Thailand's Economic Problems

[joekicker 53]

Here is another interesting read: It was written last Sept just after the coup...

 

It was interesting in September. Yesterday, the baht and the stock exchange both hit 10 year highs. Growth will indeed be around 4, maybe 4.5 per cent but that's only because it had a very slow start. I bet Mr Morganstanley has changed a lot of things for this month's report.

 

Like most economies, the Thai one profits or loses from the mood and confidence. Right now, confidence is up, foreigners are tossing billions into the stock market and short-term investments. The problem with a military junta is that it can reverse on a dime, so to speak, heh. But it's pedal to the metal right now.

 

The Americans and Yurpean governments are keeping arm's distance from the junta. But if they really have elections this year as they say, then it's back to pre-1997 growth in a flash. Even now it's at an annual rate of about 6 per cent or better.

[Shilo 371]

Joe,

 

If you took issue with that last piece, then you'll go to town on this one:

 

http://www.doublestandards.org/liu1.html

 

Again, it's a little to long for a copy and paste. Personally, I'm not saying that I support or disagree with some of the things that are written in the pieces but I do like to search out different opinions, try to digest their main points and hopefully in the end walk away with a little more food for thought.

 

There are a lot of things that I see happening in the world markets that have me concerned. At the top of a long list is easy access to debt. I do agree with the idea that there is WAY to much liquidity in the markets. All of that money has to go somewhere and in the end it seems to raise asset prices without improving fundamentals.

 

For what it is worth, I came across these items while looking for info on Stagflation. For those who don't know, stagflation is defined as lack of growth with rising cost.... one of the worst things in my mind that can hit an economy. In Thailand we are seeing a slowdown in growth. It is suggested that this is because of the current political issues. And there is a measurable up tick in inflation. The reason stagflation is so bad is because to improve growth a country will generally cut their interest rates (as the Thai's are doing now) but this often leads to more inflation. Or they might raise interest rates to slow inflation but then they hurt their growth. In a recession you cut rates to spur growth... with high inflation you raise rates to slow growth and cut inflation.... in stagflation you are basically screwed.

 

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[joekicker 53]

Joe,

 

If you took issue with that last piece, then you'll go to town on this one:

 

Oh, I'm sorry if you think I took issue. I didn't. When it was written it was actually quite good. It holds up. I'd give props to Stanley. But it's 9 months old,and a lot has happened in the past three months.

 

I think less of your second one, but only because I find a lot more of "the fortune teller" in it. In economics these days, if you say "it has to happen again because it happened last time", you lose me. For example:

 

There *is* a bubble growing again in Asia, but it is *not* 1997, and things will not happen the way they happened then. I say this with even more confidence if possible than your Mr Liu say the opposite.

 

Again, it's a little to long for a copy and paste. Personally, I'm not saying that I support or disagree with some of the things that are written in the pieces but I do like to search out different opinions, try to digest their main points and hopefully in the end walk away with a little more food for thought.

 

Absolutely. I have no idea what your own opinion is, if any, and I was commenting on the article, which I found very interesting but, as I say, now outdated.

 

There are a lot of things that I see happening in the world markets that have me concerned. At the top of a long list is easy access to debt. I do agree with the idea that there is WAY to much liquidity in the markets. All of that money has to go somewhere and in the end it seems to raise asset prices without improving fundamentals.

 

I'm not an economist. I believe there is one economic law, which is supply and demand, and everything falls from that. I don't believe there is such a thing as "too much". But that's me.

 

I sure as HELL remember stagflation, man oh man did I make a lot of money betting correctly that Jimmy Carter was an economic midget. 20 per cent interest in a savings account?

 

For what it is worth, I came across these items while looking for info on Stagflation. For those who don't know, stagflation is defined as lack of growth with rising cost.... one of the worst things in my mind that can hit an economy. In Thailand we are seeing a slowdown in growth. It is suggested that this is because of the

 

Don't be too sure about this. Actually, in the past three months, Thai growth has gotten some legs. That's why I say that post-coup paper by Morganstanley is out of date. Baht is up, exports are WAY up - that's a very good indication of growth, since exports are supposed to fall if the currency goes up. But there is a lot of stuff bubbling in the Thai economic pot, and you're also a fool if you don't take politics into account because right now politics is 95% of the confidence factor.

 

And my last word here is that the economy is classic, evolutionary chaos. When a butterfly flaps its little wings, the knock-on is very unpredictable. If the economy was easy to predict, we'd all be very, very well off, eh?

[Shilo 371]

I have no idea what your own opinion is, if any,

 

Let me toss out a few opinions and believe me, that is all that they are

 

In the US the stock markets have been going strong since 2003 which means that we are going into the 5th year of the current cycle and I believe that we haven't had a 10% correction in all of that time. I suspect that 2008 will see a correction in the stock markets. This would have a big impact on countries that depend on exports. I also think that China with something like 1.4 trillion US dollars in their reserves will start looking for other places to invest that money besides in US treasuries. I wouldn't be surprised to see China start to issue their own bonds which would give their people a place to invest outside of their stock markets. If this happens then it would cause longterm interest rates in the US to rise. It wouldn't matter what the Fed did with short rates... it would just mean a reversal back to the normal yield curve with short yields below long duration yields. If the US stock markets should correct along with a drop in bond prices (which happens when bond yields go up) then we could be looking a possible recession in the US. Add in the higher debt levels in the states and you'll see the US consumer pull back on spending.

 

China has still got a lot of cheap labor but that is just beginning to change. Labor cost in China are rising at a 10% yoy rate. This isn't a problem yet because productivity is going up by more. But China depends on exports and if the West (lead by the US) starts to cut back on spending then this could cause problems. But China is still creating a middle class. They will want the things that we take for granted like meat, cars, and air con. I don't know about commodity prices on things like construction materials, metals and such, but I expect oil and food cost to continue to rise around the world.

 

And it's the slower growth and higher prices that have me concerned about stagflation.

 

 

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