Required Reading: Wonka's Thai Economy Post

[Zao]

I think the long term view here is worth noting:

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

I hope I'm not taking too much liberty here, but we should all check out Wonka's above post. It's great reading. The post was tucked away in a separate thread. Some might have missed it.

It's a November 2013 piece that brings together a lot of handy data in a single place.

Thanks Wonka!

[Zao]

Here's my 2 pence on the article.

Wonka, well done. This a a great read. Thanks for sharing it.

The only fault with the article is the lame-ass conclusion. I guess the author was exhausted by that point. I submitted a couple of papers like that in school, I think!

In the final section "How Thailand's Bubble Economy Will Pop", after exhaustive analysis of not exactly easy to collect data and some fairly incisive points, he wraps up with a gaping waffle:

"Thailand’s bubble will most likely pop when China’s economic bubble pops."

C'mon! What a cop out. Give your prose some balls.

His wimp out continues with "and/or as global and local interest rates continue to rise, which are what caused the country’s credit and asset bubble in the first place."

What does that even mean? Global interest rates dropping (plus QE) encouraged the flood of money into Thailand. They are now rising. But the credit and asset bubbles were caused by low global interest rates. Further, local interest rates are falling, not rising. 2013 saw two rate cuts in Thailand - June and November - to the lowest in three years, and this year should see BOT make one more cut.

To be fair, what he was trying to say is that as QE tapering once again builds momentum, BOT may - at some point - have to raise rates to attract foreign capital. Indeed, IMO, a rate rise in late 2014 would not be a surprise.

Further, Thailand has lower inflation than other Asians. This means "real interest rates" - I'm about to nod off - had been rising. Other economies - India, Indonesia - have been raising rates to combat inflation and attract foreign funds, because US bond yields have been trending higher. (US bond yields rise as QE falls. Zzzzz.) To attract foreign capital away from "safe" US bonds, Thailand will have to raise rates, once the economy firms up. But anything higher than 3% (they had hit 5% briefly in 2006) will be quite a ways off: Thailand has a lot of excess capacity to use up before economic growth can kick in.

Ok. Now I'm sleeping.

Still, aside from blaming the Chinese gorilla - kind of like blaming McDonalds for the world's fat people: easy to do, but tough to link - I don't think he's made a case for how Thailand's Bubble Will Pop.

Anybody have any thoughts? How might Thailand's bubble pop?

Clearly the key will be something that brings consumer and public debt crashing in on itself. This occurred in Japan in the late 1980s, but the situation is different. Or is it? What triggers an asset class crash? What holds the key for the Thai economy's future? Or is all this talk of a bubble simply rubbish?

I've got my own guess on this. I'll add it in a later post.

[Rooo]

Already running HERE.