The US dollar is free falling.
Weakest against Yen since 1995 !
Lower against Yuan at 7,1
Historic low against Euro at 1,5540 !
And meanwhile, against THB… almost unchanged.
I mean what a joke : the BOT must be buying on a massive scale, and issuing bonds also on a massive scale (to absorb the liquidities).
For what ? To go against the global trend ? To wait and see ? To gain a few weeks ? It’s insane.
And meanwhile, oil is going to the moon : so a stronger THB would reduce the oil bill…
Save the thai drivers ? Save the thai exporters ? Save the foreign currency reserve ? Save the government ? Reduce or increase inflation ? Cut or increase interest rates ?
Cornelian choice. Conundrum. Check mate. You name it.
What do you suggest Thai govt do? Last time baht goes way up, all investors and farang leaf country and go someplace else for products and holiday. The dollar has was low in past like this but most likely arrives back after recession cycle. Japanese are holding back major investments and car part company looks to Vietnam now instead.
A few comments first :
-one year a go, THB was at 36. Under 35, was considered like the end of the world… Today we are at 31. During this year, exports were vigorous… However, I agree a lot of businesses are struggling.
So my point : a higher THB does not mean automatically a devasted thai export sector.
-furthermore : USD is falling against other asian currencies.
Therefore, because it’s relative, Thailand does not automatically become less competitive than China, Japan or Vietnam.
-third : USD won’t go up again. I strongly disagree with the classic idea of cycles. The on going global financial crisis is different, and on a much broader scale that the cycles growth/recession we had before when the world economy was one simple equation : Europe+USA+Japan.
-fourth : other asian countries will have to make the same choice : for instance, the low Dong is killing Vietnam with high inflation (oil bill, etc.). You can be sure (vietnamese gvt is already talking about it) : the VND will go up.
So now, what would i do ? I aknowledge that’s the ultimate tricky question. I don’t really know. Except that instead of going toward the reinforced concrete wall, I would make a bet. The bet of a country that want to change from the asian-low-currency-exported-without-any-social-and-political-evolution for a model of developped-country.
That’s my motto on this blog : first point : create a money making machine in a country with low currency, and legions of poor workers… is VERY EASY. Destroy western industries is very easy. But as we can see, it creates several problems after.
Second point : economy is, eventually, interlinked with political and social developpment. Always.
Asian countries, at that point, can’t continue with the same pattern. We just can’t continue to have such non sense in political systems, education systems and such income gaps.
If we don’t change voluntarily… then revolutions (violent) will change for us. It’ not lunacy : it’s just history.
With higher incomes (which the export model has achieved, we can’t deny it) come higher tensions with the people left behind and higher demand from the people who are going forward.
From that point of view : the chinese model (brutal capitalism with centralized gvt and no public liberties) can not last long in my opinion.
At one point, tensions will be too strong. And sending the tanks on Tienamen square, or shooting on the street of Bangkok, won’t work anymore…
Why stop there, ThaiCrisis? – lets hear some suggestions for the US govt as well.
(That’s assuming their social, political, economic model is not already perfect)
Thailand hasn’t learned anything from its previous economic crises, which is frightening.
Almost every modern economic crisis in the last 75 years has had something to with the currency. And it had mostly to do with indecisive bureaucrats making lame decisions or getting poor advice.
Thailand really has only two choices: either float the currency and let the market decide or peg it and defend the peg like Malaysia, Hong Kong and China.
The wishy washiness of the policy makers makes the baht a target for currency speculators.
Also, a strong currency has its benefits. Thailand can import capital equipment, it can buy technology from the US cheaper, it can do some modernizing of its infrastructure, oil is cheaper, Thais can invest overseas and repatriate the profits.
Further, maybe Thailand should stop sucking at the teats of exports and tourism and do something else to diversify its economy.