A chat with the BOT governor is like a GOOD, LONG READ

[webfact]

STREETWISE
A chat with the BOT governor is like a GOOD, LONG READ

BANGKOK: -- Bank of Thailand Governor Prasarn Trairatvorakul is second to none when it comes to knowledge about economic issues. And he's not the type to answer questions the easy way.

He never tires of elaborating when asked what's on his mind. In an interview last week he was asked how the hamburger crisis, as the 2008 global fiscal jolt was dubbed, is still affecting the role of central banks today. He spent more than five minutes in detailed reply.

The influence of the crisis remains immense, he began. But of course we didn't expect that he would stop there. The governor has never left anything to guesswork. He can still vividly recall the first day the meltdown hit the United States.

In Thailand, Prasarn said, the pre-crisis government debt level was 40 per cent of gross domestic product (GDP). But, with interbank trust demolished by the revelations from the West, the government stepped in within months and boosted the debt level to 80 per cent. It's above 100 per cent now. Worse, the legislative branch was able to assert its power over government revenues, expenditures and public debt - imprudently, Prasarn believes, since at least one of those areas should have retained some flexibility. As a result, America's central bank intervened, commencing "quantitative easing" programmes, with QE1 targeted at calming the crisis and QE2 and QE3 bolstering the economy as deemed necessary.

Prasarn said the authorities in the euro zone and Japan took similar actions to ease their respective troubles. And now the Thai central bank's duty is to regularly evaluate how US rate hikes will affect the economy here.

And that answer was short compared to his dissertation on the Monetary Policy Committee's current focus. In an effort to be brief, he insisted that a weaker baht, influenced by lower rates, won't necessarily help the economy as long as our trade partners have lowered purchasing power. This is why Thailand's export sector hasn't fully recovered, even though the baht is close to Bt34 on the dollar, well below its level over the past four years, even as exports were enjoying double-digit growth.

Admitting that the inflation/foreign exchange correlation is not 1:1, as often claimed, Prasarn said low rates can also cause fresh problems. His fear is that they might spark speculation in the stock market. "Stock speculation and UFUN [pyramid investment scams] - these things usually occur in times of low rates," he said.

Prasarn was also fielding a list of questions from a foreign newspaper, beginning with "Why does the BOT like a strong baht?" That's not the case at all, he said.

Aside from his in-depth knowledge and patience with the press, Prasarn has a way with words that's always spices up a story.

An ardent fan of the English Premier League, he once said fiscal and monetary policy were supportive of each other and should work together like a football team. The central bank was under pressure at the time to lower its policy rate.

Switching to another of his favourite sports, he recently compared monetary-policy management amid global uncertainties to fighters slugging it out in the ring. "We need to have a bracket of monetary policy that's flexible, similar to a boxer going into the ring - the legs must not stay still, because if your legs are dead, the opponent will easily knock you down."

In the same way, monetary policy needs to be flexible. "It needs good footwork while using a mixture of balanced tools to take down the opponent."

He must also have been following last month's SEA Games closely. In our interview, when describing headwinds running against the Thai economy, he said the Games results - Thailand did very well - could serve as the tailwind that our economy desperately needs.

"I just noticed a tailwind - the national football team. They were great, showing how much their technique has developed," he smiled. We can only hope, as he must, that the Thai economy demonstrates similar improvement. If our football squad - engulfed in bad news that diminished its strength - can reclaim its past glory, why not the banks?

Prasarn, who's 61, acknowledged that his many years in lofty offices have worn him down to some extent. He's now dreaming of a slower life, a long-needed pause, and was quick to quash the rumour that he'll join the junta government as soon as his term ends.

"Spacing out the brain's attention" is how he put his desire to "unplug" for a while. He's lost much of his youthful enthusiasm for work. "I no longer have that feeling," he said.

His departure from the BOT is bound to be unfortunate for the press. We will surely miss him when the day comes, along with all that knowledge, all that willingness to explain, and all those sidebar stories.

Source: http://www.nationmultimedia.com/opinion/A-chat-with-the-BOT-governor-is-like-a-GOOD-LONG-R-30262885.html


-- The Nation 2015-06-23

[Srikcir]

"We need to have a bracket of monetary policy that's flexible ..."

That's not the policy he had during Yingluck's administration. He resisted lower interest rates, a cheaper baht and discouraged foreign investments in Thailand. There were rumors that the administration would dismiss him.

But once the Junta took over, he reversed his policies that helped cushion economic shock caused by the coup. It's no wonder that it's rumored that he would be seeking a cabinet position with the Junta that Prayut has said will stay in place through 2016.

[Thai at Heart]

Thailand's debt to GDP is 100? Huh? Surely he mean that in the USA and EU.

[phoenixdoglover]

Like must national banking guys, he uses a lot of words, but doesn't say much, especially about the Thai economy.

Alan Greenspan, the US Fed Chairman, was famous for that. He would give long testimony to Congress, and then the press would go to great lengths to try to decipher what he said.

His obtuseness spawned some wry humor.

"Mr. Greenspan, do you expect the stock market to rise or fall?"

"Yes, but not immediately."