Thai Baht: Tempers Rise Over B O T Rate Policy

[NeverSure]

This is one thing in Thailand that doesn't have a happy ending.

[NeverSure]

I still cant understand how a country which is run so badly and is full of corruption at all levels, where 80% live in third world conditions and make it so hard for outside investors to work there, can have such a strong currency.

When other countries have major problems like the floods and political upheavals consistently, their economy takes a major hit..............

Your telling me that the Thai economy has gained almost 50% on many of the worlds biggest over the last 5 or so years......something fishy is definately going on somewhere.

It’s not the Thai Baht appreciating it's the Dollar, Euro, Pound, Yen depreciating. The western central banks are devaluing their currencies by keeping interest rates low and creating money at a rate never seen before in world history.

It’s a difficult situation for Thailand they could lower interest rates, create some Baht and inject it in the economy same as their

doing in the west but that would create inflation here in Thailand and hurt the Thai people especially the poor. However,

if they do nothing their export market will suffer and that hurts Thailand as well.

There are no easy answers.

The THB is appreciating.

Why the heck do you think the most powerful people in the country are having a debate on how to slow it down?

They are having a debate because the BOT is not controlled by the government who have a different view on how this should be managed.

As Robert points out the world's major currencies are all weakening - the US$, GBP, Euro and Yen. Speculators are looking for other opportunities. The BRIC's are not attracting all the attention so that attention has to go elsewhere. Australia, Canda, Swiss Franc - all got their pros and cons.

I've spoken to several fund managers in different countries and organizations and asked them why Thailand. Rightly or wrongly they see the fundamentals better for Thailand than its ASEAN partners, and moreover are all desperate to find somewhere to try and generate profits and value increases.

Like all "bubbles" built on and driven by speculation this has the potential to burst.

Thailand, like many third world countries, has to react to all of this without being in a position to really influence the bigger picture. As Robert says, there are no easy answers. But steady experienced hands stand a better chance of navigating through this than politicians driven by political expediencies rather than the long term interests of the nation. Many countries have suffered from knee jerk populist or simplistic reactions to these forces.

There's nothing to worry about. The same brilliant minds that brought the new minimum wage into the export mix, somehow lost the flood control money, and dreamed up an incredibly brilliant way to ruin the rice exporting business have this firmly under control.

As China, the UK, Japan, Australia, Canada, the US and other large economies wage a war to lower the values of their currencies to stimulate exports, Thailand will put a stop to that somehow. They'll probably build and lease more warehouse space for the dollars they will buy and lose billions on in a magnificent attempt to raise the value of the dollar. Let's see. They surely can buy at least .000000000001% of the major currencies, and totally change the whole landscape of the world currency market. They may even get free warehouse space for the dollars as the rice rots and they throw it out.

In the meantime they lose their collective asses on the foreign currencies they buy. They can't win this one.

And those who say the baht is rising really don't get it. It is rising only compared to major currencies which are deliberately being devalued. The baht is standing in the middle of the road like a deer in the headlights.

[samran]

There's nothing to worry about. The same brilliant minds that brought the new minimum wage into the export mix, somehow lost the flood control money, and dreamed up an incredibly brilliant way to ruin the rice exporting business have this firmly under control.

As China, the UK, Japan, Australia, Canada, the US and other large economies wage a war to lower the values of their currencies to stimulate exports, Thailand will put a stop to that somehow. They'll probably build and lease more warehouse space for the dollars they will buy and lose billions on in a magnificent attempt to raise the value of the dollar. Let's see. They surely can buy at least .000000000001% of the major currencies, and totally change the whole landscape of the world currency market. They may even get free warehouse space for the dollars as the rice rots and they throw it out.

In the meantime they lose their collective asses on the foreign currencies they buy. They can't win this one.

And those who say the baht is rising really don't get it. It is rising only compared to major currencies which are deliberately being devalued. The baht is standing in the middle of the road like a deer in the headlights.

Two points which blow your argument out of the water.

- The BOT are in control of this issue. Not the government

- I follow the Australian debate, and apart from bit of whinging from industry, there is absolutely no 'war' to bring down the value of the AUD. It is all about inflation, and a high AUD is helping keep keep inflation down nicely thank you very much.

I don't know where you pulled than nugget of horse poo from that the RBA were trying to weaken the AUD.

[chiang mai]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

Edited April 26, 2013 by chiang mai

[farang000999]

The government should use the stronger baht to do something about the fact that internet in Thailand is so slow and crappy.

[NeverSure]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

I do have a legitimate economic theory and I've said much of it many times. The baht is strong only when measured against major currencies which are deliberately being devalued. This, and the new minimum wage is severely hurting Thai exports. In a sister thread here, it mentions some industries losing as much as 40% of exports, and Thailand trying to substitute that loss with border trades. That's an admission that they can't compete in exporting to the West and they as much as say so.

I have posted and posted and frankly I'm tired of doing it, to have people miss it. Thailand has too strong of a baht and they can't do anything about it without hurting the economy one way or the other. They also ruined their rice export business and lost their customers. They also introduced a minimum wage which isn't competitive with other emerging economies.

Thailand has a sense of entitlement, does what it wants, thinks it's the center of the universe, and gets flustered and out of control when everyone else doesn't fall into line.

Thailand has competition but Thailand is making itself not competitive with it's policies.

All of this attempted manipulating by such a really small economy is just scene two of the rice scheme. They think they can have things right where they want them and everything else will fall into line because they are the center of the universe. They arrogantly introduce a new minimum wage which hurts exporters, let the baht stay high as if it was a badge of honor, and keep interest rates high and think they will be competitive. I offer the wholly failed rice scheme as exhibit A.

Edited April 26, 2013 by NeverSure

[Konini]

Guess Soros is not a farang?

I wonder where he is in this time of need...

Making sure that every last cent has been shifted out of Thailand perhaps? When it falls, I fear it will fall hard.

[Naam]

Guess Soros is not a farang?

I wonder where he is in this time of need...

Making sure that every last cent has been shifted out of Thailand perhaps? When it falls, I fear it will fall hard.

don't be afraid. your wishful thinking will not come true

[chiang mai]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

I do have a legitimate economic theory and I've said much of it many times. The baht is strong only when measured against major currencies which are deliberately being devalued. This, and the new minimum wage is severely hurting Thai exports. In a sister thread here, it mentions some industries losing as much as 40% of exports, and Thailand trying to substitute that loss with border trades. That's an admission that they can't compete in exporting to the West and they as much as say so.

I have posted and posted and frankly I'm tired of doing it, to have people miss it. Thailand has too strong of a baht and they can't do anything about it without hurting the economy one way or the other. They also ruined their rice export business and lost their customers. They also introduced a minimum wage which isn't competitive with other emerging economies.

Thailand has a sense of entitlement, does what it wants, thinks it's the center of the universe, and gets flustered and out of control when everyone else doesn't fall into line.

Thailand has competition but Thailand is making itself not competitive with it's policies.

All of this attempted manipulating by such a really small economy is just scene two of the rice scheme. They think they can have things right where they want them and everything else will fall into line because they are the center of the universe. They arrogantly introduce a new minimum wage which hurts exporters, let the baht stay high as if it was a badge of honor, and keep interest rates high and think they will be competitive. I offer the wholly failed rice scheme as exhibit A.

1. "the Baht is only strong when measured against major currencies which are deliberatly being devalued"

True, but it's also strong when compared against regional currencies in ASEAN!

2. "the new minimum wage is hurting exports - some industries have lost 40% of their market".

I'd be keen to see a link that confirms the above is true, personally I do not believe it is other than in a handful of extreme cases. My experience of the 300 baht minimum wage is that this has not been an issue in companies where business is brisk, where it is not, many companies have found ways to give with one hand and take back with the other, typically in the form of reducing bonuses. And from a socio-economic point of view, I personally think that the minimum wage initiative was one of the more useful ones to deploy in a country such as Thailand where the vast majoirty of people are employed in menial and manual work.

3. "Substituuting border trades to compensate for lost trade to the West".

If you look at the numbers month on month for the past few years you'll see that there has not been any meanignful decline in the value of exports, what you don't see in those numbers however is that the value of exports to China have increased and if this is the cross border trade you refer to, that is certainly very desirable. As far as the financial impact of that trade is concerned: all export bills are settled in USD so it really doesn't matter whether the trade is to the US, Europe, Japan or China, the currency used is the same (albeit recent initiatives/agreements with China allow for non-USD settlement). It's also worth pointing out here that whilst the US is technically the largest Thai export market at 10.9%, China dn Jaoan fall very close behind at 10.3% and 10.6% respectively.

4. "Strong baht hurts the economy and can't do anything about it"

Yes, the THB has got a lot stronger but that is mostly a function of point 3 above so it's not as though this was an unanticipated event! But I wholly disagree that the BOT can't do anything about it, in the comming weeks and days you'll see that come true as BOT moves to protect its markets and drive the value of THB lower, that has started to happen already this week.

5. "The rice scheme".

A failed popularist policy, don't tell me that you've never seen one of those before back home.

The rest of what you've written NS is all about the sky is falling and the associated panic and alarm, but the existence of the rice scheme and the minimum wage are not quite enough to justify your anxiety.

http://www.tradingeconomics.com/thailand/exports

http://www.economywatch.com/world_economy/thailand/export-import.html

[samran]

^^ just about every post by NS is panic merchant stuff, all about the tyranny of authority, this is no different. So it makes it hard to have a sane and rational conversation as he views life through that particular prism. If you said to him "NS, you should apply a liberal does of common sense to your analysis" he'd think that you were asking him to apply socialist principals to your decision making process.

[Sophon]

I do have a legitimate economic theory and I've said much of it many times. The baht is strong only when measured against major currencies which are deliberately being devalued.

<snipped>

Have you bothered checking the facts before forming your theory? The Baht is strong not only against the major currencies and is appreciating in it's own right not just because of weaknesses in other currencies. Here are some examples of regional currencies against the Baht over the last year:

The Baht is up against all these and most other currencies to varying degrees, even against an otherwise appreciating currency like the CNY.

Sophon

[Konini]

Guess Soros is not a farang?

I wonder where he is in this time of need...

Making sure that every last cent has been shifted out of Thailand perhaps? When it falls, I fear it will fall hard.

don't be afraid. your wishful thinking will not come true

I really and truly hope not. For all it's faults, I love living here

[detinu68]

The appreciating Baht does seem to reflect the positive fundamentals in the Thai economy:

A stable government by historical standards (for now...)

Low unemployment

Strong inward investment, still

and what appears to be good balance between the manufacturing and service sectors

The strength of the Baht does make exports more expensive. But at the same time it makes imports cheaper thereby helping to keep a lid on inflation and perhaps gives the BOT an opportunity to cut the baseline interest rate to help slow the Baht's appreciation.

[Robby nz]

Meanwhile in todays news

Thai Govt Eases Calls For Action On Baht.

Go have a look

[samran]

^^ ah, noted that headline this morning. The whinging ninnies had the airwaves for a week or two, and after sitting down with the BOT and learning there are pro's and con's to everything, they've gone quiet. Clearly the BOT told them a few home truths about the alternative of a depreciating currency and inflation, so that probably shut them up.

[Pib]

I expect all parties agreed in "off the record" conversations to "save face" by making public statements which were not a clear win or loss for any party but still indicated the govt and BOT are working to tame the baht's appreciation. To me after reading the news reports over the last few weeks it seems the BOT has been pressured to pay much more attention to the baht's exchange value and just using inflation as their golden management rule does not make a lot of people/businesses happy....especially anything related to exports which is around two-thirds of Thailand GDP. I also expect whatever actions taken by the govt and BOT (publically and behind the scenes) will be done in baby steps....just hope the baby don't walk so slow the baht appreciates another 5-10% over the coming months/year.

[samran]

There isn't too much the BOT can do though. Interest rate differentials aren't that great in Thailand so even if you've cut rates the baht stays strong. Then what? The only options left are that the BOT starts printing money.

At present to BOT is probably very nervous to cut rates as the governments proposed borrowing and spending plans are going to push demand in the economy. So if you want to control inflation in that context interest rates might need to go up rather than down.

[chiang mai]

Or put another way, the clueless with supportive facts are outgunned by the clueless with no facts, gotcha!

[metisdead]

An off topic circular argument has been removed.

[Tep]

The friction between MOF and BOT goes way beyond the present currency issue. It's roots lie in the still unresolved fallout from the 97 crisis and the MOF's view on the BOT's management of the FIDF liabilities. Dr. Prasarn is a respected technocrat and a quite amazing survivor.

I would enjoy reading a debate bout capital controls,if anyone had anything sensible to say on the subject. It is my understanding that capital flows are the root of the current situation.

[the wanderer]

Guess Soros is not a farang?

I wonder where he is in this time of need...

Making sure that every last cent has been shifted out of Thailand perhaps? When it falls, I fear it will fall hard.

don't be afraid. your wishful thinking will not come true

And you know this for sure ,how? please tell us ,and not just some witty remark ,but with facts.

[pacman32]

I still cant understand how a country which is run so badly and is full of corruption at all levels, where 80% live in third world conditions and make it so hard for outside investors to work there, can have such a strong currency.

When other countries have major problems like the floods and political upheavals consistently, their economy takes a major hit..............

Your telling me that the Thai economy has gained almost 50% on many of the worlds biggest over the last 5 or so years......something fishy is definately going on somewhere.

it's them aquatic aliens who have taken over. that's why it seems fishy.

Frank loves his fish fingers

He also loves all the holiday spends he can get for his ill gotten thai stashes. Lets wait till he wants to buy his baht back I really do believe he is at the centre of all of this, among many of his old mega rich chronies who still silently run things.

[Rajab Al Zarahni]

Given the collective financial wisdom on this thread alone, it beggars belief that we ever had a worldwide financial crises

[Naam]

I wonder where he is in this time of need...

Making sure that every last cent has been shifted out of Thailand perhaps? When it falls, I fear it will fall hard.

don't be afraid. your wishful thinking will not come true

And you know this for sure ,how? please tell us ,and not just some witty remark ,but with facts.

my "witty" remark was the answer to the ridiculous claim (with the added question mark) "last cent shifted out..." and the baseless non-witty assumption "when it falls..."

these kind of postings from laymen do not deserve more attention than a one-line answer, especially when several threads exist in which the topic was touched umpteen times and facts submitted.

[NeverSure]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

Yes sir. Shame on me.

Now, what are we going to do about the first of my predictions sticking its toe under the door?

Two Thai banks, one of them government owned, are tits up. They are asking the Thai government for 2/3 of a billion US dollars in bailouts. Of course the initial surprise and request is never the end of it or the total. That's just what can be seen under water right now. Link

So where is the Thai government, which is practicing deficit spending already, and issuing bonds to pay the bills, going to get US$666 million dollars? It does after all own one of the banks, and guarantee the deposits it the other.

Bank runs in Thailand in this great economy? Yes, they've been having them.

Oh, you thought the Thai government had a balanced budget, lots of money, and wasn't borrowing its azz off already? You thought it was solvent? Mercy me.

Just asking; what is Thailand to do with this first two dominoes?

[chiang mai]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

Yes sir. Shame on me.

Now, what are we going to do about the first of my predictions sticking its toe under the door?

Two Thai banks, one of them government owned, are tits up. They are asking the Thai government for 2/3 of a billion US dollars in bailouts. Of course the initial surprise and request is never the end of it or the total. That's just what can be seen under water right now. Link

So where is the Thai government, which is practicing deficit spending already, and issuing bonds to pay the bills, going to get US$666 million dollars? It does after all own one of the banks, and guarantee the deposits it the other.

Bank runs in Thailand in this great economy? Yes, they've been having them.

Oh, you thought the Thai government had a balanced budget, lots of money, and wasn't borrowing its azz off already? You thought it was solvent? Mercy me.

Just asking; what is Thailand to do with this first two dominoes?

Well it's good to see that BOT is doing it's job as designed and is catching these things, (that's why the IMF insisted it be extablished in the first place) albeit the two banks in questions are extremely small in banking terms - and it is only two banks and nowhere near the 465 bank failures in the US over the past five years. http://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_%282008%E2%80%93present%29

What are they going to do about them you ask and where will they get the princley sum of USD 666 mill. from, probably from the petty cash I would guess and if there's not enough in that cookie jar they could always sell 0.5% of their foriegn reserve holding of USD 150 bill. And if that avenue not open to them they could always borrow the money because in doing so, even after they borrow the 2 trillion baht for the infratsucture projects, borrowings will still be less than 455 of GDP vs wesetrn countries where it is in excess of 100%. But wait, there is a simple answer to the question of where and that is in the tax that BOT has imposed on the banks to pay for such a scenario.

Next!

[NeverSure]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

Yes sir. Shame on me.

Now, what are we going to do about the first of my predictions sticking its toe under the door?

Two Thai banks, one of them government owned, are tits up. They are asking the Thai government for 2/3 of a billion US dollars in bailouts. Of course the initial surprise and request is never the end of it or the total. That's just what can be seen under water right now. Link

So where is the Thai government, which is practicing deficit spending already, and issuing bonds to pay the bills, going to get US$666 million dollars? It does after all own one of the banks, and guarantee the deposits it the other.

Bank runs in Thailand in this great economy? Yes, they've been having them.

Oh, you thought the Thai government had a balanced budget, lots of money, and wasn't borrowing its azz off already? You thought it was solvent? Mercy me.

Just asking; what is Thailand to do with this first two dominoes?

Well it's good to see that BOT is doing it's job as designed and is catching these things, (that's why the IMF insisted it be extablished in the first place) albeit the two banks in questions are extremely small in banking terms - and it is only two banks and nowhere near the 465 bank failures in the US over the past five years. http://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_%282008%E2%80%93present%29

What are they going to do about them you ask and where will they get the princley sum of USD 666 mill. from, probably from the petty cash I would guess and if there's not enough in that cookie jar they could always sell 0.5% of their foriegn reserve holding of USD 150 bill. And if that avenue not open to them they could always borrow the money because in doing so, even after they borrow the 2 trillion baht for the infratsucture projects, borrowings will still be less than 455 of GDP vs wesetrn countries where it is in excess of 100%. But wait, there is a simple answer to the question of where and that is in the tax that BOT has imposed on the banks to pay for such a scenario.

Next!

First, I'd appreciate it if you wouldn't compare to the US. This is Thailand. It's not the UK or Australia with their problems either.

Second, you don't understand foreign reserve holdings. Thailand is running deficits and is borrowing money to pay its bills. A banker you aren't.

Now, you have just witnessed the first two Thai banks bite the dust due to exuberant thinking just like yours.

I suggest you look up "bank accrual accounting" and "fractional reserve banking" to see just how much poop these banks are really in.

You are writing from your emotions with almost no knowledge of how all of this really works.

And, you're looking silly.

[chiang mai]

Neversure - And all along I thought that somewhere, amidst all the rehtoric, you actually had a potentially legitimate economic theory or at least you were missing some key elements that you didn't fully understand, the reality is that you are simply a Thai basher, shame on you for having nothing better to do.

Yes sir. Shame on me.

Now, what are we going to do about the first of my predictions sticking its toe under the door?

Two Thai banks, one of them government owned, are tits up. They are asking the Thai government for 2/3 of a billion US dollars in bailouts. Of course the initial surprise and request is never the end of it or the total. That's just what can be seen under water right now. Link

So where is the Thai government, which is practicing deficit spending already, and issuing bonds to pay the bills, going to get US$666 million dollars? It does after all own one of the banks, and guarantee the deposits it the other.

Bank runs in Thailand in this great economy? Yes, they've been having them.

Oh, you thought the Thai government had a balanced budget, lots of money, and wasn't borrowing its azz off already? You thought it was solvent? Mercy me.

Just asking; what is Thailand to do with this first two dominoes?

Well it's good to see that BOT is doing it's job as designed and is catching these things, (that's why the IMF insisted it be extablished in the first place) albeit the two banks in questions are extremely small in banking terms - and it is only two banks and nowhere near the 465 bank failures in the US over the past five years. http://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_%282008%E2%80%93present%29

What are they going to do about them you ask and where will they get the princley sum of USD 666 mill. from, probably from the petty cash I would guess and if there's not enough in that cookie jar they could always sell 0.5% of their foriegn reserve holding of USD 150 bill. And if that avenue not open to them they could always borrow the money because in doing so, even after they borrow the 2 trillion baht for the infratsucture projects, borrowings will still be less than 455 of GDP vs wesetrn countries where it is in excess of 100%. But wait, there is a simple answer to the question of where and that is in the tax that BOT has imposed on the banks to pay for such a scenario.

Next!

First, I'd appreciate it if you wouldn't compare to the US. This is Thailand. It's not the UK or Australia with their problems either.

Second, you don't understand foreign reserve holdings. Thailand is running deficits and is borrowing money to pay its bills. A banker you aren't.

Now, you have just witnessed the first two Thai banks bite the dust due to exuberant thinking just like yours.

I suggest you look up "bank accrual accounting" and "fractional reserve banking" to see just how much poop these banks are really in.

You are writing from your emotions with almost no knowledge of how all of this really works.

And, you're looking silly.

Here's two links for you to study:

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=94&language=ENG

http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Who'd have thunk it, Thailand has greater FOREX reserves than the US!

As for looking silly and not knowing how things work, tell us about Iceland again!

Edited April 28, 2013 by chiang mai

[metisdead]

A post using an intentional misspelling of the Prime Minister's name has been removed. If you don’t want your post to be removed, spell people’s names correctly.

[NeverSure]

Here's two links for you to study:

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=94&language=ENG

http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Who'd have thunk it, Thailand has greater FOREX reserves than the US!

Dude, you're making a fool of yourself. You don't know what FOREX is, or that it's offset by liabilities.

You also don't know the US banking system which has an independent Federal Reserve which bought 3 trillion dollars worth of Euros not long ago to help Europe have dollars they could use to trade. See, to trade internationally, they need US Dollars.

What is your deal with always bringing up the US? It has nothing to do with this conversation, and you don't understand the conversation anyway.

You have an emotional thing about winning something here with no knowledge of the subject.

You're still not discussing the two Thai banks that just went tits up, and the clear fact that the Thai government has to come up with 2/3 of a billion dollars to bail them out, for now. You also aren't thinking "oops, what if there are more banks?"

Thailand doesn't have all of that money you think they have. Try to think. If they did, would the PM be running around the world trying to borrow a measly 2 tril baht to build a high speed rail system?

Huh???