Why Abhisit will suffer and why people will be disappointed : coffers are empty

The Thai government witnessed cash deficit of Bt56.3 billion in November, which boosted the cash deficit in the first two months of the 2009 fiscal year to Bt163 billion, according to the Fiscal Policy Office. (Nation)

Tax collection are down (read here)… expenses are up… the coffers are already empty. And they will be emptier because of the global economic crisis.

This is why Abhisit has a difficult task ahead. Should we say “impossible task” ? People are waiting for the Messiah, the asian Obama, rich like Cresus, able to say the Word (“growth !”) and deliver it (what ? the bill, you are not following). πŸ˜‰

Disappointement (at least) will be the name of the game.

We forgot that the previous governments… have already increased the budget deficit, and spent a lot with several and various “stimulus plans” (read here, there) along with other tax cuts (on diesel, on properties) and stupid “gifts” (free water, free trains, etc.).

It’s a perpetual contradiction…

One example : when agricultural and oil prices were at the roof, the idea was to help people to cope with… Now that that prices of commodities have plunged… the idea is to help… the farmers ! πŸ˜‰

Like a good politician, Abhisit had a revelation : he wants to do the same, to copy the policies of ex-TRT, ex-PPP. More or less. And probably more. Spend. Stimulate. It’s the Dildo Economy.

But he’s going to face very quickly the harsh reality and one universal rule : no money, no honey.

UPDATE
Prime minister-elect Abhisit Vejjajiva said Wednesday his government would announce economy stimulus package next month.

He said the package would include measures to cope with rising unemployment to help laid-off workers. (Nation)

It’s obvious that laid-off workers are going to feel extremely stimulated by Mister Abhisit… Poor us. Poor world.

16 Responses to “Why Abhisit will suffer and why people will be disappointed : coffers are empty”


  1. 1 khun Jay 17 December 2008 at 12:46 pm

    This is the very reason Thaksin backed off, he knows the next few months are going to be difficult for any Thai government …so why not let the Dems fail as they will (due to the reasons you point out) & Thaksins cronies will scream we told you so; then PT or whatever name they next dream up (PMT, PS, etc etc ) will be voted back in with a massive majority.

    Thaksin is a smart cookie pity he’s a megalomaniac

  2. 2 ThaiCrisis 17 December 2008 at 12:52 pm

    I start to share exactly the same idea…

    That must have been a difficult decision to take, because Thaksin is “hot”, he wants to fight back now. But indeed, the best solution for him is to wait quietly for Abhisit to… blow up.

    The question is not if it will happen. But only when.

    Thaksin was seen as totally finished just after the coup in september 2006… This guy will never give up. πŸ˜‰

  3. 3 chinesethai 17 December 2008 at 1:09 pm

    ThaiCrisis:

    I think there are something strange with the details in the report, which I found readers need to think twice.
    – Typo —> polices(?) he keeps repeating the same typo mistakes more than twice!
    – Other than the first paragraph which says “The Democrat-led coalition government will stick with Thaksin-style populist polices….”, I don’t find anywhere in the report that really quotes Abhisit or Korn of saying or implying so. Did the reporter make the conclusion on his own?

    I think in time of crisis the keys are ONE to manage public expectation that Thais cannot rely on the government for unproductive handouts, which would only waste limited resources, and TWO to counter Thaksinomic propaganda that for years has spread a false belief among the grassroot that the economy is good only under Superman Thaksin.

    Most businesses and middle class have embraced and prepared to respond to the worst scenario for quite sometime, regardless of being under Pro or Anti-Thaksin governments. However, the grassroot with unequal access to the information were always told to be overly bullish and go for excessive debt creation.

    You have got to remember that every world government, not only Abhisit’s one, is now faced with similarly daunting task – how to salvage public confidence from plunging further. Let alone restoring it.

  4. 4 thaioutsidein 17 December 2008 at 1:34 pm

    What do you guys suggest the Thai government should do?

    I see a lot of criticism of interest rate cut and fiscal stimulus plans, but never saw a constructive suggestion.

  5. 5 ThaiCrisis 17 December 2008 at 1:34 pm

    I think you have your answer with the update I’ve just added…

    And yes, Thailand is only following the inane policies that virtually every country in the world are following : the run toward zero.

    We had a spectacular demonstration of it last night with the FED cutting to zero…

    I’m not afraid to be emphatic : at that point, there is only thing to do…. To pray.

  6. 6 fall 17 December 2008 at 1:34 pm

    Linking Dem to other elements and let them take the fall, a double whammy I would say…

    But as to the government spending funding, last time there was Miyazawa and IMF loan. May be IMF might give, but probably got no Miyazawa this time. So let’s enjoy the show, (sadly) front and center seat…
    Or they could always seize Thaksin’s asset and spend it…

  7. 7 ThaiCrisis 17 December 2008 at 1:42 pm

    I see a lot of criticism of interest rate cut and fiscal stimulus plans, but never saw a constructive suggestion

    Yeah, yeah, I know it’s the classic counter-argument : what do you propose as an alternative ?

    Simple : exactly the contrary of all the bullshit they serve us since too long : enough of “stimulation”… Take our collective losses. Stop supporting zombie banks and living-dead businesses.

    Enough stupid consumption, enough of inane property market where prices double because it’s fun, enough of the financial black magic that they’ve called “growth”, enough of the parasites (public spendings, civil servants, public companies etc.).

    Enough of the Rabbit Hole were debts = assets.

    Enough of the “toilet paper” AKA paper currency.

    Enough of the politicians who are unable to tell the truth to the people.

    Enough of the global cowardness.

    Go back to SAVINGS. And go back to WORK, with real innovation, financed by savings. Go back to real TRUST. Go back to sound money.

  8. 8 ThaiCrisis 17 December 2008 at 1:46 pm

    Sure… The problem is… there are just too many countries in front of the bank ! πŸ˜‰ They all want to do the same : stimulate by spending money they don’t have.

    Look at the US… We don’t even know anymore with precision how much they “spent”. Trillions. Gazillons ? Numbers have lost all meaning.

    So, okay, go for it. Thailand is going to borrow money. Great. Happy. And then, what do we do after ? We make another “stimulus plan”.

    We have to see the harsh reality : the system is broken.

  9. 9 chinesethai 17 December 2008 at 2:06 pm

    Obviously, the stimulus is not meant to revive the economy back to normalcy. It is just a relief, no doubt. There is nothing any government can do to restore confidence. To salvage it is good enough.

    However, I still stand firm on my notion that naturally like the rest of Asia, Thailand has the capability to weather the storm. As I always said, those are….
    – Low financial leverage. You can see that so far Asian businesses have needed NO bailouts while the U.S. and Europe are busy bailing their banks and conglomerates.
    – Self-reliance on abundant food supplies.
    – Large FX reserves

    Unless…..Thaksin wants to instigate another turmoil. But again, it is the task Abhisit has to counter by communicating to the large section of this society.

  10. 10 thaioutsidein 17 December 2008 at 3:38 pm

    ThaiCrisis, without EFFECTIVE fiscal stimulus and low interest rate, you could well again see the great depression. Exactly what happened in 20’s.

    I totally agree with lowering leverage level and over-consumption (especially of the Western economies). But that is a longer term structural change that will take years if not decades.

    For fiscal stimulus, it depends what you are spending on. Previous government’s plan to just “hand out money to people” was absurd. These investments need to be productive. Governments have to run deficits when the economy slows because the private sector will not invest enough to increase production and reverse recession. HOWEVER, since government resource is the key driver of economic growth, PRODUCTIVITY of these investment is absolutely vital to getting an economy out of the recession.

    I have no confidence in Thai government but some in Obama-led government (especially his promise to invest in green-etch.)

    But doing nothing will not help. Finger pointing at each other won’t help either.

  11. 11 FDL 17 December 2008 at 3:56 pm

    If Thailand could insulate itself from the rest of the world, then Thailand do not have anything to worry about. But the world had actually shrunk these past few decades and only true hermit countries like Burma, N. Korea or Cuba would be least affected by the global economic turmoil getting worse every day. (Oh yes Burma, N. Korea and Cuba are in such economic depths these countries would hardly notice anything externally bad).

    Export dependent industries will already be feeling the pain by now . . and the economic pain will get worse early next year. Eventually the average Thai consumer would start getting worried about keeping his/her job and/or maintaining his current living standard. They’ll start buying less, avoid long commitments (like condos/houses), postpone big outlays (cars, home repairs, travel, etc.).

    While governments of the world try to inject more liquidity and print more fiat money . . . the loss of confidence and the malaise will not be easily restored.

    Real economic recovery begins only once the shake-out of all the excess production capacity, excess leveraging/borrowings . . . excess corporate fat (redundant workers, redundant machines, redundant everything).

    If PM Abhisit could do magic by hypnotizing the Thai consumers to spend more in the face of global economic malaise . . . then PM Abhisit is better voodoo master than I give him credit for.

    In the meantime . . . tighten your belts folks . . . because the turbulence on the way down will be sickening.

  12. 12 ThaiCrisis 17 December 2008 at 3:58 pm

    But doing nothing will not help.

    I disagree with this rethoric : “better to do that than nothing”.

    You aknowledge that the previous “stimulus” plans were disconnected with the reality of the problem. And Thailand has no exclusivity. Do you remember all the circus they made with the “check” (total cost 150 billions USD) Bush sent to each tax payer in the US… ? Result ? A fart on Q2 GDP. Well done.

    Samak then followed with his six months free whatever plan. Result ? Ah yes… I forgot : people were able to drive again their pickup truck. And buy some new mobile phones (they saved a few hundred THB on water and electricity bills). Total cost for the thai state : we don’t even know. 45 billlions THB probably.

    Do you believe that Abhisit will do something else ? I can already tell you that the HE WILL CONTINUE the Samak plan. Allez, let’s be imaginative : 6 months more. πŸ˜‰ Alleluia.

    Okay, I’m not really fair… We have the famous mega-projects… Will Abhisit be able to EVENTUALLY launch those hundred of km of new train lines (plan announced by… Thaksin in… 2005) ?

    Thaksin made a circus of it. The junta made a circus of it. Samak too. Somchai too. And, obviously, Abhisit will continue to entertain us with the mega-projects (I call those the “Heil Hitler Autobanh”).

    I mean : don’t you have enough ? Are you happy to be fooled by those pathetic people when every month they announce the mega projects ?

    I’ll tell you : with luck, Abhisit could launch (I say just launch) probably 2 lines in Bangkok (red and blue lines)… Those projects will last FOR YEARS (because unlike the chinese, the thai work slowly, look at the various other “projects” like the BTS extensions…).
    2 lines.
    Do you seriously believe that those 2 train lines will “stimulate” the economy ? And boost “confidence” ?
    Talk about confidence if Newin friends put their dirty hands on… the Transports Ministry !

    Anyway. You speak rightly about “long term structural change”… A depression would accelerate those changes. For our benefit.
    I vote for a depression. Clearly. An ugly one. But a quick one. We will suffer. So what ? They have fooled people with the illusion of an easy life (buy today, pay tomorrow).

    A depression would be better than a slow, a very slow economic agony with Abhisit, Bush, Obama, Bernanke or whoever clown willing to tell us that “everything is going to be okay”…

    And to answer to CT : since it’s obvious that the situation is worsening a lot, I believe too that Thailand has a few cards to suffer less than other countries.

  13. 13 fall 17 December 2008 at 4:49 pm

    @ThaiCrisis
    …I believe too that Thailand has a few cards to suffer less than other countries
    Hello, people! Need reminding that Thai GDP compose of +50% export? Global recession will cumulative that effect.

    Do you believe that Abhisit will do something else ? I can already tell you that the HE WILL CONTINUE the Samak plan…
    Still remember how the Dem spend the 1997’s Miyazawa fund? They buy up lemons and tell bureaucrats to use it to clean the floor. Talking about shore up crop price AND put bureaucrat to actually work in one shot…
    So, no… unless Abhisit got a good, huge stimulus package. He wont get it up.

    Bracing for impact and let market adjust itself, mergers, Chapter 11, and take-over. It’s a reasonable free market response, but who is willing bite the bullet?

    @ChineseThai
    Low financial leverage. You can see that so far Asian businesses have needed NO bailouts…
    NO bailouts, yet. Assuming Thailand, TG already asking for a bail-out. Heavy and auto industries are foreign investment, they dont ask for Thai bail-out. And Thai’s own textile factories never ask for bail-out, they just close.
    It’s just a matter of time before NPL start to show and government need to bail-out the banks. Yes, most banks have set aside their portion of NPL, but still…

  14. 14 ThaiCrisis 17 December 2008 at 5:14 pm

    Hello, people! Need reminding that Thai GDP compose of +50% export? Global recession will cumulative that effect.

    Fall, believe me… I know the exports issue. I spend enough time to speak about it on this blog πŸ˜‰

    I would laugh too if we were in a recession.

    But I start to think that the situation is going to worsen. A lot of more. It’s the D word : depression.

    And then it changes everything if I may say.

    In a depression, Thailand would definitely resist, much more than western countries.

    -Thailand is a warm country, no need to pay for heating in winter.

    -It’s so easy to grow food in Thailand (leave it in the dirt, come back the next day, you have a plant). πŸ˜‰

    -the work force is already… used to agriculture (ask an european to become a farmer…)

    -average thai people are not used to all the gizmos, abundance, luxury, gadgets we have in western countries. Therefore to loose them will be much less painful in Thailand than in Europe, US etc.

    -fundamentally, the average thai individual can live a frugal life. Talk about “frugality” to an american…

    -thai people are not used to all the social protection and safety nets we have in Europe for instance… therefore they are more resilient. Stronger.

  15. 15 Fonzi 17 December 2008 at 5:47 pm

    TC-

    I think you are on to something. Maybe it is best to bite the bullet and have a good economic house cleaning with a depression for a year, year and a half, then have a V shaped recovery.

    People are talking about deflation. Well, yeah, when you had an artificial bubble go on and on for many years based on voodoo economics, then one day somebody has got to pay the piper.

    There are reasons why Ponzi scheme, Boiler Room Enron type companies fail. It is apparent to anybody with a braincell in their head. Same principle in 1997, same during DotCom boom. You can’t throw money at paper, phantom companies that produce nothing, return nothing or artificially hyper-inflated assets and “hope” for the best, just because some salesman pitched you on fraudulent accounting, quick rich schemes, and the notion that in a capitalist economy that a boom never ends. You can’t call junk bonds triple a paper, because one day somebody somewhere will snap people out of the delusions and call a junk bond a junk bond.

  16. 16 thaioutsidein 18 December 2008 at 5:29 am

    Depression by definition is a prolonged period of economic contraction.

    You can’t call a V shape downturn a “depression”


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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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