Thai opinion: It seems like 1997 all over again

[ray23]

We had half finished buildings' all along ring road for years, here in Udon. Most of them jave been finished now and tons of new ones starting. Even a project to build an outer ring road going on. Property prices went through the roof in the last few years anywhere close to Udon.

That being said a I reacall ( Old Git) the banks are tightening credit, could it happen again I think so.

This dallar intevetion has always confused me. BOT is supposed to have a ton of dollar reserves, so why intervene. Exporters sure didn't want it. That drove a lot of SME's out of business, primarliy in clothing business's I beleive. Could that with a 30% pay increase, they simply could not offer the product at competetive pricing.

Udon actually feels more like Cahing Mai these days, during work traffic time. We have three movie theatres in town now an Ice Rink and our own Villa Market, four new upscale shopping centers.

So a lot of growth in the last few years. Will the populations be able to support all this?

We are not a tourist destination. We do have a lot foreigners living here now. But, not enough to support all the new bars around that's for sure.

I really don't know how some of these business's make it here. Things go south really going to hurt this area.

[chiang mai]

We had half finished buildings' all along ring road for years, here in Udon. Most of them jave been finished now and tons of new ones starting. Even a project to build an outer ring road going on. Property prices went through the roof in the last few years anywhere close to Udon.

That being said a I reacall ( Old Git) the banks are tightening credit, could it happen again I think so.

This dallar intevetion has always confused me. BOT is supposed to have a ton of dollar reserves, so why intervene. Exporters sure didn't want it. That drove a lot of SME's out of business, primarliy in clothing business's I beleive. Could that with a 30% pay increase, they simply could not offer the product at competetive pricing.

Udon actually feels more like Cahing Mai these days, during work traffic time. We have three movie theatres in town now an Ice Rink and our own Villa Market, four new upscale shopping centers.

So a lot of growth in the last few years. Will the populations be able to support all this?

We are not a tourist destination. We do have a lot foreigners living here now. But, not enough to support all the new bars around that's for sure.

I really don't know how some of these business's make it here. Things go south really going to hurt this area.

The stronger the Baht the more expensive Thai exports become and as a consequence exports fall in volume. So yes, whilst some exporters would have been happy to see THB march ever upwards against USD, overall the volume of exports would have fallen further and faster as fewer sales are made.

[ray23]

I just wonder if the baht would have something to do with dealing with China?

[harryfrompattaya]

Surely it's all Soros fault again?

You Joke but I told so about year ago Please go back and read my post which most of the poor made fun of me

[MaxLee]

No this isn't 1997 all over again,... this the year 2013, the year of the worst emerging cases scenario economic problems, where politicians in Thailand have become more and MORE greedy corrupt and with murderous over dead body and FACE SAVVY attitude and more WHITE LYING than ever, who are not sparing one sign of common sense to LEARN ANYTHING from the past...

2013, the year of emerging problems of political party violence on the streets, first yellow, then red, then yellow again and so forth....

[giggles]

of course they have more reserves with so many sponsors sending money to their thai women it all mounts up

[Thai at Heart]

OK, we could debate the semantics of this all day and nobody would be any the better off, the fact is however that if Thailand had indeed only had 3 billion in foriegn reserves in 1997 it would not have been that unusual, given the number of countries that only have that much some fifteen years later. Clearly many countries can and do function at that level, regardless of their other attributes.

Thailand had 30+ billion, not 3 when the 97 crisis happened.

Thailand today has now reserves than the UK.

Doesn't mean it can't quickly be used up if there is a huge run on the baht, but still it's a significant amount with which to defend the currency if they want to.

How would a run on the Baht happen to a currency that is effectively (not actually) a closed currency, step me through that process?

Well in 97 it was a classic case of Thai banks borrowing a ton of USD to fund Thai baht loans to construction, with a fixed exchange rate. Problem is that, construction projects need loans over a period of maybe 3 to 10 years, and the banks from the US were lending 1 to 3 years. So, Thais were happily going along with their Thai baht loans which had been borrowed from overseas in USD, constructing along very happily.

The problem came when, instead of rolling over the principle, the foreign bank wanted their principle back, and the projects weren't finished. Hmmmm. What to do. Start paying back, and paying back, and paying back, but no cash in the bank, and of course, this started to put downward pressure on the baht, and the government started trying to sell USD and buy baht from the market to keep the value, but the amount of baht coming into the market was far beyond that the Thai government could afford to buy up, so when they had used up about 50% of their USD to mop up the excess baht in the market, it then went into freefall.

It is a perilous line when you take foreign currency loans to fund domestic projects with a fixed exchange rate. Argentina did it, and it went bang eventually also. You can't have a free national capital account and a fixed exchange rate. It will cause imbalances eventually.

External debt has indeed increased:

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=659&language=ENG

This was the caveat that was being bandied around a few years ago that Thai banks had learnt their lessons are were sourcing funding locally and weren't so exposed to international lending.

Then about a year ago I saw a story about SCB or Bangkok bank expanding their sourcing of funds overseas. USD have been very very cheap.

This is why you have risk control officers but as you see from the west, making a profit often outweighs this control.

[Thai at Heart]

Surely it's all Soros fault again?

You Joke but I told so about year ago Please go back and read my post which most of the poor made fun of me

It wasn't soros fault the first time, and not this time again if a problem comes.

Lending to the wrong people too often eventually breaks banks. Simple.

[CHRISTIANa9]

Frankly I like to see a repeat of 1997. Ok maybe not so drastic but abit of deep recession is good to make people realize the excesses in the past.