Thailand's bubble economy is heading for a 1997-style crash

[webfact]

Thailand's Bubble Economy Is Heading For A 1997-Style Crash
Jesse Colombo, Contributor

Thailand is part of the overall emerging markets bubble that I have been warning about in recent years, along with Indonesia, Malaysia and other Southeast Asian countries.

The emerging markets bubble started in 2009, when China launched a bold stimulus-driven economic growth strategy to counter the deleterious effects of the global financial crisis on its economy.

China immediately scrambled to construct scores of new cities (many of which are still empty) and ambitious infrastructure projects for the sake of generating economic growth, which sparked a global raw materials boom that benefited commodities exporters such as emerging market nations and Australia.

Global investors soon began to pile into emerging market investments to diversify away from ailing Western nations in wake of the financial crisis. [read more...]

Full story: http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/

-- Forbes 2013-11-05

[David48]

Forbes' credential are beyond reproach.

The author's however ...

I am an economic analyst and anti-economic bubble activist who was recognized by the London Times for predicting the Global Financial Crisis. I am currently warning about growing bubbles in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more. I believe that the popping of these bubbles will cause the next financial crisis. You can learn more about me on my Wikipedia page.

Every recent article written by the Author has the word 'Bubble' in it ...

.

[cheeryble]

An article full of lots of good facts we need like debt ratios etc etc.

Not taking a position here, but:

The question is often begged.....does higher debt cause damage or stimulate greater prosperity?

I also note that Jesse Colombo says he has been warning "in recent.years" about a bubble.

Sorry the investor who used this as a sell signal

(Even sorrier the poor souls who sold on Nouriel Roubini's multiple sell signals.....as the market rose every time.)

Again, great info here.....only a matter of how to judge it.

Historical comparisons seem lacking.

Cheeryble

[Patje]

Forbes' credential are beyond reproach.

The author's however ...

I am an economic analyst and anti-economic bubble activist who was recognized by the London Times for predicting the Global Financial Crisis. I am currently warning about growing bubbles in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more. I believe that the popping of these bubbles will cause the next financial crisis. You can learn more about me on my Wikipedia page.

Every recent article written by the Author has the word 'Bubble' in it ...

.

Maybe he should change his job, soap master for dishwasher and detergent compagnies

[GrantSmith]

And directs further reading to his "wiki" file...

Seems legit

[brit1984]

economies (and markets) follow cycles - predicting a downturn will follow the upturn - what a genius

[brit1984]

it is a beautiful sunny day outside right now but i predict it wont last forever

[Time Traveller]

Taking the advice of mainstream media about investments is never a good strategy,

[i claudius]

I predict Thailand will go from strength to strength

I also predict it will crash

i will be 50% right no matter what ,you can send your congratulations when either happens.

[midas]

An article full of lots of good facts we need like debt ratios etc etc.

Not taking a position here, but:

The question is often begged.....does higher debt cause damage or stimulate greater prosperity?

I also note that Jesse Colombo says he has been warning "in recent.years" about a bubble.

Sorry the investor who used this as a sell signal

(Even sorrier the poor souls who sold on Nouriel Roubini's multiple sell signals.....as the market rose every time.)

Again, great info here.....only a matter of how to judge it.

Historical comparisons seem lacking.

Cheeryble

Knowing that you are a fan of the stock market (further highlighted by your reference to Nouriel Roubini's multiple sell signals) , I would hazard a guess that one of those that believes higher debt stimulates greater prosperity ?

If the prosperity is genuine, then why do all these economies require continuous stimulus packages and gimmicks such as the car subsidies so as to appear healthy?

Printing money doesn't lead to increase in genuine economic output.

I think the author has done a very good job, particularly including the opinion of three Thai tycoons who have experienced the symptoms first hand themselves previously.

[colinp]

it is a beautiful sunny day outside right now but i predict it wont last forever

If you had posted some graphs/charts and statistics I would go along with your predictions, until then...

[Thai at Heart]

All very good analysis.

The one thing I can't find answered, is the fact that in 97, Thailand had enormous overseas borrowings to fund domestic infrastructure. When it couldn't be paid, money flooded out of the country. This time around, there is less foreign money flooded in, and also not a fixed exchange rate, so how will this equate to a breaking of a pegged exchange rate, and a crash as in 97. The problems are manifestly NOT THE SAME as 97.

The economy may not go so well, the economy might stagnate, there maybe some construction companies going bust, but, the issues with 97 are completely different with today. If Thaiand wanted to negate all hot money removal from the country in one go, they have 190bn USD in the bank with which to act. So, whilst I agree that there maybe problems in the economy, the situation is COMPLETELY different from 1997, and is unlikely to result in a currency crash in the same way as 97. So what if the currency reduces to 35 to 36 to the USD? Is this is a catastrophe? That is just the normal ebb and flow of currencies. Issue is, is there enough bad news stored up in the Thai economy to make it race its way to 45 to the USD? I don't think so.

[midas]

All very good analysis.

The one thing I can't find answered, is the fact that in 97, Thailand had enormous overseas borrowings to fund domestic infrastructure. When it couldn't be paid, money flooded out of the country. This time around, there is less foreign money flooded in, and also not a fixed exchange rate, so how will this equate to a breaking of a pegged exchange rate, and a crash as in 97. The problems are manifestly NOT THE SAME as 97.

The economy may not go so well, the economy might stagnate, there maybe some construction companies going bust, but, the issues with 97 are completely different with today. If Thaiand wanted to negate all hot money removal from the country in one go, they have 190bn USD in the bank with which to act. So, whilst I agree that there maybe problems in the economy, the situation is COMPLETELY different from 1997, and is unlikely to result in a currency crash in the same way as 97. So what if the currency reduces to 35 to 36 to the USD? Is this is a catastrophe? That is just the normal ebb and flow of currencies. Issue is, is there enough bad news stored up in the Thai economy to make it race its way to 45 to the USD? I don't think so.

They use almost the same words as you on page 2 of the article.

One of the Thai tycoons mentioned earlier in this report, Boonchai Bencharongkul, cautioned against excessive government spending, saying “This time, the nature of the crisis might be different. Last time it was the private sector that went bankrupt, but this time we might see the government collapse.” Sawasdi Horrungruang, founder of NTS Steel Group, warned that Thailand’s government should not borrow beyond its ability to service its debt, which will eventually become the burden of taxpayers.

Which governments these days are able to service their debts comfortably? There aren't many. Japan's debt is now 240% of GDP.

In fact, that's what makes it so much worse than 1997 because so many other governments are too deeply in debt,all simultaneously.

Edited November 5, 2013 by midas

[Thailand]

The hub of bubbles?

A Hubble?

Or is that out of the scope of some analysts?

[chrisrazz]

I'm forever blowing bubbles

pretty bubbles in the air

they fly so high

nearly reach the sky

and like my dreams

they fade and die

fortunes always hiding

i've looked everywhere

i'm forever blowing bubbles

pretty bubbles in the air

[horsewell]

Make hay while the sun shines and don't make plays that will end with disaster...

[Thai at Heart]

All very good analysis.

The one thing I can't find answered, is the fact that in 97, Thailand had enormous overseas borrowings to fund domestic infrastructure. When it couldn't be paid, money flooded out of the country. This time around, there is less foreign money flooded in, and also not a fixed exchange rate, so how will this equate to a breaking of a pegged exchange rate, and a crash as in 97. The problems are manifestly NOT THE SAME as 97.

The economy may not go so well, the economy might stagnate, there maybe some construction companies going bust, but, the issues with 97 are completely different with today. If Thaiand wanted to negate all hot money removal from the country in one go, they have 190bn USD in the bank with which to act. So, whilst I agree that there maybe problems in the economy, the situation is COMPLETELY different from 1997, and is unlikely to result in a currency crash in the same way as 97. So what if the currency reduces to 35 to 36 to the USD? Is this is a catastrophe? That is just the normal ebb and flow of currencies. Issue is, is there enough bad news stored up in the Thai economy to make it race its way to 45 to the USD? I don't think so.

They use almost the same words as you on page 2 of the article.

One of the Thai tycoons mentioned earlier in this report, Boonchai Bencharongkul, cautioned against excessive government spending, saying “This time, the nature of the crisis might be different. Last time it was the private sector that went bankrupt, but this time we might see the government collapse.” Sawasdi Horrungruang, founder of NTS Steel Group, warned that Thailand’s government should not borrow beyond its ability to service its debt, which will eventually become the burden of taxpayers.

Which governments these days are able to service their debts comfortably? There aren't many. Japan's debt is now 240% of GDP.

In fact, that's what makes it so much worse than 1997 because so many other governments are too deeply in debt,all simultaneously.

Well, Thailand is still at less than 50%, which is a more than easy figure for Thailand to service. Also, bear in mind, that Mr. Benjarongkul is the previous DTAC man, who lost his company to Telenor, whilst AIS survived, so I wouldn't exactly expect him to be apolitical when it comes to predicting a crash under the current government. All of these blokes who were in that round table were businessmen who got their ass handed to them under the crisis of 97. I am not saying that this government policy is perfect, and they do need to watch how much they borrow and how much and how they spend. But it isn't at crisis levels yet, unless there are a lot of numbers hidden under the carpet.

So whilst the original writer says it may be like a 97 crisis, the other quote states it will be different from a 97 crisis. So my question remains. Which will it be? And why should it be a crisis at all? If the baht wends it's weary way to 35 to the USD, this hardly represents a crisis, just a slow devaluation of the currency.

[inzman]

I would think that if the government has 195 million in the bank, the politicians would have looted it long ago. Has anyone checked the vault lately?

Sent from my iPad using Thaivisa Connect Thailand mobile app

[khunken]

Yes, the economy is not very healthy and the government just throws money at anything that they feel will win them votes. But an economic crash? No, not on the horizon. A political crash? Maybe.

I have to say that IMO Forbes is about as credible as Faux 'News' - heavy on opinion and light on facts.

[crazykopite]

One thing is certain today is Guy Fawks day in the UK, and tomorrow if my predictions are correct will be Wednesday !!!!!!!!

[GAZZPA]

All very good analysis.

The one thing I can't find answered, is the fact that in 97, Thailand had enormous overseas borrowings to fund domestic infrastructure. When it couldn't be paid, money flooded out of the country. This time around, there is less foreign money flooded in, and also not a fixed exchange rate, so how will this equate to a breaking of a pegged exchange rate, and a crash as in 97. The problems are manifestly NOT THE SAME as 97.

The economy may not go so well, the economy might stagnate, there maybe some construction companies going bust, but, the issues with 97 are completely different with today. If Thaiand wanted to negate all hot money removal from the country in one go, they have 190bn USD in the bank with which to act. So, whilst I agree that there maybe problems in the economy, the situation is COMPLETELY different from 1997, and is unlikely to result in a currency crash in the same way as 97. So what if the currency reduces to 35 to 36 to the USD? Is this is a catastrophe? That is just the normal ebb and flow of currencies. Issue is, is there enough bad news stored up in the Thai economy to make it race its way to 45 to the USD? I don't think so.

I think the reference to 97 is a comparison for scale not circumstances. I think Thailand is absolutely heading for a crash as is China.. There are so many properties empty absolutely everywhere and household debt in Thailand has risen rapidly, even in the first half of this year and is still rising.

There are other reasons covered in the article and plenty of data available online,, in short something has to give sooner or later, hence predicted crash.

[Thai at Heart]

All very good analysis.

The one thing I can't find answered, is the fact that in 97, Thailand had enormous overseas borrowings to fund domestic infrastructure. When it couldn't be paid, money flooded out of the country. This time around, there is less foreign money flooded in, and also not a fixed exchange rate, so how will this equate to a breaking of a pegged exchange rate, and a crash as in 97. The problems are manifestly NOT THE SAME as 97.

The economy may not go so well, the economy might stagnate, there maybe some construction companies going bust, but, the issues with 97 are completely different with today. If Thaiand wanted to negate all hot money removal from the country in one go, they have 190bn USD in the bank with which to act. So, whilst I agree that there maybe problems in the economy, the situation is COMPLETELY different from 1997, and is unlikely to result in a currency crash in the same way as 97. So what if the currency reduces to 35 to 36 to the USD? Is this is a catastrophe? That is just the normal ebb and flow of currencies. Issue is, is there enough bad news stored up in the Thai economy to make it race its way to 45 to the USD? I don't think so.

I think the reference to 97 is a comparison for scale not circumstances. I think Thailand is absolutely heading for a crash as is China.. There are so many properties empty absolutely everywhere and household debt in Thailand has risen rapidly, even in the first half of this year and is still rising.

There are other reasons covered in the article and plenty of data available online,, in short something has to give sooner or later, hence predicted crash.

Well, I don't think that the elements are there to create something the same size as 97 then, so it shouldn't be the same as 97.

[jonesthebaker]

All very good analysis.

The one thing I can't find answered, is the fact that in 97, Thailand had enormous overseas borrowings to fund domestic infrastructure. When it couldn't be paid, money flooded out of the country.

so your not aware ot the current deal going through to borrow 2 trillion baht for domestic infrastructure. obviously not!

[brit1984]

i predict a riot

[klauskunkel]

Thailand blamed their economic fiasco in the late '90s on George Soros.

Who will be blamed for this alleged coming crash? China?

Nah, can't do that, gonna find another farang...

[Muhendis]

As others before me have said there are lots of useful facts and figures in the [Forbes] report however the analysis is based on 1997 events. This is flawed because there are many different activities now. Having said that, the subjective nature of predicting what may happen leaves me a bit nervous because the general trend of events for investors in Thailand is like a gathering storm. I think we must watch this space.........Closely.

[bangon04]

Where is Naam when we need him?

[skorchio]

Well I dont have much of an opinion about the numbers and terms bandied around in the article. I have lived here for 12 yrs though. In that time I was returning maybe twice a year to Ireland, where I witnessed a changing society similar to time lapse photography. The property bubble boom in Ireland was in full swing, and every time I went home I saw it advance and I must say the place became less enjoyable to visit. Cars changed from bangers to Mercs and BMs, many people were on their second property and had thousands to burn. It seemed 50 euro was the smallest note. Yet my peers were all still earning far less than me. What were they spending?

I see the same step change in Thailand over the 12 yrs .... my Toyota Sportrider used to be a tasty motor. Now it is but a peasants chariot amongst the Cayennes and Merc clogging up the Phuket roads. The style and mode of marketing for new Condos seems to be on the same level as what was seen by me in Ireland 10-5 yrs ago. "living, dreaming, aspiring" .... and a picture of a chick on a sofa wearing glasses with an apple laptop, as though the laptop is a happiness life support device. Asking prices are sometimes a little eyewatering. And when you go and see what they are building, fark me it is a competition in the corner cutting of bad finishing. All I am saying is it has many of the hallmarks of Ireland only a few years ago.

[Skint]

Bubble not going to burst until the elite have milked everything, then it will burst. So still a while yet.

Sent from my iPhone using Thaivisa Connect Thailand

[isawasnake]

I think it is good to analyze and be vigilant, but when I see this type of "crash" thinking, all I can think is it is probably coming from somebody who is not making money in the stock market, and who has probably gotten hurt by it in the past. If you see a crash, get some cash out and prepare to buy some more stocks on sale