Thailand's household debts jump to the highest level in nine years

[Srikcir]

2 hours ago, chiang mai said:

 

If you understood economics you'd realize you were actually correct - see post 2 again.

See post 2 again as it concluded, Something doesn't seem to square

 

[chiang mai]

15 minutes ago, alant said:

Thank you, what about the 74 that default? is that consistent with the economics?

 

Non Performing Loans (NPL's) are a feature of any economy and today they average around 3% which is high by historical measures but not high enough to be of concern (2.5% was the target), as long as the banks make suitable provisions, which they have. Now, 74% of the 1,221 sample is certainly no where near the 3% reported by the BOT. That being the case I strongly suspect that 1. the sample is far too small to be meaningful, and 2. by "default" what is meant is, a payment was missed.

 

https://www.bot.or.th/English/Statistics/Graph/Pages/NPL.aspx

Edited September 16, 2016 by chiang mai

[chiang mai]

2 minutes ago, Srikcir said:

See post 2 again as it concluded, Something doesn't seem to square

 

 

I hadn't seen that in LRB's post and presume it was the result of a late edit, regardless, we both agree that sample size is one of the issues, terminology a second and almost certainly sloppy reporting and poor English language skills/interpretation a third.

[Srikcir]

4 hours ago, shirtless said:

this does not count for loan sharks

It does. Loans from loan sharks are called "non-formal debts."

Loan sharks in Thailand are partially to blame for the rising household debt that is responsible for Thai’s spending less money on goods and services.  http://news.thaivisa.com/thailand/thailand-offers-more-assistance-to-combat-loan-sharks-in-the-country/145815/

Prayut's answer to loan shark loans is to offer 50 billion baht in soft loans to help residents refinance non-formal debts, such as debts taken on from loan sharks.

[pepi2005]

I've always been wondering how Thais could afford the recent explosion in cars - this pretty much answers it.

[Agent Sumo]

Just now, pepi2005 said:

I've always been wondering how Thais could afford the recent explosion in cars - this pretty much answers it.

 

Don't people borrow money to buy new cars in your country?

[williamgeorgeallen]

2 hours ago, Agent Sumo said:

The banks are crooks. They borrow money for nothing and gouge credit card and loan holders with disgusting interest rates. As far as I'm concerned, those bastards deserve everything they get and if it wasn't for the taxpayer safety net they quietly rely on, they'd be a lot more careful about what they lend and who they lend to

2 sides to every coin. credit and leveraging are amazing vehicles to gain wealth. i have been buying and selling properties for about 15 years. i am not rich and my personal wealth is around half a million dollars. not amazing but much better than it would have been without being able to borrow hundreds of thousands of dollars to be able to buy and sell. dont think the banks should take full responsibility for people over borrowing. the people themselves are also responsible for borrowing money they cant afford to pay back. really the government should be regulating the banks to control their lending to give some protection to the people. this has been done in nz recently with people by law needing a 20% deposit to purchase property.

[Agent Sumo]

1 minute ago, williamgeorgeallen said:

2 sides to every coin. credit and leveraging are amazing vehicles to gain wealth. i have been buying and selling properties for about 15 years. i am not rich and my personal wealth is around half a million dollars. not amazing but much better than it would have been without being able to borrow hundreds of thousands of dollars to be able to buy and sell. dont think the banks should take full responsibility for people over borrowing. the people themselves are also responsible for borrowing money they cant afford to pay back. really the government should be regulating the banks to control their lending to give some protection to the people. this has been done in nz recently with people by law needing a 20% deposit to purchase property.

 

I tend to agree that borrowers should shoulder some responsibility but the banks must take the bulk of the blame for making credit so alluring.

 

Most people are not financially sophisticated and think only of what they can get with the money they borrow without paying enough attention to the implications for their finances going forward should they encounter difficulty.

 

The banks are financially sophisticated and the onus should be placed on them to stop sacrificing prudent, responsible lending on the altar of short-term profitability

[williamgeorgeallen]

3 minutes ago, Agent Sumo said:

 

I tend to agree that borrowers should shoulder some responsibility but the banks must take the bulk of the blame for making credit so alluring.

 

Most people are not financially sophisticated and think only of what they can get with the money they borrow without paying enough attention to the implications for their finances going forward should they encounter difficulty.

 

The banks are financially sophisticated and the onus should be placed on them to stop sacrificing prudent, responsible lending on the altar of short-term profitability

yes some good points but banks exist for the bottom line and making money for the shareholders. many people are just not responsible enough to manage debt so the govt needs to step in an regulate the process. 

[12DrinkMore]

2 hours ago, Agent Sumo said:

The banks are crooks. They borrow money for nothing and gouge credit card and loan holders with disgusting interest rates. As far as I'm concerned, those bastards deserve everything they get and if it wasn't for the taxpayer safety net they quietly rely on, they'd be a lot more careful about what they lend and who they lend to

 

Banks do not borrow money in order to make a loan.

 

They create it using a keyboard and it costs them nothing to do so.

[Agent Sumo]

7 minutes ago, williamgeorgeallen said:

yes some good points but banks exist for the bottom line and making money for the shareholders. many people are just not responsible enough to manage debt so the govt needs to step in an regulate the process. 

 

Well we know what happened to that, don't we.

 

The banking lobby is right up there with the NRA in terms of clout. Dodd-Frank, reintroduction of Glass-Steagall all gone the way of the dodo

[12DrinkMore]

12 minutes ago, Agent Sumo said:

 

I tend to agree that borrowers should shoulder some responsibility but the banks must take the bulk of the blame for making credit so alluring.

 

Most people are not financially sophisticated and think only of what they can get with the money they borrow without paying enough attention to the implications for their finances going forward should they encounter difficulty.

 

The banks are financially sophisticated and the onus should be placed on them to stop sacrificing prudent, responsible lending on the altar of short-term profitability

 

The shareholders are to blame.

[Agent Sumo]

2 minutes ago, 12DrinkMore said:

 

Banks do not borrow money in order to make a loan.

 

They create it using a keyboard and it costs them nothing to do so.

 

I don't think you really know what you're talking about

 

Central banks create money, not commercial banks. 

 

Commercial banks have to rely either on deposits (insufficient to meet their requirements given the crap interest rates they pay depositors) or they have to borrow money from each other on the money markets or from the central bank

[worgeordie]

Those in debt,don't worry, the Government will be along

shortly with loans to pay off the debt,make everyone 

smile again.

regards worgeordie

[12DrinkMore]

14 minutes ago, Agent Sumo said:

 

I don't think you really know what you're talking about

 

Central banks create money, not commercial banks. 

 

Commercial banks have to rely either on deposits (insufficient to meet their requirements given the crap interest rates they pay depositors) or they have to borrow money from each other on the money markets or from the central bank

 

Nope.

 

Absolutely incorrect.

 

Central Banks are responsible for issuing the paper stuff, but that is generally less than a couple of percent of what we consider to be "money".

 

Ignoring the exceptional last decade of Fed, Boe, BoJ, SNB, and the ECB asset purchases, Central Banks have very little to do with creating "money".

 

Almost all "money" in bank accounts is created by private commercial banks through the loan creation process. It is very simple.

 

Customer goes to bank and takes out a 1,000 loan.

 

Bank types in two book-keeping entries.

 

1. Liability :  IOU for 1,000 to customer in customer's account as a number.

2. Asset : IOU for 1,000 from customer to repay loan.

 

That's it. Job done. Books balance.

 

Suddenly another 1,000 in circulation. No central bank involvement whatsoever.

 

Edited September 16, 2016 by 12DrinkMore

[Agent Sumo]

10 minutes ago, 12DrinkMore said:

 

Nope.

 

Absolutely incorrect.

 

Central Banks are responsible for issuing the paper stuff, but that is generally less than a couple of percent of what we consider to be "money".

 

Ignoring the exceptional last decade of Fed, Boe, BoJ, SNB, and the ECB asset purchases, Central Banks have very little to do with creating "money".

 

Almost all "money" in bank accounts is created by private commercial banks through the loan creation process. It is very simple.

 

Customer goes to bank and takes out a 1,000 loan.

 

Bank types in two book-keeping entries.

 

1. Liability :  IOU for 1,000 to customer in customer's account as a number.

2. Asset : IOU for 1,000 from customer to repay loan.

 

That's it. Job done. Books balance.

 

Suddenly another 1,000 in circulation. No central bank involvement whatsoever.

 

Nope

 

That 1,000 is an IOU from the customer to the bank and the bank must account for it to its stockholders and the banking regulator each year.

 

This is why the Italian banks are in such a pickle right now with the non performing loans

 

It's only an asset if it is used as collateral if/when the bank packages it up with thousands of other loans and sells the security on the markets

[12DrinkMore]

4 minutes ago, Agent Sumo said:

Nope

 

That 1,000 is an IOU from the customer to the bank and the bank must account for it to its stockholders and the banking regulator each year.

 

This is why the Italian banks are in such a pickle right now with the non performing loans

 

It's only an asset if it is used as collateral if/when the bank packages it up with thousands of other loans and sells the security on the markets

 

One last effort at making this clear.

 

Commercial banks have a balance sheet which they are required to balance daily.

 

On the liability side are amounts that the bank is liable for, mostly bank accounts held by customers. The bank says it owes you the money.

 

On the bank's asset side to balance out the liabilities are all the loans that are owed to the bank.

 

You can go and look at the published accounts of any bank to see this, they are all on the internet.

 

The problem with the non-performing loans is not that they are non-performing per se, Japan has been running banks like this for decades, but if the loans were written off then the amount recovered would not cover the liabilities of the bank, namely your account balance.

 

(Your last sentence is clearly wrong, as anything that can be packaged and sold is by definition an asset).

 

If you still do not beleive me, then on the website of the Bank of England there are a couple of papers and even some videos discussing where money comes from.

 

The whole financial system, including all the shadow banking institutions, is based on swapping IOU's around. It is all based on debt and who owes who what, and critical in there is the creditabiilty of the debtors. It has always worked that way.

 

The interesting thing is to find out why the misunderstanding that banks take in money and relend it is a widely held belief. 

 

Here you go, read this paper from the horse's mouth. We do not have to discuss this. The facts are clear.

 

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf

 

 

Quote

Far more important for the creation of bank deposits is the act of making new loans by banks. When a bank makes a loan to one of its customers it simply credits the customer’s account with a higher deposit balance. At that instant, new money is created.

 

 

[bark]

Thailand still needs to hit House Hold Debt of 400,000 baht to be Considered " The Asian House Hold Debt Hub " .

Hope they get by 2018.

[Cake Monster]

The mainstream banking sector may have recently curtailed their lending mortgages , but the very recent explosion in " red plate " new cars will surely have taken up a lot of the slack.

 

With the public now able to buy a new car with a minimum 50,00 down and the balance over a period of 84 months with an interest rate of nearly 5% ( yes - 84 months ) is there no end to the stupidity of people to own  something that they will pay an absolute fortune for, and at the end of the period will be a vitualy worthless piece of scrap

[djlest]

Well i never... so which previous government was pushing credit cards for Taxis and all sorts of incentives to spend and become debt laden?

We all saw this coming really... As a nation with zero discipline but big appetites for the latest model phones, cars etc. Give them a piece of plastic and they suddenly become rich!

although now we are in recession because of it...

[hohososo]

Is this net debt?

Most thais i know own property without a mortgage. But would have substantial debt but the asset value exceeds the debt.

[chiang mai]

Just now, hohososo said:

Is this net debt?

Most thais i know own property without a mortgage. But would have substantial debt but the asset value exceeds the debt.

 

No, it is rarely if ever reported that way.

[ExpatOilWorker]

9 hours ago, chiang mai said:

 

Non Performing Loans (NPL's) are a feature of any economy and today they average around 3% which is high by historical measures but not high enough to be of concern (2.5% was the target), as long as the banks make suitable provisions, which they have. Now, 74% of the 1,221 sample is certainly no where near the 3% reported by the BOT. That being the case I strongly suspect that 1. the sample is far too small to be meaningful, and 2. by "default" what is meant is, a payment was missed.

 

https://www.bot.or.th/English/Statistics/Graph/Pages/NPL.aspx

 

From that graph it actually looks like the economy is improving, but I had the impression that NPL was actually on the uptick and that the economy and exports in particular is slowing.

[chiang mai]

1 minute ago, ExpatOilWorker said:

 

From that graph it actually looks like the economy is improving, but I had the impression that NPL was actually on the uptick and that the economy and exports in particular is slowing.

 

That's broadly correct, but it's difficult to look at more than one component of the economy at a time without context, this one is consumer loans.

[TPI]

10 hours ago, trainman34014 said:

Thai's just gotta have that big house, latest phone/tablet and huge gas guzzling shiny pick-up truck to show BIG FACE around their neighbourhood and with their workmates.  My wife worked as a Nurse for 25 years here and says all her workmates ever talked about was what they were going to borrow money for to buy next.

 

Been here just short of 10 years and have lost count of the amount of houses and vehicles i have seen re-possessed  by the banks and other lending institutions.  The banks here are doing exactly what the banks in the US did and are lending vast sums of money to people who will never be able to repay it.....and we know what the result will be !

Same old, same old! The banks lend money to people who can't manage the payments (I know, other factors come into play) the bank then repossess the security, any losses are written off against tax.....bank wins again! 

[Jackin1960]

What better way is there of keeping the people at the grind stone and off the streets protesting.

[Thechook]

Ah this is why thais are smiling again and on the cusp of greatness.

[Stargeezr]

This is not good news as the Thailand currency has been high against the US and other currencies for

a long time. If the Baht were to go down to its actual worth, then the country would be in even bigger

troubles.  Don't feel alone Thailand, as a lot of Canada people are in debt up to their ears as well, especially

in the oil province of Alberta.  There are some people who will lose their jobs, and maybe even their houses

this year, or in 2017, as our economy will not improve until after that. We even have Carbon Tax to pay, thanks

to the new party in power in Alberta, the NDP, or New Democratic Party.  Stay tuned, maybe after the next

election in 3+ years, the NDP will be like the Dodo bird.

Geezer

[chiang mai]

49 minutes ago, Stargrazer9889 said:

This is not good news as the Thailand currency has been high against the US and other currencies for

a long time. If the Baht were to go down to its actual worth, then the country would be in even bigger

troubles.  Don't feel alone Thailand, as a lot of Canada people are in debt up to their ears as well, especially

in the oil province of Alberta.  There are some people who will lose their jobs, and maybe even their houses

this year, or in 2017, as our economy will not improve until after that. We even have Carbon Tax to pay, thanks

to the new party in power in Alberta, the NDP, or New Democratic Party.  Stay tuned, maybe after the next

election in 3+ years, the NDP will be like the Dodo bird.

Geezer

 

A few things:

 

Consumer debt is very unlikely to impact the value of THB.

 

THB is almost certainly undervalued currently, as has been discussed widely in a series of threads over the past year, BOT spends more money trying to weaken THB than it ever did trying to make it stronger - making it stronger hurts exporters.