1997 Style Thai (And Asean) Economic Meltdown Warned About

[Jingthing]

After the booms come the busts. That's capitalism for you.

Cause for alarm for some.

Cause for hope for others (baht rates).

"Southeast Asias heady debt-fuelled growth is beginning to resemble the unsustainable mid-1990s boom. But authorities are shy to raise interest rates as doing so could attract more overseas capital, stoking inflation and financial instability. Direct curbs on credit and capital flows may prove more attractive.

Growth is strong across the region. Thailands GDP jumped almost 19 percent from a year earlier in the final quarter of 2012.

...

Ultimately, though, the dams offer only temporary reprieve against waves of global liquidity. A few more years of credit-fuelled growth will make the repeat of a 1997-type crisis a distinct possibility."

http://blogs.reuters.com/breakingviews/2013/02/21/southeast-asias-growth-could-lead-to-credit-curbs/

[WilliamCave]

In your opinion were is the economy going to close to the 1997 crash?

Routers warns it could happen again is that what they are saying ?

[nevets]

Why is the bhart so low on the exchange rate.

[chiangmaikelly]

Don't worry JT. Euro Money mag has put Thailands risk lower. And says improvements in economics politics and structure have accounted for the ECR score improvement.

http://www.euromoney.com/Article/3082097/SubPage/9449/ChannelPage/0/Region/14091/Thailands-risk-score-improves-as-economy-surpasses-growth-forecast-estimates.html?copyrightInfo=true

Edited February 22, 2013 by chiangmaikelly

[yoshiwara]

Those who are spooked by the markets are for ever fighting the last war in their nightmares.

[chiangmaikelly]

Those who are spooked by the markets are for ever fighting the last war in their nightmares.

What last war has been mentioned?

[Jingthing]

Obviously, the exact same history doesn't ever repeat itself, because the past is the past and the future is the future. All the blog article is saying is expressing an opinion that the fundamentalists might be in place for a future variation of the late 90's crash.

[davejones]

And before the financial collapse of 2008, all experts were saying how great things were, and there was no danger ahead, only more good times. The vast majority of so-called financial experts have no idea whatsoever what is going to happen. Yes, there'll be a recession sometime in the future, and after that there'll be more growth. But we don't know when. These experts can't even accurately predict what will happen in the next 3 months. They even get wrong what happened in the last three months. They are totally hopeless, so you may as well ignore them.

[nidieunimaitre]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

[chiangmaikelly]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

[GAS]

CMkelly: Read more, post less.

[chiangmaikelly]

CMkelly: Read more, post less.

Gas. If you disagree state your reasons.

[BlackPuddingBertha]

"After the booms come the busts. That's capitalism for you."

Not capitalism, just debt and "growth".

Until people realise that the entire notion of endless growth for no reason is fatally flawed, and that you simply shouldn't spend more than your disposable income, this will just keep happening over and over and over again.

[kyb789]

And before the financial collapse of 2008, all experts were saying how great things were, and there was no danger ahead, only more good times. The vast majority of so-called financial experts have no idea whatsoever what is going to happen. Yes, there'll be a recession sometime in the future, and after that there'll be more growth. But we don't know when. These experts can't even accurately predict what will happen in the next 3 months. They even get wrong what happened in the last three months. They are totally hopeless, so you may as well ignore them.

I remember a television show many many years ago. They had a group of 6th grade students, and group of stock analysists, and a group of monkeys pick some stocks. The monkeys won with the highest returns, followed by the 6th grade students.

[chiangmaikelly]

And before the financial collapse of 2008, all experts were saying how great things were, and there was no danger ahead, only more good times. The vast majority of so-called financial experts have no idea whatsoever what is going to happen. Yes, there'll be a recession sometime in the future, and after that there'll be more growth. But we don't know when. These experts can't even accurately predict what will happen in the next 3 months. They even get wrong what happened in the last three months. They are totally hopeless, so you may as well ignore them.

I remember a television show many many years ago. They had a group of 6th grade students, and group of stock analysists, and a group of monkeys pick some stocks. The monkeys won with the highest returns, followed by the 6th grade students.

I recollect I saw the same show with brain surgeons and architects and astronauts. You are correct those 6th graders and monkees sure are smart fellers.

[nidieunimaitre]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

No sir, that is NOT inflation.

[Ricardo]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

If the Baht strengthens, surely that makes the cost-in-Thailand of imported-goods cheaper, not more expensive ? Because it takes fewer Baht, to buy the can of baked-beans, sold/imported/invoiced in UD$ ?

Of course the retailers may be slow, to pass-on the benefits of cheaper imports, or while they sell their older/more-expensive stocks.

[chiangmaikelly]

http://en.wikipedia.org/wiki/Sterilization_%28economics%29

The expansion of the money supply can cause inflation, which can erode a nation's export
competitiveness just as much as currency appreciation would.

[CaptHaddock]

http://en.wikipedia.org/wiki/Sterilization_%28economics%29

The expansion of the money supply can cause inflation, which can erode a nation's export

competitiveness just as much as currency appreciation would.

Widely believed by those ignorant of how an economy works. In 2001/2002 Japan increased its money supply by one third. The result: more deflation.

Edited February 23, 2013 by CaptHaddock

[chiangmaikelly]

http://en.wikipedia.org/wiki/Sterilization_%28economics%29

The expansion of the money supply can cause inflation, which can erode a nation's export

competitiveness just as much as currency appreciation would.

Widely believed by those ignorant of how an economy works. In 2001/2002 Japan increased its money supply by one third. The result: more deflation.

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. http://en.wikipedia.org/wiki/Inflation

Summary of Link Between Money Supply and Inflation

• In normal economic circumstances, if the money supply grows faster than real output it will cause inflation.
• In a depressed economy (liquidity trap) this correlation breaks down

  because of a fall in the velocity of circulation. This is why in a

  depressed economy Central Banks can increase the money supply without

  causing inflation. This occured in US between 2008-11. – Large increase

  in money supply no inflation.

• However, when the economy recovers and velocity of circulation rises, increased money supply is likely to cause inflation.

http://www.economicshelp.org/blog/111/inflation/money-supply-inflation/

• Why Increasing Money supply in US didn’t cause inflation
• Why Increasing the money supply can cause inflation (theoretical)

Edited February 23, 2013 by chiangmaikelly

[terryp]

we now know why so many Countrys are in the sh£t....Japan increased its money supply by one third. The result: more deflation.

Idiotic

[nidieunimaitre]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

No sir, that is NOT inflation.

Where is that Klingon poster when you need him?

And sorry, I do not have a work permit, so I can not teach here in Thailand.

[Naam]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

No sir, that is NOT inflation.

Where is that Klingon poster when you need him?

And sorry, I do not have a work permit, so I can not teach here in Thailand.

being a layman i hate to interfere when experts agree to disagree but a referee would judge the score "Maître/CMK 1:0"

[chiangmaikelly]

I quote all sorts of information and give everyone lots of interesting stuff to read and a guy comes along and his total comment in rebuttal is, "no." I sense some kind of fix in the game.

But in reality it is interesting that in a thread about an economic meltdown we end up talking about the opposite. There seems to be no one who really thinks recession or depression is on the horizon for Thailand.

A week or so ago in another thread I predicted the UK losing it's AAA credit rating which it did today. Maybe you guys should listen a bit more. Just saying......

[monty]

I'm just a simple layman myself, but being around in Thailand during the '97 financial crisis, I daresay whatever happens next (boom, bust, who knows), will not have the same cause of what happened in '97!

Back then the Thai banks simply went tits up due to borrowing pretty much everybody heaps of cash with virtually no collateral.

One could easily borrow 10 million with a 200,000 Baht property as collateral as long as you kicked back a few 100k Baht to the loan officer.

And that was just for us mortals. Big companies could borrow billions of Baht without collateral by courting the right bank officer. Ask Mr. Rakesh Saxena, he approved a few of those! Took Thailand a good few years to get him extradited out of Canada

It was then that the Thai banks discovered that "non performing loans" were not so good for the bottom line!

Then Thailand (Chavalit actually) discovered that they really didn't have the (foreign) cash anymore to peg the US$ exchange to 25 Baht, and they had to float the Thai Baht. All the way down to 56 Baht to the US $ (Jan '98, ouch !!).

Which apparently started sort of a domino effect in the whole of Asia.

I doubt that currently Thai banks are anywhere near bankrupt, and there's a fair bit of foreign reserves floating around....

[nidieunimaitre]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

"Where did you teach econ?" is not a question that invites a serious discussion.

[jamescollister]

Haven't read the whole thread, but many years ago they used to publish financial predictions for the coming year, UK.

Money people working in the city.

Garbage collector and a parrot with ink on it's feet

Parrot beat the garbage collectors, who beat the bankers and stock brokers.

Get a parrot. Jim

[chiangmaikelly]

Raising interest rates would stoke inflation?

That's a new one for me.

After a lifetime of teaching macro economics.

Money in low interest rate countries is used to purchase money in high interest rate countries. This is called the carry trade. If everyone wants to buy baht the value of the currency goes up. If the value of the baht goes up then it costs more to buy things in Thailand. That is inflation. Where did you teach econ?

"Where did you teach econ?" is not a question that invites a serious discussion.

I think if you will look back at the posts you will discover that it was you and not I who said he taught Econ. Although I am used to people not responding to the information I post opting rather for personal shots. If you would rather not tackle the information I postged OK by me. It's not really on topic anyway. Although who can tell eh?

[monty]

Keep it civilized gents...

At least as civilized as the local economics

[chiangmaikelly]

Haven't read the whole thread, but many years ago they used to publish financial predictions for the coming year, UK.

Money people working in the city.

Garbage collector and a parrot with ink on it's feet

Parrot beat the garbage collectors, who beat the bankers and stock brokers.

Get a parrot. Jim

Silly waste of time that thar London School of Economics.

Edited February 23, 2013 by chiangmaikelly