“The Bank of Thailand should cut interest rate… again”

Suchart is like a Duracell battery : he never stops.

The Bank of Thailand slashed interest rates by 100 basis points one week ago (from 3,75 to 2,75 %), and the… caretaker Finance Minister is already asking for more !

“The economy will begin to slow clearly from the [fourth quarter] of this year. We could see just 1% growth this quarter, with growth for the full year of 3% to 4%, down from previous estimates of 5% growth,” said Dr Suchart.

He urged the Bank of Thailand to cut interest rates further to support liquidity within the financial system. (Bangkok Post)

Support liquidity within the system ? That’s the obsession of… all politicians and central bankers around the world.

Atchana Waiquamdee, a deputy governor of the Bank of Thailand, said liquidity in the money market and banking system was at a high level and could support additional lending growth.

The MPC rate cut represents a clear signal from the central bank to local banks that commercial banks should use their funds to lend more to the real sector, Dr Atchana said.

The 1% rate cut is akin to the central bank telling commercial banks that funds should flow out to the public and business sector rather than simply being held as deposits,” she said.

You see : they are lost, like orphaned children. Their text books don’t apply anymore. For those people, you cut the rate, the banks start to lend more. It’s automatic. It should be automatic. 😉

But problem : it doesn’t work… In the US, in Europe, in Thailand, everywhere, it doesn’t work anymore.

Because, in a full blown recession (and maybe worse), there is no point for any bank to take more risk, to lend more. And on the demand side, there is no point to take more debts : to do what ? To build new factories with no customers ?

Look at the report from the Bank for International Settlements…

Net issuance of bonds and notes by corporations, financial institutions and governments fell to 247 billion dollars (195 billion euros) from 1.086 trillion dollars in the second quarter, said the world’s top central bank body.

Debt issued in euros fell most, plummeting from 466 billion dollars in the second quarter to 28 billion dollars in the third quarter.

Debt issued in dollars also dropped steeply, from 396 billion to 40 billion dollars in the three months ending September. (AFP)

The poor Suchart… and the poor BOT can’t fight this.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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