Bangkok Bank Exec Fears New Economic Crises

[george]

BBL exec fears new economic crisis

Lack of governance, failure to adhere to sufficiency model 'could see repeat of 97'

BANGKOK: -- Kosit Panpiemras, executive chairman of Bangkok Bank and former secretary-general of the National Economic and Social Development Board (NESDB), last week warned that Thailand may soon face another economic crisis if it fails to adhere to the sufficiency-economy model.

If the Kingdom continues to spend beyond its means, the problems that arise from poor governance might worsen, he said, pointing to a rise in crony capitalism, conflicts of interest, insider trading and monopolies.

His Majesty the King's philosophy of a sufficiency economy will help avert a crisis caused by these "crimes of capitalism", Kosit said.

His comments were made during a seminar on the 10th NESDB plan (for 2007 to 2011), which stresses a healthy society rather than a growth-oriented economy.

The timeliness of his remarks is underscored by the celebrations of the 60th anniversary of His Majesty the King's accession to the throne. His Majesty is a leading advocate of the sufficiency-economy model.

With politically connected businesses at the centre of Thailand's political crisis, the sufficiency economy is being held up as a model that can help correct poor governance while achieving sustainable economic and social development.

Many analysts have concluded that the current political crisis and economic malaise are a result of poor governance, inefficient bureaucracies and corrupt independent organisations.

Some fear the current political stalemate will lead to an economic crisis while others worry about potential violence.

Amid this frustration and pessimism, people are turning to HM the King's ideas for direction. His advocacy of a sufficiency economy - which has been lauded by the United Nations - has renewed people's confidence in their future as well as the Kingdom's.

"At this crucial moment for our country we are in dear need of the philosophy of a sufficiency economy to help us avert the next crisis," Kosit said.

The idea of sufficiency economy, or well-balanced capitalism, is simple. It is based on following one's conscience. HM the King's suggestions remind people to follow simple moral rules. For example, he advises people not to be greedy, to be moderate and live within their means.

Leo Mittelholzer, managing director of Siam City Cement Plc, said that HM the King had "vision" and said this vision could lead Thailand to sustainable economic development.

As a result of poor governance, political leaders adopt policies for short-term popularity at the expense of long-term, sustainable development. For example, the populist policies implemented by Caretaker Prime Minister Thaksin Shinawatra have led to an increasing level of household debt.

While the 1997 economic crisis was largely a result of mismanagement by private companies, the next crisis will likely result from "economic crimes".

Just a few months ago, hundreds of thousands of people took to the streets to vent their anger towards what they saw as worsening economic crimes, including conflicts of interest, unfair competition, cronyism, lack of transparency in public affairs and unregulated monopolies.

As the political system weakened over the past five years, money politics became the rule and politicians allegedly colluded with senior officials to protect their interests. Independent organisations were undermined, and the system of checks and balances eroded. This sparked the political crisis.

If the political crisis persists an economic crisis may be imminent. The 1997 crisis was partly caused by poor corporate governance. Poor governance in the public sector and a government that failed to develop a sufficiency economy could trigger the next one.

--The Nation 2006-07-05

[Netfan]

A banker talking about the "crimes of capitalism". Interesting. How many credit cards has BBL issued over the past few years to people who they knew were borderline? How may loans? How many mortages? I hate to be cynical, but this doesn't exactly seem like real foresight. More like someone trying to cover their a**.

[Mr_Dave]

A banker talking about the "crimes of capitalism". ...[snip]... I hate to be cynical, but this doesn't exactly seem like real foresight.

...I second that comment from Netfan.

It's not any foresight at all, just bad thinking.

If the man at the top thinks like that, what will be the future of that bank?

...Can't remember the source, but worth mentioning in response to this news article,

"Capitalism is what happens when you leave people alone."

.

[Heng]

It's all relative. We can all live using His Majesty's sufficiency economy principles. The application isn't going to be the same for everyone. Yes you can still be a banker or whatever and not be growing your own vegetables AND still be living "por piang." One can express living 'sufficiently' in other ways.

[Scott]

As the number 1 spender/earner of money--through taxes, you need a gov't to keep a close eye on and help to make sure the economy moves within limits.

As far as granting credit cards and loans--I think a time needs to come when people are held accountable for their acitons. If you spend more than you make then you will have problems and there will be consequences for these problems.

I spent the last 20 some years without a credit card. Finally got one only to use when traveling. I have never charged 1 baht to the thing and never will unless it is an emergency. This comes from some lessons learned when I was quite young.

Any mismanagement wasn't the bank's fault.

[soap]

if you buy a property by auction from the bangkok bank,they will give a 90% morgage and a 20% loan to furnish the property subject to status.

with figures like that its no wonder they think the country is going broke again

[Martin]

I thoroughly agree with 'Scott", who says in post #5:

"As far as granting credit cards and loans--I think a time needs to come when people are held accountable for their acitons. If you spend more than you make then you will have problems and there will be consequences for these problems."

And what applies to individuals applies to bigger organisations, too. Right up to Governments.

Large parts of international economies are teetering on the brink as a result.

The US keeping on financing a year's deficit of US$800,000,000,000 ($800 billion) cannot go on indefinitely. That is $800 billion borrowed annually, mostly from the savings of the Chinese.

The bubble is bound to burst, and the dollar collapse with huge 'knock-on' effects.

Thailand is very lucky, though, that its 'fundamentals' are strong enough for it to survive (provided it has been prudent and not let borrowing get out of hand).

Thailand has enough land to feed its entire population, and have a bit to spare for export.

And it doesn't have to buy oil to keep its people warm in winter.

So it is very fortunately positioned, compared to many countries, for when the bubble bursts.

'Heng' is right that 'por piang' is not a matter just for the 'knit your own yoghourt' brigade.

We can all be prudent, and not profligate, in our own spheres.

[marshbags]

Quoted from the main news article

With politically connected businesses at the centre of Thailand's political crisis, the sufficiency economy is being held up as a model that can help correct poor governance while achieving sustainable economic and social development.

Many analysts have concluded that the current political crisis and economic malaise are a result of poor governance, inefficient bureaucracies and corrupt independent organisations.

Some fear the current political stalemate will lead to an economic crisis while others worry about potential violence. unquote.........................................................................

.........................................................

While the above mentioned institutions are / will be immune to the consequences, we are not.

May i offer a bit of advice to all not aware of the downside of 1997.

Keep your incoming transfers to essential requirements and your deposits to the minimum needed to meet visa obligations ect for the forseeable future.

The financial future is indeed less than certain and it doesn,t take a Greenspan to see what is coming.

In my humble opinion of course.

marshbags

Edited July 6, 2006 by marshbags

[chownah]

Kuhn Kosit has suggested a bitter pill to swallow for the Mercedes-Benz capital of the world.....

[Soju]

May i offer a bit of advice to all not aware of the downside of 1997.

Keep your incoming transfers to essential requirements and your deposits to the minimum needed to meet visa obligations ect for the forseeable future.

Curious as to why you recommend limiting incoming transfers? Because you think the Thai Baht is about to tank? For those with foreign currency accounts in Thailand, that wouldn't have any effect. I try to keep my cash and investments denominated in various currencies to avoid catastrophe should one of the currencies fail.

The financial future is indeed less than certain and it doesn,t take a Greenspan to see what is coming.

Ok, what am I missing here? You're saying that the future is less than certain? And almost anyone can see what's coming? Those two statements seem to me to be mutually exclusive.

If indeed another currency crisis was looming and everyone could see it coming, then the currency markets would have already reacted. They have not, thus the general consensus is that the Baht is not in danger anytime soon. That doesn't mean that there couldn't be such a crisis in the near future, it just means that the general consensus among investors, etc. is that there is no crisis coming.

Edited July 6, 2006 by Soju

[cclub75]

If indeed another currency crisis was looming and everyone could see it coming, then the currency markets would have already reacted. They have not, thus the general consensus is that the Baht is not in danger anytime soon. That doesn't mean that there couldn't be such a crisis in the near future, it just means that the general consensus among investors, etc. is that there is no crisis coming.

You seem too focused on 1997 and the currency crisis.

Right now, the danger looks broader.

As for the THB, it will tank but as a consequence, not a detonator.

We have in Thailand the same vicious circle that in the US :

-inflation is rising because of oil (plus all the inflation in assets prices, real estate for instance, an inflation that is well hidden), and overall because the world is washed by cheap cash (prices increases are not a cause but a consequence of over money supply).

-so "logically" BOT should increase interest rates.

-but if they do so, then they will break the "engine" of the country (export and industry and the glorious "confidence") and the real estate market will make "boum", creating an economic crisis (and i'm not speaking about the political risks, Thaksin needs to continue his martial march toward economic "expansion").

-if they don't, then THB will be attacked, creating an economic crisis etc.

So, which devil would you choose ? That's a tricky question.

Personaly, I don't buy the famous Greenspan's expression : "Soft landing", that would be a very nice "third way".

"Soft landing" has become the new paradigm of every finances minister on earth, the new "magic stick" that could solve all our problems. It's a myth. Economy is still driven by cycles : expansion, heat, contraction, cool, equilibrium etc.

Reminds me 2000 and the "new economy". It's the same wishfull thinking.

The truth is : since 2001, US has invented a new way to divert and delay recessions : massive cash injection to keep stock market up, to keep the engine and the confidence. Plus the insane policy of BOJ that have created the Yen carry trade (you borrow money free in japan, 0% interest, and then you invest in ANYTHING, US bonds, assets, stocks, litteraly anything, you sure to win because of the difference).

It worked a few years... but it has created a monster : huge amount of "virtual money" and assets bubbles everywhere.

At one point : it will be "check bill time". It's sure. The only question is : when.

[Heng]

if you buy a property by auction from the bangkok bank,they will give a 90% morgage and a 20% loan to furnish the property subject to status.

with figures like that its no wonder they think the country is going broke again

It's all relative. If you buy from Kasikorn, they also offer 1% for the first two years. From Thai Military Bank, 0% for the first year. Plenty of folks use these type of low interest loans as free swing loans to their benefit. I'm a big fan of the TMB 0% rate for property acquisitions, even though I have more than enough on hand for cash purchases.

Folks who are going to go broke are going to go broke no matter what the marketing is. Not everyone buys into the marketing. There's a huge base here of 100% equity folks. Downturns and interest risk don't mean much for these folks (and don't forget it's these folks who are employing most of the other folks).

Edited July 6, 2006 by Heng

[Martin]

'club75' is right. The danger is wider this time.

And a 'soft landing' is impossible, in the circumstances.

To get a 'soft landing' there would have to be a smooth and orderly and gradual reduction in the exchange rate of the US dollar, and corresponding increase for the yuan/remimbi.

But the moment that is embarked on, it is a signal to the speculators/hedge funds that there is a 'one-way' bet available, and turmoil would commence.

Another cleft stick squeezing Chancellors of the Exchequer etc is that, to deflate the bubble gently,

they need to ask their populations to save more, and reduce those credit card debts. But, if they do, the shop tills' takings are reduced, demand is down, people's jobs become redundant and they lose their income. So demand goes further down in a vicious spiral.

Well-off Thais can protect themselves. Buy gold and productive land now, whilst their prices are down. Buy low, never sell.

As to the baht exchange rate, I would have expected it to go down a fair bit, due to the political uncertainty, but it hasn't. That makes me think that there is a lot of foreign money flowing in (which normally raises the rate), and the two effects are cancelling each other.

But too much money being offered from abroad to Thailand was at the root of the 1997 happenings.

1997 was made worse by the 'peg' to the dollar having become unrealistic; and, at least, that isn't there this time. However, too much foreign money, flowing in to be lent, is still dangerous.

When the bubble bursts, currencies will fluctuate wildly. I just pray that it doesn't cause such a loss of confidence that we get Depression (psychological, as well as economic). That could cut the ground from under the feet of fiat money, big way.

But Thailand could still be OK, even with that.

We still do quite a bit of paying bills with kilos of rice up here, in the Isaan villages, and the government could follow suit---barter the surplus (and the much bigger surpluses from the Chao Praya's banks) for the small amount of oil and other imports that Thailand needs.

Hope for the best, but be prepared for the worst.

[Martin]

Sorry about the 'double'. I think the man in the IPStar satellite sneezed, or something.

[soap]

if you buy a property by auction from the bangkok bank,they will give a 90% morgage and a 20% loan to furnish the property subject to status.

with figures like that its no wonder they think the country is going broke again

It's all relative. If you buy from Kasikorn, they also offer 1% for the first two years. From Thai Military Bank, 0% for the first year. Plenty of folks use these type of low interest loans as free swing loans to their benefit. I'm a big fan of the TMB 0% rate for property acquisitions, even though I have more than enough on hand for cash purchases.

Folks who are going to go broke are going to go broke no matter what the marketing is. Not everyone buys into the marketing. There's a huge base here of 100% equity folks. Downturns and interest risk don't mean much for these folks (and don't forget it's these folks who are employing most of the other folks).

one of the major factors in the crash of 1997 was that the bank managers lent money to people who had no intention or means to pay this money back,at the time it was the IN THING to put the chinord with the bank and what i can only surmise as a back hander you could toddle off and build yourself a row of shop houses in the middle of nowhere with the banks money,knowing that thailand was the tiger economy at the time, and in a year or two the money borrowed will be worth twice as much (never mind about the 15%plus interest rate the banks were charging).

well has we all know it did not work out like that, no matter where you go in thailand you will see a glut of empty shophouses with only the insects for company.

i would say in my area over 50% of the land is still with the banks,they hold auctions from time to time but even at discount prices whats sold is minimal and the people who put the land in the bank in the first place are still working the same land and can you blame them.

but these same bank managers come real estate agents are still in the same jobs they were in before the bubble burst and that could be a recipe for another disaster in my opinion

[Martin]

In addition to what 'soap' says, very rightly, in post #16, there was the fact that those bank managers could get the money to lend by taking deposits from overseas in the decade before 1997.

There was a lot of money looking to be 'placed' here.

The overseas financial managers didn't bother about whether it was going to end up in viable projects or not. Because it was going to an official bank, they knew that the government of Thailand would have to honour the commitment of that bank here, even if things did go 'pearshaped' for the 'end user' of the money.

I think that there are worries in banking circles that Thaksin has got the country into that position again.

And, even though Thailand's fundamentals are sound as a bell, it would make the coping with an international 'crash' much worse than they need be.

The migrant workers fom the provinces got hit hard in 1997, and some of the Central Region middle class, but there are a lot more middle class who are vulnerable this time, if it comes.

[Heng]

if you buy a property by auction from the bangkok bank,they will give a 90% morgage and a 20% loan to furnish the property subject to status.

with figures like that its no wonder they think the country is going broke again

It's all relative. If you buy from Kasikorn, they also offer 1% for the first two years. From Thai Military Bank, 0% for the first year. Plenty of folks use these type of low interest loans as free swing loans to their benefit. I'm a big fan of the TMB 0% rate for property acquisitions, even though I have more than enough on hand for cash purchases.

Folks who are going to go broke are going to go broke no matter what the marketing is. Not everyone buys into the marketing. There's a huge base here of 100% equity folks. Downturns and interest risk don't mean much for these folks (and don't forget it's these folks who are employing most of the other folks).

well has we all know it did not work out like that, no matter where you go in thailand you will see a glut of empty shophouses with only the insects for company.

i would say in my area over 50% of the land is still with the banks,they hold auctions from time to time but even at discount prices whats sold is minimal and the people who put the land in the bank in the first place are still working the same land and can you blame them.

but these same bank managers come real estate agents are still in the same jobs they were in before the bubble burst and that could be a recipe for another disaster in my opinion

Yes, plenty of projects that didn't quite make it. Like I said, there is an endless line of folks ready to run with the ball. You have folks that buy and build on credit and then you have folks that buy and build on plentiful cash reserves. Empty shophouses are sometimes some of the best investments because they are easy to mothball (I prefer empty land, but I do have more than a few never been lived in/boarded up shophouses as well). Many places, what was once the middle of nowhere, in just a little time will be in the middle of the city. So when someone sees an old abandoned project, it may be sitting in the bank's hands or it may just as well be in someone's portfolio, just biding its time.

[penzman]

Sorry about the 'double'. I think the man in the IPStar satellite sneezed, or something.

Fixed.

[marshbags]

May i offer a bit of advice to all not aware of the downside of 1997.

Keep your incoming transfers to essential requirements and your deposits to the minimum needed to meet visa obligations ect for the forseeable future.

Curious as to why you recommend limiting incoming transfers? Because you think the Thai Baht is about to tank? For those with foreign currency accounts in Thailand, that wouldn't have any effect. I try to keep my cash and investments denominated in various currencies to avoid catastrophe should one of the currencies fail.

The financial future is indeed less than certain and it doesn,t take a Greenspan to see what is coming.

Ok, what am I missing here? You're saying that the future is less than certain? And almost anyone can see what's coming? Those two statements seem to me to be mutually exclusive.

If indeed another currency crisis was looming and everyone could see it coming, then the currency markets would have already reacted. They have not, thus the general consensus is that the Baht is not in danger anytime soon. That doesn't mean that there couldn't be such a crisis in the near future, it just means that the general consensus among investors, etc. is that there is no crisis coming.

................................................................................

...................................ended

Soju, no disrespect but................................

My quotes are based on observations in Thailand and in particular my Ban and Udonthani / Issan

If you look around you will see that everyone in is borrowing money to buy big time and doing so well beyond their means to pay it back.

First of all most Thai,s with exception to the poor are driven by greed, the more they have the greedier they become.

As security they are putting their land and houses into the bank and consequently as they have no chance in hel_l of repaying, defaulting and now sadly no longer own either / nothing.

On a larger scale business is borrowing on a similar footing and also own nothing as the bank holds all there assets as security.

Look at the empty shells posters refer to, many going back to the first crisis which are useless in the monetary terms that the banks lent against them.

The situation now is far more serious than in 97 in because most of the money involved then and now will never been paid back.

Add on top of that as I suggest all that has been borrowed since Thaksin came to power and lent out via the banks ( as a way of winning and keeping his supporters and retaining popularity ) and this is trouble big time regarding the amount of N.P.L,s in total.

I foresee inflation hitting incredible heights when this and all the other indicators are taken into account.

Regarding my reference to Greenspan , I was using him as an example of a financial expert in general terms, it could have been another and while I am not one, I can see the same sort of build up to what happened in 97, wether circumstances are different or not they do not change the obvious outcome.

I also think that the currency is being manipulated for political and personal gain reasons and does not reflect the true situation financially by the way.

I do not know if you where here in 97 but the situation was screaming out what was going to happen long before it actually did and you can multiply what is screaming out now by 10.

The experts with vested interests kept saying over and over again there was no problem, just like now and they will eventually walk away with their own coffers full to bursting, along with what they are presently putting overseas.

You cannot keep spending what you haven,t got as somewhere down the road the day of reckoning will duly arrive.

Even now they are still trying to borrow more to pay the previous loans off and having to pay unbelievable interest that they haven,t a chance of finding and the Puyai ( Vultures ) know this and are taking advantage of the situation and taking what,s left of the stuff they bought by their previous loans from the bank, if not manipulating a way to get everything because of vested interests, before the first providers.

Try rolling 73 billion baht around your tongue and what the strong baht will do for this money if / when it leaves the country for starters.

The bubble will surely burst eventually and again it doesn,t take anyone of reasonable intelligence failing to see the wood beyond the trees.

Not withstanding all the political turmoil going on which will also makes for a very unstable economy, surely.

Then there,s the oil crisis on top of everything else, also.

My advice is therefore that the people who are transferring foreign currency into current accounts from funds that are more secure in their own countries, should only bring in what they need.

More importantly your life savings that took many years to earn which will disappear in a heartbeat.

Posters like Martin, cclub75 and others have put it a little more eloquent than I have while expanding on my original post.

Thanks to you all.

marshbags

Edited July 7, 2006 by marshbags

[Martin]

For 'Heng", re post 17:

You say: "Yes, plenty of projects that didn't quite make it."

And: "Many places, what was once the middle of nowhere, in just a little time will be in the middle of the city. "

That is true.

At the end of a property boom, there will always be a few well-planned projects that were 'caught when the music stopped'.

But what I see, and what 'soap' is, I think, referring to, in what is now post #15, is rows of shophouses out in the middle of nowhere.

Somebody went to the bank with a request to borrow money to build those, on the basis that s/he would attract occupants who would pay rents, from which the loan would be paid back.

That person was either an idiot, or a con merchant.

And the bank official who approved the loan without examining the business proposal and having it checked by the bank's property appraiser (who would have taken one look at the empty field surrounded by other empty fields and burst out laughing at the idiocy/try-on) was derelect in her/his duty.

In earlier times, all the roles of deposit taker, business plan examiner, local-property expert and issuer of loan were rolled into one person ---the small-town banker---who was the professional who accepted deposits and lent the money out very carefully, lest he and the depositer came unstuck.

There is a long chain now beween the 'depositor' (who is usually a member of a pension scheme and making her/his monthly payment) to the property developer on the other side of the world. And if there is one, or more, links that lack either ethics or competence, the chain breaks.

So governments have to stand as guarantors for those who are in their country's piece of the chain.

Making sure that they are not let down by their nationals is the "governance" that this Bangkok Bank executive is speaking about.

Those derelict, never-used shophouses five miles from anywhere are monuments to failure of 'governance' a decade ago.

Derelict, once-busy factories will be the memorials to another such failure of governance.

[Soju]

May i offer a bit of advice to all not aware of the downside of 1997.

Keep your incoming transfers to essential requirements and your deposits to the minimum needed to meet visa obligations ect for the forseeable future.

Curious as to why you recommend limiting incoming transfers? Because you think the Thai Baht is about to tank? For those with foreign currency accounts in Thailand, that wouldn't have any effect. I try to keep my cash and investments denominated in various currencies to avoid catastrophe should one of the currencies fail.

The financial future is indeed less than certain and it doesn,t take a Greenspan to see what is coming.

Ok, what am I missing here? You're saying that the future is less than certain? And almost anyone can see what's coming? Those two statements seem to me to be mutually exclusive.

If indeed another currency crisis was looming and everyone could see it coming, then the currency markets would have already reacted. They have not, thus the general consensus is that the Baht is not in danger anytime soon. That doesn't mean that there couldn't be such a crisis in the near future, it just means that the general consensus among investors, etc. is that there is no crisis coming.

................................................................................

...................................ended

Soju, no disrespect but................................

My quotes are based on observations in Thailand and in particular my Ban and Udonthani / Issan

If you look around you will see that everyone in is borrowing money to buy big time and doing so well beyond their means to pay it back.

First of all most Thai,s with exception to the poor are driven by greed, the more they have the greedier they become.

As security they are putting their land and houses into the bank and consequently as they have no chance in hel_l of repaying, defaulting and now sadly no longer own either / nothing.

On a larger scale business is borrowing on a similar footing and also own nothing as the bank holds all there assets as security.

Look at the empty shells posters refer to, many going back to the first crisis which are useless in the monetary terms that the banks lent against them.

The situation now is far more serious than in 97 in because most of the money involved then and now will never been paid back.

Add on top of that as I suggest all that has been borrowed since Thaksin came to power and lent out via the banks ( as a way of winning and keeping his supporters and retaining popularity ) and this is trouble big time regarding the amount of N.P.L,s in total.

I foresee inflation hitting incredible heights when this and all the other indicators are taken into account.

Regarding my reference to Greenspan , I was using him as an example of a financial expert in general terms, it could have been another and while I am not one, I can see the same sort of build up to what happened in 97, wether circumstances are different or not they do not change the obvious outcome.

I also think that the currency is being manipulated for political and personal gain reasons and does not reflect the true situation financially by the way.

I do not know if you where here in 97 but the situation was screaming out what was going to happen long before it actually did and you can multiply what is screaming out now by 10.

The experts with vested interests kept saying over and over again there was no problem, just like now and they will eventually walk away with their own coffers full to bursting, along with what they are presently putting overseas.

You cannot keep spending what you haven,t got as somewhere down the road the day of reckoning will duly arrive.

Even now they are still trying to borrow more to pay the previous loans off and having to pay unbelievable interest that they haven,t a chance of finding and the Puyai ( Vultures ) know this and are taking advantage of the situation and taking what,s left of the stuff they bought by their previous loans from the bank, if not manipulating a way to get everything because of vested interests, before the first providers.

Try rolling 73 billion baht around your tongue and what the strong baht will do for this money if / when it leaves the country for starters.

The bubble will surely burst eventually and again it doesn,t take anyone of reasonable intelligence failing to see the wood beyond the trees.

Not withstanding all the political turmoil going on which will also makes for a very unstable economy, surely.

Then there,s the oil crisis on top of everything else, also.

My advice is therefore that the people who are transferring foreign currency into current accounts from funds that are more secure in their own countries, should only bring in what they need.

More importantly your life savings that took many years to earn which will disappear in a heartbeat.

Posters like Martin, cclub75 and others have put it a little more eloquent than I have while expanding on my original post.

Thanks to you all.

marshbags

I think you and many others are forgetting something very important. The 1997 financial crisis was an Asian-wide crisis, not just Thailand. I was in Korea at that time, and saw the effect it had here, in Thailand, the Philippines, and most Asian countries. If there hadn't been a financial crisis in other Asian countries at the same time, the situation in Thailand would have been much better. Investors around the world got spooked with respect to all of Asia and suddenly there was no money regardless of how good or bad the real situation might have been. So even if the same or worse situation is now occuring in Thailand, the result likely will not be the same or worse as in 1997 unless another Asian-wide crisis hits.

In times past, economies were very dependent upon internal factors. These days, most countries', including Thailand's, economies are controlled to a much larger extent by international factors. I agree that there's lots of problems currently inside Thailand, and it could cause some significant effects on the Thai economy soon. But I personally don't see the same thing happening as in 1997 because I don't see an Asian-wide crisis happening anytime soon.

[hammered]

I dont know if we are going to see a ful blown financial crisis but cetainly before the 1997 collapse the currency was artificially kept high by the government. In this period certain insiders made a fortune. Taking a look at who was in the government then and who is in power now (currently unchecked) is enough to start anyone worrying about sudden movements in the baht.

[Martin]

This discussion has brought an image to my mind.

It is of a fisherman who is out in the bay attending to his lobster pot, when he thinks he hears on his crackly little radio a newscaster saying "tsunami warning".

If he leaves his lobster pot and a tsunami comes, it is impossible to guess what will happen. It may be sucked far out to sea in stage one, and then be swept far inland in stage two. Or it may just bob up and down in the bay, after tearing loose fom its anchor. But he will either find it badly damaged, or lose it.

If he leaves the pot and no tsunami comes, it may catch a lobster for him overnight.

If he takes the pot home quickly to his house high on the hill, he'll save his pot to use another day (but forgoes any chance of finding a lobster in it tomorrow).

In the above story, substitute "cash savings" for "lobster pot", "bank" for "bay", "seeing US deficit" for "hearing on radio", "dollar collapse" for "tsunami", and "gold" for "house high on the hill".

If I had any savings still in cash, I would put them in gold today.

[chownah]

What are the signs in Thailand that an economic crisis is coming? I really don't know what they are.....or will Thailand fall as part of an international collapse? I can understand some of the reasons why some people think there will be an internatinal collapse....I just don't know about what's going on inside Thailand enough to know what things are going badly now.

[Martin]

I have "The Currency Crisis in Southeast Asia", by Manuel F.Montes.

Although it is tedious reading, as what could have been clearly described in ten pages is padded out to fill fifty, it does make clear that the 1997 crisis was confined to SE Asia.

The major economies of the world were stable before, during and after 1997.

Basically, the Thai Government, like all the other ASEAN governments (except Brunei!!) had been building up their industrial sector rapidly. In-country money went in quite substantially and showed good returns.

So 'hot' foreign investment money was keen to get in on the action, especially as the developed nations were only offering relatively low returns at the time.

Unfortunately, when it became easy to borrow money, it encouraged property speculation, too.

There was an export slump, especially in electronics goods, in 1996. So the 'hot' money started to move out and the over-high price at which the baht was pegged to the dollar became indefensible. When the Government floated the baht (after using up nearly all the foreign reserves trying to defend the pegged over-price), the overseas money rushed out.

The other ASEAN countries were not in quite the same position as Thailand, but the crisis proved to be contagious because the overseas investors' personnel had 'SE Asian investment' as one lump in their thinking. Even the Singapore/Brunei dollar went down quite a bit, for which there was no economic justification whatsoever.

In my opinion, there is no reason at present for there to be a Thai economic crisis, unless there is a big drop in demand for its exports. But that would happen if there was an international crisis.

And the worry is that many middle class Thais have got into debt as Thaksin fuelled retail demand by making credit available.

A downturn in demand makes some jobs redundant.

When the holders of those jobs lose them, that is always bad.

But if they become unemployed whilst owing a lot, that is doubly bad.

[soap]

the 1997 crisis started in thailand and its summed up in two words

greed and corruption,when you get people in authority who lend hundreds of

trillions (most probably thousands not hundreds) of baht without any check on the borrowers ability

to pay the loan back never mind the interest that was at the time 15% plus, so what happened

there was a snowball effect when the bubble burst.

the borrowers could not pay back or had no intention of paying the loan back,

the banks started to have a deficit with thier books

that gave way to the word jitters, the baht started to slide

the bank of thailand lost billions of its foreign currency reserves trying

to prop the baht up (without success)

in stepped the imf to lend the goverment 17 billion dollars ( i think) so the goverment

could guarantee the banks.

the knock on effect in asia was not as bad with some countries as it was with the likes of indonesia

mabe the words greed and corruption were just as relevant there as in thailand.

singapore got over the crisis in time, malaysia pegged its currency to the dollar and said take it or leave it.

i would sum thailand up with the word FRAGILE its not as bad as in 1997 because the banks will now only lend money subject to status and i think the final word comes from head office.

a word of warning for mr heng ,i have attended about 20 bank auctions (as a hobby)in the

past 3years in my area, i would say not 5% of the vast amounts of lots that have gone through have been sold, even after the courts giving discounts of up to 50% and if he goes to the courts in my area they have a special office for bank repossessions that they try to auction off every week.

to put it mildly if they put all the lots on top of each other i think jack would rather climb is beanstalk,

but i hope you are right mr heng because thailand his my home and i love the place

i must finish on a quote from dickens,

a certain mr macawber

annual income one pound, annual expenditure nineteen and sixpence

result happiness and bliss

but annual income one pound, annual expenditure one pound and sixpence

result distaster

he was speaking from the work house

[number6]

ive lived thorugh 2 property crashes the 74 stock market vrash in uk (Ftse 140 now 5800 or so) seen all doom mungers for long time - yes it could all go pear shaped - yes a downturn is over due and likely - stay long term and youll make loads like me = if im wrong whole world is fxxxxxx so why worry

[marshbags]

Getting a stable economy / society is in the interest of all of us no matter who we are.

Ater all we want out children to grow up with security and stability.

While 97 is not 06 there are lessons to be learned from the build up to that eventual burst.

Greed and corruption are the loudest messages of all.

Corruption is at it,s worst when it comes from the people who govern and blatantly engage in doing this week in and week out.

At the same time sending a message out to all that it,s o.k. to cheat and lie so long as you gain financially from it, along with robbing Peter to pay Paul

What puzzles me is that people must walk about with their eyes closed as the chaos and degeneration of Thai society is once again starting to dehumanise.

My Moo Ban where i am presently staying has many decent people who are gradually loosing hope.

Even the so called well off are finding it difficult to pay the bank after borrowing beyond their means and getting sucked in to the spend, spend mentality.

You wouldn,t believe some of the ones that have asked me to help them and lost all dignity and face, as Thai people put it.

It is very sad for me to have to say no ( very diplomatically ) they loose respect and unfortunately things are never the same again between us.

Would you also believe that i am now portrayed as a poor farang in a very derogratory manner by some of them.

Thai tittle tattle spreads like the bird flu.

Again no problem for me but upsetting for my family when they are ignored by so called friends.

I am not a doom and gloom merchant and genuinely care about the situation that,s unfolding yet again.

Reality doesn,t allow me to pretend there isn,t a problem while walking about with blinkers on and ignoring all the signals.

marshbags

P.S. Should my fears be unwarranted i will be very happy to be proved wrong, especially for my family.

This is only my take on the situation in layman terms and hopefully i am being misled by it all.

Edited July 8, 2006 by marshbags

[Soju]

In my opinion, there is no reason at present for there to be a Thai economic crisis, unless there is a big drop in demand for its exports. But that would happen if there was an international crisis.

Enjoyed your post and glad to see I'm not the only one who doesn't agree with all the doom-and-gloom posters. I respect all their opinions, but simply don't see it coming as bad as they say. Anyone with even the slightest economic background knows that all economies go in cycles. Thailand is now on the upswing, so anyone predicting a downswing in the future will be correct. I don't deny that such a downswing is coming, but nobody can reliably predict when exactly these downswings will occur because they are primarily triggered by human reactions to conditions. Investor/consumer confidence suddenly goes down and the economy reacts. Confidence or lack of it is what drives the ups and downs and only if you can predict future events and how they will effect confidence in an economy will you be able to accurately predict when and to what extent the cycles will occur. Nobody has such a crystal ball. Just we can make educated guesses and sometimes we're right and sometimes we're wrong. I hope I'm right and no huge economic crisis is looming, but like everyone else, I'm just making my own educated guess based on what I see.

I have "The Currency Crisis in Southeast Asia", by Manuel F.Montes.

Although it is tedious reading, as what could have been clearly described in ten pages is padded out to fill fifty, it does make clear that the 1997 crisis was confined to SE Asia.

The major economies of the world were stable before, during and after 1997.

I have to take exception to that statement. It was absolutely not confined to SE Asia, as Korea, last I checked, is not part of SE Asia. The crisis hit Korea especially hard. In that year, the Korean won went from about 800 Won to the Dollar to over 2000 at one point. Banks, businesses, jobs, real estate, etc. were all badly hit.

From what I hear, Japan was already in a long recession, so it didin't have a huge impact there other than to prolong their existing state.

I don't recall what the exact situation was in Taiwan, but believe they were at least partially effected.

To my knowledge, it didn't greatly affect economies outside of Asia, but was absolutely not confined just to SE Asia as the author says. Perhaps he's not familiar enough with the geography of Asia to realize that Korea is not part of SE Asia.

[Martin]

I am familiar with the geography of SE Asia as part of Asia.

Unfortunately, I forgot that Korea got hit hard, too.

But, as I remember it, it would be wrong to say it was an Asian crisis, as the big boys (China and India) weren't part of it.

As you say, down at the bottom, it all rests on confidence.

There had been an over-confidence that the 'New Tiger' economies could keep up their growth, and it flipped into an over-panic.

My own reading of the international financial scene is that something similar is brewing there.

I hope I am wrong.