. Bangkok and pattaya there is still land available and you can build out further from the city center.

Then people come on this forum and say well this talk about a bubble is rubbish I bought way back when and my condo/ property has increased in value. Well yes, the bubble hasn't burst yet.

How do you think it's going to keep going up like this without the bubble bursting? Any idiot can get a loan in Thailand these days. People are buying condos on credit to speculate that the price will go up and not necessarily living in them. When you're living in a place there's more incentive to come up with your mortgage payment. Not so much if its a speculative investment.

So the builders are building because the buyers can get loans which pays them off. The buyers buy the condos and are just making small payments to the bank every month knowing with the hopes the property will go up in price. Meanwhile there is till plenty of land available and still new construction. Once the people who bought a lot of these places start defaulting its going to create a snowball effect.

I don't know how people can ignore the signs here. If you look around bkk you can still see the unfinished ghost buildings from 1997. If you're saying it won't happen in Thailand realize it actually DID already happen on the USA. There's just no way Thailand can keep up the building and loan boom indefinitely and the bubble will eventually have to burst.

For the expats I would hold off buying property right now and just wait for some good deals in the future and a better exchange rate.

Edited January 26, 2013 by Scott
formatting

[Thai at Heart]

Sorry i disagree. Bad debt ratio is ok now because people have not defaulted yet. When I say this I am thinking of he United States, and if it can happen on the USA it can happen in Thailand. The United States had he mortgage meltdown. People were being approved for loans based upon very little proof of income. The interest rate was low and people were buying on variable rate interest. Since anyone could get a loan and essentially didn't have to prove they had any money...the home prices went up. People who could legitimately make mortgage payments were competing with people who could not. The people who should have not been loaned money in the first place defaulted and homes went in foreclosure. The foreclosures caused home prices to drop (because the banks were auctioning them off just to recoup any money) so the people who could afford the loans and make the payments were now stuck with payments for a home worth much less. Then they started walking away. The effect snowballed. The united stated is still not fully recovered. The Thai baht was once tied to the US dollar. And not so many years ago the us exchange rate was higher in Thailand as well as the rest of the world. Why did he dollar to down? Largely due to the mortgage crisis.

The way it is in Thailand is that anyone can get a loan. My cousin got one. 2 million baht requires little verification these days. It's all fine and well when everyone makes payments. However a lot of these people should never have got loans. Then they will default. Then you will have a glut of condos on the market as the band try to recover. This will cause the price of other condos to go down. Right now here is no shortage of condos or new developments in Thailand. Certain places will always be immune to sudden price drops just because there is little land available. Think New York, Tokyo, or Hong Kong. Thailand is not like those places. Bangkok and pattaya there is still land available and you can build out further from the city center.

Then people come on this forum and say well this talk about a bubble is rubbish I bought way back when and my condo/ property has increased in value. Well yes, the bubble hasn't burst yet.

How do you think it's going to keep going up like this without the bubble bursting? Any idiot can get a loan in Thailand these days. People are buying condos on credit to speculate that the price will go up and not necessarily living in them. When you're living in a place there's more incentive to come up with your mortgage payment. Not so much if its a speculative investment.

So the builders are building because the buyers can get loans which pays them off. The buyers buy the condos and are just making small payments to the bank every month knowing with the hopes the property will go up in price. Meanwhile there is till plenty of land available and still new construction. Once the people who bought a lot of these places start defaulting its going to create a snowball effect.

I don't know how people can ignore the signs here. If you look around bkk you can still see the unfinished ghost buildings from 1997. If you're saying it won't happen in Thailand realize it actually DID already happen on the USA. There's just no way Thailand can keep up the building and loan boom indefinitely and the bubble will eventually have to burst.

For the expats I would hold off buying property right now and just wait for some good deals in the future and a better exchange rate.

And the entire system was created because some clever bankers thought that if you sprinkle just a few percent of these dodgy loans into a mix of good ones, pay off the ratings agencies to give them a good rating, you could sell the debt onto someone else. Securitisation of sub prime mortgages. Sounds so nice, intelligent, warm and fuzzy doesn't it. All very well and good, until you realise that it isn't just a few percent that were never going to be paid but quite a significant percentage. Then you get the government to nationalise the problem, and whammo, the country is saddled with enormous debt.

It can happen anywhere, but Thailand is fairly stringent with their financing requirements for people to obtain a mortgage.

[submaniac]

Thailand is pretty stringent on their requirements for people to obtain a mortgage? Says who? Thai bankers?

If you asked me in 2006 if the us banks were stringent in requirements to get a mortgage the answer would have been yes but we have learned otherwise. Thailand? I doubt that the requirements would are more stringent than even the old USA standards. My cousin got a loan fairly easily and I know I would never have loaned him the money.

[Robby nz]

But it isnt just condos in BKK, CM, PT that will be the problem as I said I live outside the main centres and see blocks of 'town houses', one within a 100m of us where there are 20, 2 story 1 bedroom units, they are advertising them now for sale at 1mill B each.

Many of the new ve hickles I see around cost more than that and I doubt many of the proud owners have paid cash for them.

[Thai at Heart]

Thailand is pretty stringent on their requirements for people to obtain a mortgage? Says who? Thai bankers?

If you asked me in 2006 if the us banks were stringent in requirements to get a mortgage the answer would have been yes but we have learned otherwise. Thailand? I doubt that the requirements would are more stringent than even the old USA standards. My cousin got a loan fairly easily and I know I would never have loaned him the money.

Go read the offers. Interest us relatively high, and virtually every offer i can remember requires quite a significant down payment. All quite old fashioned like it used to be in the rest of the world.

Off plan purchases are a different matter, but then consider the rather sizeable margins built into the sale prices.

[chiang mai]

Sorry i disagree. Bad debt ratio is ok now because people have not defaulted yet. When I say this I am thinking of the United States, and if it can happen to the USA it can happen in Thailand. The United States had the mortgage meltdown. People were being approved for loans based upon very little proof of income. The interest rate was low and people were buying on variable rate interest. Since anyone could get a loan and essentially didn't have to prove they had any money...the home prices went up. People who could legitimately make mortgage payments were competing with people who could not. The people who should have not been loaned money in the first place defaulted and homes went in foreclosure. The foreclosures caused home prices to drop (because the banks were auctioning them off just to recoup any money) so the people who could afford the loans and make the payments were now stuck with payments for a home worth much less. Then they started walking away. The effect snowballed. The united stated is still not fully recovered. The Thai baht was once tied to the US dollar. And not so many years ago the us exchange rate was higher in Thailand as well as the rest of the world. Why did he dollar to down? Largely due to the mortgage crisis.

The way it is in Thailand is that anyone can get a loan. My cousin got one. 2 million baht requires little verification these days. It's all fine and well when everyone makes payments. However a lot of these people should never have got loans. Then they will default. Then you will have a glut of condos on the market as the banks try to recover. This will cause the price of other condos to go down. Right now there is no shortage of condos or new developments in Thailand. Certain places will always be immune to sudden price drops just because there is little land available. Think New York, Tokyo, or Hong Kong. Thailand is not like those places. Bangkok and pattaya there is still land available and you can build out further from the city center.

Then people come on this forum and say well this talk about a bubble is rubbish I bought way back when and my condo/ property has increased in value. Well yes, the bubble hasn't burst yet.

How do you think it's going to keep going up like this without the bubble bursting? Any idiot can get a loan in Thailand these days. People are buying condos on credit to speculate that the price will go up and not necessarily living in them. When you're living in a place there's more incentive to come up with your mortgage payment. Not so much if its a speculative investment.

So the builders are building because the buyers can get loans which pays them off. The buyers buy the condos and are just making small payments to the bank every month knowing with the hopes the property will go up in price. Meanwhile there is till plenty of land available and still new construction. Once the people who bought a lot of these places start defaulting its going to create a snowball effect.

I don't know how people can ignore the signs here. If you look around bkk you can still see the unfinished ghost buildings from 1997. If you're saying it won't happen in Thailand realize it actually DID already happen on the USA. There's just no way Thailand can keep up the building and loan boom indefinitely and the bubble will eventually have to burst.

For the expats I would hold off buying property right now and just wait for some good deals in the future and a better exchange rate.

Bad debt doesn't come all at once, it tends to build and can be seen quite a long way away from the peak, unless of course the banks change the rules as in the case of mortgage lending in the West.

But from what you've written there's a case to suggest that any economic boom of any size is in fact a bubble and that distorts things unhelpfully. There's growth that flatlines after a while and then there's a bubble which when popped causes the growth to deflate and things return to the average mean, the latter is clearly a bubble, the former is simply business as usual and I think we're in the former currently.

[lungmi]

The crisis of Spain has the same origin as in Thailand now.

[richusa]

The Baht would benefit all travelers to Thailand at 42-45 to the USD. At the current rate, People don't spend as much. I come to Thailand quite a lot each year, I quit buying everything here, I buy elsewhere...it sucks when you change 100USD and get 2,950 baht back. I loved it when you got at least 4,200 baht back. bye...bye...Thailand and my money.

[chiang mai]

The Baht would benefit all travelers to Thailand at 42-45 to the USD. At the current rate, People don't spend as much. I come to Thailand quite a lot each year, I quit buying everything here, I buy elsewhere...it sucks when you change 100USD and get 2,950 baht back. I loved it when you got at least 4,200 baht back. bye...bye...Thailand and my money.

Unfortunately for you there's more to Thailands GDP than just tourist dollars.

[Thai at Heart]

The Baht would benefit all travelers to Thailand at 42-45 to the USD. At the current rate, People don't spend as much. I come to Thailand quite a lot each year, I quit buying everything here, I buy elsewhere...it sucks when you change 100USD and get 2,950 baht back. I loved it when you got at least 4,200 baht back. bye...bye...Thailand and my money.

I suggest you address your request to the US Federal reserve and the US government.

[Naam]

The Baht would benefit all travelers to Thailand at 42-45 to the USD. At the current rate, People don't spend as much. I come to Thailand quite a lot each year, I quit buying everything here, I buy elsewhere...it sucks when you change 100USD and get 2,950 baht back. I loved it when you got at least 4,200 baht back. bye...bye...Thailand and my money.

oh my Buddha! that's real bad news for Thailand.

[geriatrickid]

The difference with debt in Thailand is that borrowers have a hard time defaulting and walking away. Often members of the family have cosigned and they are at risk, it somchai doesn't pay up. Defaulting on a debt is not as easy as it is in North America, Australia or the UK. The judicial system allows for a wide range of remedies including seizures and the auctioning off of seized property, and even criminal charges. The Thai system is more similar to to the Spanish system where people cannot not just walk away from a bad loan.

[TommoPhysicist]

Sorry i disagree. Bad debt ratio is ok now because people have not defaulted yet. When I say this I am thinking of he United States, and if it can happen on the USA it can happen in Thailand. The United States had he mortgage meltdown. People were being approved for loans based upon very little proof of income. The interest rate was low and people were buying on variable rate interest. Since anyone could get a loan and essentially didn't have to prove they had any money...the home prices went up. People who could legitimately make mortgage payments were competing with people who could not. The people who should have not been loaned money in the first place defaulted and homes went in foreclosure. The foreclosures caused home prices to drop (because the banks were auctioning them off just to recoup any money) so the people who could afford the loans and make the payments were now stuck with payments for a home worth much less. Then they started walking away. The effect snowballed. The united stated is still not fully recovered. The Thai baht was once tied to the US dollar. And not so many years ago the us exchange rate was higher in Thailand as well as the rest of the world. Why did he dollar to down? Largely due to the mortgage crisis.

The way it is in Thailand is that anyone can get a loan. My cousin got one. 2 million baht requires little verification these days. It's all fine and well when everyone makes payments. However a lot of these people should never have got loans. Then they will default. Then you will have a glut of condos on the market as the band try to recover. This will cause the price of other condos to go down. Right now here is no shortage of condos or new developments in Thailand. Certain places will always be immune to sudden price drops just because there is little land available. Think New York, Tokyo, or Hong Kong. Thailand is not like those places. Bangkok and pattaya there is still land available and you can build out further from the city center.

Then people come on this forum and say well this talk about a bubble is rubbish I bought way back when and my condo/ property has increased in value. Well yes, the bubble hasn't burst yet.

How do you think it's going to keep going up like this without the bubble bursting? Any idiot can get a loan in Thailand these days. People are buying condos on credit to speculate that the price will go up and not necessarily living in them. When you're living in a place there's more incentive to come up with your mortgage payment. Not so much if its a speculative investment.

So the builders are building because the buyers can get loans which pays them off. The buyers buy the condos and are just making small payments to the bank every month knowing with the hopes the property will go up in price. Meanwhile there is till plenty of land available and still new construction. Once the people who bought a lot of these places start defaulting its going to create a snowball effect.

I don't know how people can ignore the signs here. If you look around bkk you can still see the unfinished ghost buildings from 1997. If you're saying it won't happen in Thailand realize it actually DID already happen on the USA. There's just no way Thailand can keep up the building and loan boom indefinitely and the bubble will eventually have to burst.

For the expats I would hold off buying property right now and just wait for some good deals in the future and a better exchange rate.

And the entire system was created because some clever bankers thought that if you sprinkle just a few percent of these dodgy loans into a mix of good ones, pay off the ratings agencies to give them a good rating, you could sell the debt onto someone else. Securitisation of sub prime mortgages. Sounds so nice, intelligent, warm and fuzzy doesn't it. All very well and good, until you realise that it isn't just a few percent that were never going to be paid but quite a significant percentage. Then you get the government to nationalise the problem, and whammo, the country is saddled with enormous debt.

It can happen anywhere, but Thailand is fairly stringent with their financing requirements for people to obtain a mortgage.

As I posted earlier, there are almost no checks on home loans, you can get 2M easily on faked wage slips.

Photoshop is the 'home loan applicants' friend.

Once you actually know some Thai people, as Submanic said, you will realize how foolish the banks have become, exactly like the western banks.

@Geriatric kid

Defaulted loans are extremely easy to walk away from in Thailand, the person who had the loan and the guarantor lose the ability to get credit, own land or vehicles for 10 years, then the debt is written off. Yep, you have to 'sell' your land to mum for a few years, but hopefully she will give it back later.

Edited January 26, 2013 by TommoPhysicist

[farang000999]

such nonsense... for 99% of the public a strong currency is a great thing. the gov want weak currencies so they can make money out of near slave labor instead of improving society and growing the economy domestically, they are scared to do that because they might lose their stranglehold of power.

[TommoPhysicist]

Thailand is pretty stringent on their requirements for people to obtain a mortgage? Says who? Thai bankers?

If you asked me in 2006 if the us banks were stringent in requirements to get a mortgage the answer would have been yes but we have learned otherwise. Thailand? I doubt that the requirements would are more stringent than even the old USA standards. My cousin got a loan fairly easily and I know I would never have loaned him the money.

Go read the offers. Interest us relatively high, and virtually every offer i can remember requires quite a significant down payment. All quite old fashioned like it used to be in the rest of the world.

Off plan purchases are a different matter, but then consider the rather sizeable margins built into the sale prices.

Looking at houses in the past two months ...... on a 2M property.

Through the developer offers between 50k and 200k deposit.

Through a bank either 5% or 10% deposit.

No real evidence of income required (6 wage slips and matching bank book to show wage deposited).

Edited January 26, 2013 by TommoPhysicist

[rayw]

Well IMO a strong currency is a wonderful problem to have. Enjoy lower imported energy, technology and material costs. Invest in improved infrastructure and see a general drop in domestic prices and wage pressures. Weaken the currency only to see the export gains evaporate in high input costs and increasing domestic inflation. Thailand is on track for a very sound economy if Kittiratt is successful resisting populist political pressure to devalue the currency.

That would have some truth in it if the fat cats were not allowed to reap all the low import cost benefits of a strong Baht. If prices reflected the stronger Baht then you should see deflation and certainly a lowering of fuel prices at the pumps for example. But intolerable and to me unacceptable extreme capitalist profiteering will prevent such benefits and we ordinary folk (whether falang or Thai) will only pay the price of a strong Baht but not see much if any of the benefits. If the Thai Government are not going to control the Baht's exchange rate then they must control the fat cats from cashing in on it with some sort of prices or profit limiting controls IMHO else the ordinary folk (95% of us all) will suffer for the gain of the tiny minority of already very much over wealthy. Uncontrolled Capitalism has proved itself to be as destructive as bloody Communism (no we are not all equal and neither are we as unequal as we are made to be today in the extreme capitalist world).

So if we step back a bit and take a real look we should be able to see that it is about time we learned that this minority greed needs fairly and seriously controlling from the centre and stop the free for all unfettered and destructive greed being allowed to continue. .Only Governments can do that and that IMHO will need a real shift away from the extreme and evil right wing regimes that plagues most of the world right now.

Edited January 26, 2013 by rayw

[RubbaJohnny]

that was a totally different situation than today

Yup theBOT had the situation absolutely under control

[lounger]

political announcements normally mean the opposite. So what is the announcement a diversion for? I suppose the baht over printing needs to be disguised as something so an announcement as above means they are pretending the baht printing is not happeneing.....confusing or what.

I just hope the thai printing presses are approx matching those of the developed western world ( Oh yes and japan too) in which case they can float the baht without too much changein valuation. That would make the current strengthening a temporary blip.

Word of advice for a poster wondering about transfering cash to Thailand. It is normal to have a major chunk of your money in the country where you live. That chunk is then free from currency volatility. You may have left it too late.

[hellodolly]

Thailand is pretty stringent on their requirements for people to obtain a mortgage? Says who? Thai bankers?

If you asked me in 2006 if the us banks were stringent in requirements to get a mortgage the answer would have been yes but we have learned otherwise. Thailand? I doubt that the requirements would are more stringent than even the old USA standards. My cousin got a loan fairly easily and I know I would never have loaned him the money.

Go read the offers. Interest us relatively high, and virtually every offer i can remember requires quite a significant down payment. All quite old fashioned like it used to be in the rest of the world.

Off plan purchases are a different matter, but then consider the rather sizeable margins built into the sale prices.

Looking at houses in the past two months ...... on a 2M property.

Through the developer offers between 50k and 200k deposit.

Through a bank either 5% or 10% deposit.

No real evidence of income required (6 wage slips and matching bank book to show wage deposited).

Not that I would buy but out of interest when I was already in the bank doing some thing else I asked.

They said because my wife did not work we would have to put half down.

[OldgitTom]

As an expert in losing money, I proffer financial advice. Ignore professional economists. Most are either crooks paid by the bankers to mislead you, or write incomprehensible gibberish in the press. Many suckers fall for the fairy story that wicked 'debt' caused this looming crisis. Rubbish; all money in circulation is debt, borrowed at compound interest from bankers: no debt = no money = economic depression (which is getting close).

There is a global currency war beginning, which will morph into a trade war. These 'wars' usually end with the bang-bang type. That's why the West is invading sundry regions - to corral as much of global resources & commodities as possible - hoping they will save their paper currencies. Even 'rock-solid' Switzerland is printing more paper money. All countries are. Never mind how dodgy the US dollar is, ALL currencies are going to lose value to rampant inflation. Thailand is too small to avoid what is happening with the monster economies east & west.

Interest rates must shoot up soon, which is when the serious grit will hit the fan. So now is a very bad time to enter into long-term financial commitments. Rent, don't buy a house, & stock up with durable foodstuffs..

Edited January 27, 2013 by metisdead
: Oversize font reset to normal, again.

[sydneyjed]

Well IMO a strong currency is a wonderful problem to have. Enjoy lower imported energy, technology and material costs. Invest in improved infrastructure and see a general drop in domestic prices and wage pressures. Weaken the currency only to see the export gains evaporate in high input costs and increasing domestic inflation. Thailand is on track for a very sound economy if Kittiratt is successful resisting populist political pressure to devalue the currency.

I think you are right on the money, so to speak...Thailand has a real economy, unlike the offshore tax havens where many tax scofflaws park their money. Thailand's strong agricultural base not only gives it something to trade that the entire rest of the world needs, and will continue to increasingly need, (FOOD), it also has an abundance of basic resources that will also be in increasingly higher demand, like WATER. Throw in a workforce that is one of the more disciplined and educated compared to many other developing nations + a robust tourism sector, and it all looks very favorable for Thailand. One challenge Thailand needs to keep dealing with is striking a balance between preserving its desirability among the investment class vs. wealth re-distribution. If such wealth re-distribution is engineered towards providing better education and training to its populace as opposed to just throwing money at the less advantaged, it can become a true prosperous economic powerhouse, with the lower classes realizing true opportunities to move up. Demographically speaking, Thailand has a more sensible population age spread compared to most western countries that have an ever-increasing portion of their populations growing older and not enough younger people coming up. Having been based here for going on 8 years now, it's a pretty interesting time for Thailand.

The early retirement laws here mean that yes there is not enough skilled trained workers in manufacturing to take their place...This compounded with a younger generation of educated thais' choosing other career paths other than manufacturing industries..Will this mean that Thailand will infact be forced to import workers into their factories to solve this shortfall?Interesting times ahead indeed and also would not be surprised to see a 'correction' at some point in the booming property condo market..

[Straight8]

The main causes of the 1997 crisis weare too much money borrowed from abroad to finance too many projects that did not have adequate collateral (no collateral in some cases, which is pretty inadequate), followed by a bad attempt to prop up the currency. Initially the building boom was based on a legitimate strong demand for offices and condos, etc.. Eventually, however, the demand subsided, but the construction continued. Supply then surpassed demand, and there were no more buyers. No more buyers meant that loans could not be paid. Banks had to stop loaning money, Inability to pay loans decreased the value of the currency, but the Central Bank tried to defend the baht without adequate reserves. It can be summed up as reasonable risk loans turning into high risk loans as a result of what Alan Greenspan called irrational exuberance) and ending with loan defaults. A failure to see supply reaching the demand level, and rather foolish games by the Central bank all worked in tandem to result in the crisis.

I think that we need to keep in mind that generally speaking banks are in business to make loans. When demand for loans is high banks want to compete to give those loans. In fact there are many pressures on banks to make loans in boom times. If banks had stopped lending, their competitors would have gotten the business. In the run-up to 1997, the banks got very careless about loans as if the boom would go on forever. But, as we have all seen in other countries, booms are not forever. Eventually the construction market runs out of buyers as supply starts exceeding demand. I could be wrong but I have seen no indications of a similar situation at present, but the potential is always there when investors see better potential in a foreign country than they see at home.

As for exports and imports, theory has it that exports and imports on a national level should be a zero sum game in terms of currency. After all, when an exporter exports, he gets paid in foreign currency, which he can't conveniently use at home, so he converts it at the bank to local currency that he can use at home. The bank uses that foreign currency to loan to importers so they can pay for imports. In practice it does not work as in theory, mainly because of government market interfering policies.

Probably should have mentioned that Soros took advantage of the situation, but there is no indication that he created the conditions that allowed him to do so.

There are so many empty condos, commercial spaces available here, now, with the owners trying to flip them at exorbitant prices, needing to boost their struggling incomes. Within 15 Kms of me, many whole developments are over 90% empty, yet more are still being built. The condo market in Thailand is way over-speculated, surely a big, fat bubble. So many of the factors from '97 are back, with the addition of a weak west, and a Chinese manufacturing economy with massive surpluses that is gasping for markets. Anyone that says that 97 couldn't happen again is trying to sell you something, imo.

You nailed it perfectly.

I am surrounded by towers that, at night have a only hand full on lights that are on.

You know there is something seriously brewing when they try to sell you a 3 bedroom condo for 16 million baht in BKK. [in the real estate market anyway!!]

There are many who will be caught with there pants down.

[Mosha]

The difference with debt in Thailand is that borrowers have a hard time defaulting and walking away. Often members of the family have cosigned and they are at risk, it somchai doesn't pay up. Defaulting on a debt is not as easy as it is in North America, Australia or the UK. The judicial system allows for a wide range of remedies including seizures and the auctioning off of seized property, and even criminal charges. The Thai system is more similar to to the Spanish system where people cannot not just walk away from a bad loan.

They do, they just dump the debt on the guarantor. A friend of ours had a 400,000 Baht loan dumped on her by her daughter. She ended up selling the house and land to her SIL. Luckily the SIL allows her to stay rent free. The stipulation being, the daughter does not return home.

[BlackJack]

so much gloom and doom

when some funds are paying 80%

so moan about it

dont worry theres enough dollars/bahts/euros/ coming into Nana Plaza, Soi Cowboy and Pattaya's natural resources to float this country for years

Thailand in the middle of China, Myanmar, Laos, Vietnam, Cambodia and all developing roads rail airports cars buildings natural resources etc. really its a no brainer = ASEAN

get in ride the gravy train and get out

or better still

heres a great idea buy a 7/11 or a bar in Pattaya - nows theres sound investment advice

Edited January 28, 2013 by BlackJack