You Got Hurt By The Strong Baht, But Are You Ready For The Next Surprise…Inflation?

[ExpatOilWorker]

One way or the other most expat or foreigners living in Thailand are feeling some sort of negative financial effect of the strong baht.

Very few people saw this coming and still in hindsight, the change was very gradual, it took the US-$ about 10 years to slide from 43 to 29 baht/$. Anyway too bad, so sad, nothing we can do about it and the damage is already done.

What if we can predict the next financial “surprise”, inflation?

With QE and lose monetary policies by big central banks, the writing is on the wall, sooner or later inflation should pick up. Back in the mid 70’ and early 80’ most of the world had double digit inflation, eroding any savings. Some South American contries had 10% inflation a month, having daily fuel adjustment at the gas pumps and making people buying their groceries at pay day, before prices went up.

How do you best protect yourself against inflation and how soon before we see significant inflation again?

Edited April 30, 2013 by ExpatOilWorker

[yoshiwara]

I just love these fear-mongering wind-up headlines all a variation on the 'If the world ends tomorrow have you got enough tins of spam in the larder?' They are all without exception the standard junk purloined from websites flogging the buy gold narrative. Thinly disguised advertising. Be warned.

[samran]

I don't get this - if you are in Thailand and the baht is getting stronger, thats going to make items like oil and other imports relatively cheaper, so a big dampener on Thai inflation.

If your sky is falling in hypothesis is true, then more money will flow into Thailand (and Australia, NZ and one or two other safe havens) making the baht even stronger, and thus imports even cheaper.

So I guess the answer to your question is - stay in Thailand.

[kblaze]

Yeah this strong baht is sure scary...I hate the way it helps lower my electricity costs

From the "other paper";

"The fuel tariff (Ft) for electricity will be slashed by 9.8% or 5.12 satang per kilowatt-hour from May to August thanks to the appreciation of the baht and lower gas prices, says an energy regulator."

Inflation isn't rising and even at the worst time of the financial crisis it didn't touch 10%; take a look

[i claudius]

Yeah this strong baht is sure scary...I hate the way it helps lower my electricity costs

From the "other paper";

"The fuel tariff (Ft) for electricity will be slashed by 9.8% or 5.12 satang per kilowatt-hour from May to August thanks to the appreciation of the baht and lower gas prices, says an energy regulator."

Inflation isn't rising and even at the worst time of the financial crisis it didn't touch 10%; take a look

Is lecy going down ? not heard this.

[kblaze]

Yeah this strong baht is sure scary...I hate the way it helps lower my electricity costs

From the "other paper";

"The fuel tariff (Ft) for electricity will be slashed by 9.8% or 5.12 satang per kilowatt-hour from May to August thanks to the appreciation of the baht and lower gas prices, says an energy regulator."

Inflation isn't rising and even at the worst time of the financial crisis it didn't touch 10%; take a look

Is lecy going down ? not heard this.

http://thaifinancialpost.com/2013/04/26/electricity-cost-to-reduce-from-lower-ft-charge/

[davejones]

Protect yourself by creating multiple streams of income. More income will more than cover anything lost to inflation.

Also, put your money into assets that are more likely to rise with inflation. I think property is a good bet at the moment, especially in the UK and USA.

Form many, higher inflation means high pensions, high rental incomes from property, and higher wages. So it balances itself out. If inflation is high, then your income should also be increasing quickly due to inflation.

I've been around for over 50 years, and am better off than ever, despite lots of inflation in those 50 years.

Some people just worry too much, or maybe have too much time on their hands. If you have time to worry, then you have time to create extra income.

Edited April 30, 2013 by davejones

[Naam]

Yeah this strong baht is sure scary...I hate the way it helps lower my electricity costs

From the "other paper";

"The fuel tariff (Ft) for electricity will be slashed by 9.8% or 5.12 satang per kilowatt-hour from May to August thanks to the appreciation of the baht and lower gas prices, says an energy regulator."

Inflation isn't rising and even at the worst time of the financial crisis it didn't touch 10%; take a look

Is lecy going down ? not heard this.

an insignificant 5 Satang decrease will not change the electricity bill during the hot season.

[BrianCR]

Cigarettes are cheap, beers not expensive, who cares about the rest?

[Pib]

Yeah this strong baht is sure scary...I hate the way it helps lower my electricity costs

From the "other paper";

"The fuel tariff (Ft) for electricity will be slashed by 9.8% or 5.12 satang per kilowatt-hour from May to August thanks to the appreciation of the baht and lower gas prices, says an energy regulator."

Inflation isn't rising and even at the worst time of the financial crisis it didn't touch 10%; take a look

Is lecy going down ? not heard this.

an insignificant 5 Satang decrease will not change the electricity bill during the hot season.

I'm in Bangkok with electricity provided by MEA. I went to the following MEA electric bill calculator and checked to see how much my electric bill will decrease with the new Ft if I used exactly the same number of KWH as last month. Total electric bill decrease when considering all the basic electricity charges, service charge, the new/lower Ft, and VAT just like you see on your electric bill was 1.4%.

Now "if" the Ft, which was reduced by 9.8%, made up a much larger part of the total electric bill then I would jumping with joy, but since the Ft only makes up approx. 10-12% of the total electric bill then the new announced Ft rate is going to make up approx. 9-11% of the total electric bill. A lower cost is definitely better than increased cost, but the lower cost resulting from the new Ft is not very significant.

I wish they would go back to the time when the Ft was usually zero or you got a Ft credit instead of charge....I just finished looking at some of my old electric bills (I have about 18 months worth) and it was in Jul 12 when the Ft jumpped way, way up...before that the monthly Ft charge was zero or a credit...yes, a credit. Apparently up to around mid year the govt had been absorbing most of the Ft charge....see this mid 2012 news Link where the Ft is projected to jump from 0 stang/KWH to 40 stang/KWH...and it did as my Jul 12 bill had a healthy price increase all due to the Ft.

[Naam]

Cigarettes are cheap, beers not expensive, who cares about the rest?

no winter tires for the car, zero heating cost in winter...

[rgs2001uk]

Bring it on, my next house in the UK just got cheaper.

Post #7,

Also, put your money into assets that are more likely to rise with
inflation. I think property is a good bet at the moment, especially in
the UK and USA.

Me too, hence my intent to buy another property in the Uk this summer, anyone got any better ideas, I am all ears.

[Tep]

I wish they would go back to the time when the Ft was usually zero or you got a Ft credit instead of charge....I just finished looking at some of my old electric bills (I have about 18 months worth) and it was in Jul 12 when the Ft jumpped way, way up...before that the monthly Ft charge was zero or a credit...yes, a credit. Apparently up to around mid year the govt had been absorbing most of the Ft charge....see this mid 2012 news Link where the Ft is projected to jump from 0 stang/KWH to 40 stang/KWH...and it did as my Jul 12 bill had a healthy price increase all due to the Ft.

The Ft stands for automatic fuel adjustment, so literally speaking there should be no credits. The actual costs of fuel used to produce power should be automatically passed through each 4 months so the consumer should pay what the fuel costs. However, from around June 2009 to June 2011, the Ft was set higher than the fuel cost to compensate EGAT for an earlier period when it had to absorb higher Ft costs. The same strategy has been used since around July 2011, when with the exception of a brief period of negative prices the cost of the Ft has been higher than the actual Ft charged to consumers. EGAT has been shouldering around 5 billion baht to cover this with the promise that when the Ft costs were lower, they would be compensated. This is happening now.

34% of the Ft is made up of fuel costs, 63% is made up of the cost of purchasing power from the IPP, SPP and VSPP projects and 3% made up of policy directives, including the adder for renewable energy and the levy on generation licensees to the Power Development Fund. In the most recent tariff review, announced in July 2011, part of the Ft and the 50 kWh free program were moved into the base tariff. The Ft is being used for a range of things not related to its original intention which was to pass the fuel risk from EGAT to the consumer. The capacity charge to provide incentives to investors in the IPP and SPP projects and the adder for renewable energy sources in SPP and VSPP projects are a case in point. The 2011 tariff review tried to rationalise this and remove the policy instruments that had snuck into the Ft since 1996 but this was not successful. There is another review currently underway to reset the base tariff. Part of the reason for the moratorium on new applications for solar generation under the VSPP is the impact of the adder (6.5 baht/kWh) on the tariff due to the larger than expected number of applications (2000 MW by 2021 in the AEDP but 3000 MW of applications received by 2010).

I don't think you will be seeing any Ft credits any time soon.

[gamini]

Those of us who have made our homes in Thailand just love the strong baht. We naturally sold up everything in the UK. Got BT73 to the GBP and invested in property and other things. Those who kept assets and properties in the UK were unwise. Rather like all the 'brits' that moved to the costa brava in Spain and had to leave when the pound went down and had to pay tax.

Two friends actually are heading back to the UK for different reasons. They have sold their properties and investment here at double the price in UK pounds. So have enough to retire comfortably in the UK.

[RKASA]

Lets see invest 1m @ 43 and now it is worth 2.4m @ 30 Oh ouch, hurt me more. Inflation? OK - make it worth more baht - I am game.

[davejones]

Those of us who have made our homes in Thailand just love the strong baht. We naturally sold up everything in the UK. Got BT73 to the GBP and invested in property and other things. Those who kept assets and properties in the UK were unwise. Rather like all the 'brits' that moved to the costa brava in Spain and had to leave when the pound went down and had to pay tax.

Two friends actually are heading back to the UK for different reasons. They have sold their properties and investment here at double the price in UK pounds. So have enough to retire comfortably in the UK.

Lets see invest 1m @ 43 and now it is worth 2.4m @ 30 Oh ouch, hurt me more. Inflation? OK - make it worth more baht - I am game.

Most people on here don't seem to realize that currencies fluctuations work both ways. It's funny that they always as what we'll do if the baht strengthens further. For people like you two, and others, the answer is probably... celebrate.

Well done.

[BlackPuddingBertha]

Cigarettes are cheap, beers not expensive, who cares about the rest?

I certainly dont care about cigarettes as I dont smoke, but beer that costs nearly GBP1 for a large can in a 7/11 seems very expensive to me. In Europe I was used to it costing half that price. Not that beer forms a very large part of my daily expenditure.

[BlackPuddingBertha]

Those of us who have made our homes in Thailand just love the strong baht. We naturally sold up everything in the UK. Got BT73 to the GBP and invested in property and other things. Those who kept assets and properties in the UK were unwise. Rather like all the 'brits' that moved to the costa brava in Spain and had to leave when the pound went down and had to pay tax.

Two friends actually are heading back to the UK for different reasons. They have sold their properties and investment here at double the price in UK pounds. So have enough to retire comfortably in the UK.

Around the time that the Baht was 73 to the GBP I bought a house in Europe. Since then it has more than quadrupled in value in the local currency (EUR), and of course has added another 30% in GBP over the past 5 years. So even in Baht terms I am well ahead of any investment I might have made here at the same time.

And the Baht could easily have gone the other way (and still may for all anyone can be certain about). Above all I bought there in the knowledge that I had clear and full legal title, and full right of both abode and employment in the country in question. None of which is necessarily the case here.

Edited April 30, 2013 by BlackPuddingBertha

[BlackPuddingBertha]

no winter tires for the car, zero heating cost in winter...

Where I lived in Europe I didnt have to have winter tyres. And it didnt actually cost me a lot more for winter heating for a building much larger than the condo that I live in here than I spend on electricity for aircon here over the year. And even while I was living in it that building also provided me with a large rental income that I dont get from the condo I live in here.

A lot of the things that I buy here already cost far more than they would have cost me there, but I do make significant savings here in relation to income and property taxes. In fact just those two savings together amount to far more than I actually spend on all my living costs each year.

And as eating out does cost less here (and I eat out twice a day every day), my general day to day cost of living is also much lower here.

But to single out particular items as being more or less expensive seems fairly pointless. It's the bottom line that counts.

[yoshiwara]

Bring it on, my next house in the UK just got cheaper.

Post #7,

Also, put your money into assets that are more likely to rise with

inflation. I think property is a good bet at the moment, especially in

the UK and USA.

Me too, hence my intent to buy another property in the Uk this summer, anyone got any better ideas, I am all ears.

There are places I wouldn't buy with a bargepole. Edited April 30, 2013 by yoshiwara

[MAJIC]

Bring it on, my next house in the UK just got cheaper.

Post #7,

Also, put your money into assets that are more likely to rise with

inflation. I think property is a good bet at the moment, especially in

the UK and USA.

Me too, hence my intent to buy another property in the Uk this summer, anyone got any better ideas, I am all ears.

A Newspaper in the UK a few days ago was forcasting an average £10,000 rise in house prices for the coming year.But maybe they are running short of readers?

But who knows ? my last property in the UK was increasing in value £1000 a month for 2.5 years.

Edited April 30, 2013 by MAJIC

[yoshiwara]

Bring it on, my next house in the UK just got cheaper.

Post #7,

Also, put your money into assets that are more likely to rise with

inflation. I think property is a good bet at the moment, especially in

the UK and USA.

Me too, hence my intent to buy another property in the Uk this summer, anyone got any better ideas, I am all ears.

A Newspaper in the UK a few days ago was forcasting an average £10,000 rise in house prices for the coming year.But maybe they are running short of readers?

But who knows ? my last property in the UK was increasing in value £1000 a month for 2.5 years.

Don't get snagged by averages. Areas and types of property behave quite differently.

[MAJIC]

Bring it on, my next house in the UK just got cheaper.

Post #7,

Also, put your money into assets that are more likely to rise with

inflation. I think property is a good bet at the moment, especially in

the UK and USA.

Me too, hence my intent to buy another property in the Uk this summer, anyone got any better ideas, I am all ears.

A Newspaper in the UK a few days ago was forcasting an average £10,000 rise in house prices for the coming year.But maybe they are running short of readers?

But who knows ? my last property in the UK was increasing in value £1000 a month for 2.5 years.

Don't get snagged by averages. Areas and types of property behave quite differently.

But of course! the North has always been much cheaper to buy a house than the South,and certain parts of the Country,right down to location can have major effects on house prices.

[BrianCR]

Cigarettes are cheap, beers not expensive, who cares about the rest?

I certainly dont care about cigarettes as I dont smoke, but beer that costs nearly GBP1 for a large can in a 7/11 seems very expensive to me. In Europe I was used to it costing half that price. Not that beer forms a very large part of my daily expenditure.

The comment was tongue in cheek and meant that people can choose what they wish to spend their money on over here as (in my belief) things are much cheaper. In Europe you need to be more selective due to cost! Beer for example, who in their right mind, would buy a can from 7/11 when you can buy a large bottle for about the same price (bottled water is much cheaper if you prefer). Cigarettes are a fraction of the price as in the UK and the money saved on said cigarettes can buy you a reasonable meal over here. Incidentally if you think one pound is expensive when was the last time you bought a pint in the UK?

[chris2004]

Cigarettes are cheap, beers not expensive, who cares about the rest?

You forgot women

[kennedy]

I have more important things to worry about, like getting this goddam rubber band off my 25 bht. breakfast!

[Pacificperson]

The on-line Wall Street Journal had an interesting graphic today. It showed Chinese labor costs rising from just under $2.00 per hour in 2008 to about $3.50 per hour in 2013 and almost $4.00 per hour in 2014. Thailand's labor costs were about the same as China's in 2008 and had rose to about $2.75 per hour in 2013. They were projected to reach $3.00 per hour in 2014. In the meantime Indonesia and Sri Lanka were pretty well constant at about $1.00 per hour. The gist of the article was that China's low cost industries were moving off-shore, but not to Thailand. For us, they were projecting a 10% increase in labor costs in Thailand in the next year. That, folks, is called cost-push inflation.

Edited May 1, 2013 by Pacificperson

[Moo2cm]

Those of us who have made our homes in Thailand just love the strong baht. We naturally sold up everything in the UK. Got BT73 to the GBP and invested in property and other things. Those who kept assets and properties in the UK were unwise. Rather like all the 'brits' that moved to the costa brava in Spain and had to leave when the pound went down and had to pay tax.

Two friends actually are heading back to the UK for different reasons. They have sold their properties and investment here at double the price in UK pounds. So have enough to retire comfortably in the UK.

Yea, I don't believe you though. What is your income stream denominated in? Renting your properties out and receiving Thai baht? You are a foriegner, yourl ucky if you really own didly, You took your life savings and bought in at Thai Baht low? Hardly gives you room to say "Those of us". Are you just calculating your imaginary property value back into your original currency? Good luck with your imaginary gains, I'm just trying to figure out who you are speaking for since it certainly isn't the majority of "THose of us who made our homes in Thailand". Let me know how it works out if you ever try and leave with "your" money. If your friends left with double their money... they are the ones that "won" and they aren't even in Thailand anymore! How can you be a winner and have to return to the UK? Yea we all love that super stong baht....

I'm not calling a liar though. Just sounds like your were proud and bored when you wrote that.

[Naam]

The on-line Wall Street Journal had an interesting graphic today. It showed Chinese labor costs rising from just under $2.00 per hour in 2008 to about $3.50 per hour in 2013 and almost $4.00 per hour in 2014. Thailand's labor costs were about the same as China's in 2008 and had rose to about $2.75 per hour in 2013. They were projected to reach $3.00 per hour in 2014. In the meantime Indonesia and Sri Lanka were pretty well constant at about $1.00 per hour. The gist of the article was that China's low cost industries were moving off-shore, but not to Thailand. For us, they were projecting a 10% increase in labor costs in Thailand in the next year. That, folks, is called cost-push inflation.

did the WSJ specify what kind of Thai labourers make 80 Baht an hour?

[jko]

I just love these fear-mongering wind-up headlines all a variation on the 'If the world ends tomorrow have you got enough tins of spam in the larder?' They are all without exception the standard junk purloined from websites flogging the buy gold narrative. Thinly disguised advertising. Be warned.

If the world comes to an end tomorrow, I would like to point out that nobody will be left to eat any spam.

Whatever happens to inflation, real estate, or gold, Thailand is likely to remain the best place to live for decades ahead.

So let's enjoy life and stop worrying!

PS: And don't bother buying any spam.