US default unlikely, but Thailand must prepare for worst: WBank

[webfact]

US default unlikely, but Thailand must prepare for worst: WBank
CHAOWARAT YONGJIRANON
THE NATION

BANGKOK: -- The United States' much-anticipated debt-ceiling deadline of October 17 continues to cast a shadow over global markets. In an interview at the World Bank office in Bangkok, although Mathew Verghis, the bank's lead economist for Southeast Asia, said a default crisis was unlikely, if it does occur Thailand would see a volatile cash outflow that would cut the baht to levels seen after the US Federal Reserve's announcement on the tapering of quantitative easing.

WHAT IS YOUR ASSESSMENT OF THE OCTOBER 17 DEBT-CEILING DEADLINE?

Our expectation is that there will be a deal reached. It might be taken to the last minute. The last time this happened, in 2011, eventually right before the debt ceiling [deadline] was going to be reached, a deal was reached. And our expectation is that the same thing will happen [this time].

WHY DO YOU THINK THERE WILL BE AN AGREEMENT?

Because the consequences are quite high. The immediate effects of the government shutdown that is happening now are serious for some people. Federal government workers in the US are laid off and are not working. So for them it is very serious. But for the broader economy, it has not been that serious. In 1995 and 1996 during [bill] Clinton's presidency, there was a similar event and the consequences both for the US and the global economy were not that serious. In that case and in 2011 they reached a deal before the debt ceiling was breached. Now if they don't manage to reach a deal, then the consequences are likely to be much more serious

BUT OBVIOUSLY, WHILE THERE SEEMS TO BE OPTIMISM, THERE IS STILL DISAGREEMENT IN THE US GOVERNMENT. HOW DO YOU SUPPOSE IT IS GOING TO END?

Well, one side or the other - or both sides - will have to make concessions. There are some proposals on the table. One of them is a temporary raising of the debt ceiling for about two or three weeks, which would give a little bit more space and time to reach a deal. But both sides have to come together, and at this point right now they have not yet done that.

BUT IS THIS JUST A POSTPONEMENT OF THE PROBLEM ITSELF OR IS IT GOING TO ACTUALLY BE SOLVED?

Well, first I would like to say that I am hopeful. I am not sure if I would describe it as very confident but I hope that they will reach a deal. In terms of whether this is a postponement of the problem, this is President [barack] Obama's point, that within countries there always have to be negotiations about budgets. You have to reach a consensus on what the budget should be.

TALKING ABOUT THE WORST-CASE SCENARIO, A DEFAULT, WHAT IS THE POTENTIAL FOR THAT, AND WHAT WOULD HAPPEN TO EMERGING AND OTHER MARKETS?

This has never happened before. The reason that US Treasuries are the safest assets in the world is that the US government has never defaulted, and there has always been an understanding that they will be able to meet their obligations. This makes it difficult to forecast what the impact would be. But one place to start could be to look at an event like 2008 when Lehman Brothers collapsed. When Lehman Brothers collapsed there was a crisis of confidence in the markets and banks, for example, became nervous about lending to one another because they were not confident in each other. And that is the kind of effect that would happen today.

IT IS REALLY ABOUT CONFIDENCE IN THE US DOLLAR, ISN'T IT? IS THIS SOMETHING THAT WE ARE GOING TO SEE STILL SUPPORTING THE US OR IS THIS A SIGN THAT THERE IS GOING TO BE CHANGE?

What is very interesting was [that] both in 2008 but also in 2011, when you had the prospect of default, when it seemed like the US government was not going to be safe, money still flowed back to the US. So somehow investors had this view that even with all the problems, the US [dollar] was still the safest currency in the world. My guess is that if there was an actual default, which hasn't happened yet, then that will start to change. There is already a long-term process by which the US is not going to be the sole international currency. Once Europe recovers, the euro is likely to be increasingly an international currency. The RMB [Chinese renminbi] is likely to be an international currency. A default in the US will strengthen that process.

LET'S TALK ABOUT THAILAND. WHAT IS YOUR ASSESSMENT FOR THE THAI ECONOMY AND WHAT SHOULD THE THAI GOVERNMENT DO IN CASE OF A US DEFAULT?

Thailand relative to many countries and relative to what happened in 2008, I think, is starting from a slightly better position. The reason for that is that there have already been some ups and downs. Most recently after the Fed announcement of tapering, Thailand has already experienced quick capital outflows, and I think that will be the first and most immediate impact. What the Thai government will have to do is to see what policies, both on the monetary and fiscal sides, they can take to help mitigate some of those measures. Now on the fiscal side, because of the policies that have already been undertaken, there is less space than there was earlier, but even within those constraints, given the magnitude of what is likely to happen, I think the government will have to prepare to respond on the fiscal side. On the monetary-policy side, I think one of the things that are going to happen that will help rebalance the economy is that the exchange rate will continue to depreciate. The other thing that I think the central bank will have to watch out for is rising interest rates, because consumer debt has been growing so fast. If interest rates continue to rise, then one of the things to monitor is whether that is going to have an impact on non-performing loans and then on the health of the banks more generally.

-- The Nation 2013-10-14

[tonneke breda]

What the Thai government will have to do is to see what policies, both on the monetary and fiscal sides, they can take to help mitigate some of those measures.

So what he really means is that the government can hide their drew ups under the umbrella of, America is to blame.....

[CIHUAHUA]

Oh bummer its a boner.

[oogster8]

Dont worry if usa defaults or not. There will be no turmoil. O-shit just trying to scare people into becomming more socialists. They will pay their bills. Its just paperwork. Its not like when you lend your gf family 100,000 baht-they have no means to pay it back.

Just look at the bond markets, No movement whatsoever in 10 year treasurys. Its a non-event. Im not saying everythings hunky dory in usa. But this oct 17 deadkline is pure monkey shit.

[ESCAPIS]

So in practical terms:

- how would that affect the interest rates on deposits in local currency and in foreign currencies?

- what would happen to the exchange rate us dollar<->baht?

[paymaster]

The same headline with a couple of word changes was used a fortnight ago! "Floods unlikely but Thailand must prepare for the worst".

Edited October 14, 2013 by metisdead
Large font reset to normal.

[rotary]

Obama needs to understand people do not want his HealthScare stuff. Lets defund Obama care and move on. Problem solved.

[churchill]

Obama needs to understand people do not want his HealthScare stuff. Lets defund Obama care and move on. Problem solved.

To a non American it seems that he was elected and then re-elected , So how can the 'people ' not want Obamacare ?

[oogster8]

Obama needs to understand people do not want his HealthScare stuff. Lets defund Obama care and move on. Problem solved.

To a non American it seems that he was elected and then re-elected , So how can the 'people ' not want Obamacare ?

Obama won re-election by default. Many who voted against obama the commie the first time didnt vote at all the 2nd time due to the WUSS Romney the republicans nominated.

Romney while no obama is just anothe r big govt guy.

[churchill]

Obama needs to understand people do not want his HealthScare stuff. Lets defund Obama care and move on. Problem solved.

To a non American it seems that he was elected and then re-elected , So how can the 'people ' not want Obamacare ?

Obama won re-election by default. Many who voted against obama the commie the first time didnt vote at all the 2nd time due to the WUSS Romney the republicans nominated.

Romney while no obama is just anothe r big govt guy.

But he won with a majority

[churchill]

Chinese state media calls for ‘de-Americanised’ world after US shutdown

Xinhua says 'new world order should be put in place' where all nations can have interests respected on equal footing

http://www.scmp.com/news/china/article/1330873/chinese-state-media-calls-de-americanised-world-after-us-shutdown

[marcusd]

Oh bummer its a boner.

I tend to agree here. Bummer... BUT for Thailand well the simple answer is WHO REALLY CARES ON A WORLD STAGE? the economy is somewhere near 50th in the world, a tin pot banana (or should I say Rice) republic with absolutely ZILCH influence anywhere except THAILAND.

America defaulting? Well It may happen and if it does will it hurt the rest of the world? I think for a month maybe then back to business as usual. the US goivernment has ways to pull extra cash if it needs to. They draw so much busines sback from China to the USa that chiana will olse influence. What has ANY asian country INVENTED? NOTHING! It is all western and most of it USA. (even the bad stuff...lol) But I think that the US might default as it is a political thing Obama wants for re election of his party and the world will see it as that too.

As for their mounting debt? Well they have to bite the bullet soon.

I read somewhere on the CIA factbook i think it was (dont quote me I may be wrong...) that once USA Debt reaches 20 trillion they are officially BANKRUPT.

Now this is the US GOVERNMENT mind you NOT US corporations which are about 1 billion per cent of the worlds economy. So relax. Maccas, Pepsi, Coke and KFC are still going to be here. As for the baht? Capital outflows from Thailand have been propped up by Cash reserves... so when that runs dry; and to give an example; the state of Victoria in australia with 5 million people has a bigger GDP than ALL OF THAILAND and that is SMALL people...The thai baht will drop like lead on the way to Davey Jones locker. And that will be good for us.

Thailand FORGETS the money they have comes mainly from OVERSEAS. Remeber, CHINA is still not large enough INTERNALLY as a self perpetuating economy to fullfil economic growth a sthe main busines sis EXPORT and guess who most of that is to? Yep, OUR WESTERN BROTHERS.. So relax enjoy and dont gain any more wrinkles. It doesn't help solve anything

[oogster8]

Obama needs to understand people do not want his HealthScare stuff. Lets defund Obama care and move on. Problem solved.

To a non American it seems that he was elected and then re-elected , So how can the 'people ' not want Obamacare ?

Obama won re-election by default. Many who voted against obama the commie the first time didnt vote at all the 2nd time due to the WUSS Romney the republicans nominated.

Romney while no obama is just anothe r big govt guy.

But he won with a majority

So did Yingluck.

Both promised to make the lives. of those who voted for them better. In reality their policies only make the supporters worse off...............lol.

But at least Y voters got their 4000 baht and O voters got their obamaphone.............lol.

I still dont believe america is a commie country!

[BuriramRes]

Chinese state media calls for ‘de-Americanised’ world after US shutdown

Xinhua says 'new world order should be put in place' where all nations can have interests respected on equal footing

http://www.scmp.com/news/china/article/1330873/chinese-state-media-calls-de-americanised-world-after-us-shutdown

China just needs to stop funding the US. If the US defaults, China should just pull the plug and demand immediate repayment of their bonds. Just forclose on New York and the Pentagon for a start.

The US needs to understand that the rest of the world no longer needs to prop up their extravagant life style. Make the US live within their means and stop fighting wars using a credit card (and stop their QE, which is just as bad as Robert Mugabe's tactics).

[Trouble]

Obama needs to understand people do not want his HealthScare stuff. Lets defund Obama care and move on. Problem solved.

To a non American it seems that he was elected and then re-elected , So how can the 'people ' not want Obamacare ?

All polls show that majority of Americans don't want the new health care program. In most cases those who favor the program will not be hit in the pocketbook. Tell every American that it is going to cost X number of dollars out of their paychecks and that would change their view. As long as someone else pays, they are for the program. On top of that the program only creates more debt. There is a need for health care reform but the bill was railroaded through Congress. Even the President did not read the bill. It only created another enormous burden on a budget that is balanced on borrowed money. Certainly the USA cannot keep spending on the credit card infinitely.

The USA has ample ability to pay the interest payments on the debt and would not default on a failure to raise the debt ceiling as it would prioritize its spending. Obviously some other areas would have to be cut. Raising the debt ceiling and default on treasuries are two different things.

The real argument in the Congress is not Obama Care as such, it is whether the USA will make moves to reduce government spending and begin to make some moves to bring the budget into balance at some point in the future. Why the Obama administration and the liberals think they can just keep creating new entitlement programs without the ability to pay for them is something the conservatives just don't understand.

[colinp]

What has ANY asian country INVENTED? NOTHING! It is all western and most of it USA.

I'm sure the rest of your post is correct but this part stood out.

http://en.wikipedia.org/wiki/List_of_Chinese_inventions

[inthepink]

marcusd needs to bear in mind that 8% of publicly held outstanding US government debt is owned by the Chinese - i.e. the US government owes the Chinese $1.2 trillion and counting - so less of the American chest beating please, it's not warranted.

Furthermore, of inventions that originated in the West, many of the most important most certainly did not come from the USA.

[oogster8]

Food 4 thought. A guy was asked about Frances accomplishments or contributions to the world. He said CHEESE................lol. Lesson- thats what happens when govt sticks their nose everywhere. Just kills human ingenuity and the spirit to do great things.

[ajarnpot]

I question the unlikely part of title. what else can the us do? default is the only sensible answer, I can't see the us selling of assets so yes prolong it all, however surely default is what will happen in the end.

And oogster8 I don't understand what the bonds have to do with anything. For all purposes the us is borrowing money to pay of interest on debt. How can it afford to pay bills off if it is borrowing money to pay off interest on debt.

Or it has so much money that paying interest on its debt is just a way to keep the tax payers money circulating?

[ajarnpot]

 

Chinese state media calls for ‘de-Americanised’ world after US shutdown

Xinhua says 'new world order should be put in place' where all nations can have interests respected on equal footing

http://www.scmp.com/news/china/article/1330873/chinese-state-media-calls-de-americanised-world-after-us-shutdown

 

I agree with the Chinese on this. And English English should remain the language of diplomacy the world over

[ajarnpot]

 

Oh bummer its a boner.

I tend to agree here. Bummer... BUT for Thailand well the simple answer is WHO REALLY CARES ON A WORLD STAGE? the economy is somewhere near 50th in the world, a tin pot banana (or should I say Rice) republic with absolutely ZILCH influence anywhere except THAILAND.

America defaulting? Well It may happen and if it does will it hurt the rest of the world? I think for a month maybe then back to business as usual. the US goivernment has ways to pull extra cash if it needs to. They draw so much busines sback from China to the USa that chiana will olse influence. What has ANY asian country INVENTED? NOTHING! It is all western and most of it USA. (even the bad stuff...lol) But I think that the US might default as it is a political thing Obama wants for re election of his party and the world will see it as that too.

As for their mounting debt? Well they have to bite the bullet soon.

I read somewhere on the CIA factbook i think it was (dont quote me I may be wrong...) that once USA Debt reaches 20 trillion they are officially BANKRUPT.

Now this is the US GOVERNMENT mind you NOT US corporations which are about 1 billion per cent of the worlds economy. So relax. Maccas, Pepsi, Coke and KFC are still going to be here. As for the baht? Capital outflows from Thailand have been propped up by Cash reserves... so when that runs dry; and to give an example; the state of Victoria in australia with 5 million people has a bigger GDP than ALL OF THAILAND and that is SMALL people...The thai baht will drop like lead on the way to Davey Jones locker. And that will be good for us.

Thailand FORGETS the money they have comes mainly from OVERSEAS. Remeber, CHINA is still not large enough INTERNALLY as a self perpetuating economy to fullfil economic growth a sthe main busines sis EXPORT and guess who most of that is to? Yep, OUR WESTERN BROTHERS.. So relax enjoy and dont gain any more wrinkles. It doesn't help solve anything

 

hmm gunpowder

[chainarong]

History shows that if you are not prepared for any financial glitch , you are in for a rough ride , no use telling everybody to prepare, when the wolf is at the door, proper planning prevents piss poor performance, works every time.