Being Tarisa, the Bank of Thailand’s governor

Nation publishes an interesting interview of Tarisa, governor of the Bank of Thailand. I guess it has been reviewed so we can understand this interview as official (sometimes Nation takes some “creative liberty” with reports and facts…).

It’s like Being Tarisa. 😉 And it explains the way the BOT is seeing the world… Like all the other central banks around the world… The Rabbit Hole and the Wonderland are never far away.

A few quotes.

The impact on exports will be evident in the new year, as well as the impact on tourism of the recent political problems. These are issues for which we must find a solution, as exports and tourism are vital to sustaining the economy.

Right. With the base effect, exports will show truely ugly figures in 2009. But what does “find solutions” mean ? When there is a global slowdown, with a global lower demand, how Thailand could “find solutions”, new markets for its exports ?

The moon perhaps or some other solar systems ?

Monetary policy cannot bolster spending, but helps to lower interest expenses. Fiscal policy has limits, as it takes time before it can be approved. We think it can boost the economy, but consumers might still not spend.

Bingo. At least, the BOT understands this universal rule : You can take a horse to the water but you can’t make him drink. Even with interest rates at zero, with free money, if people don’t want to buy new cars… you’re toasted.

US, Europe face this problem.

Don’t be panicky: it will not be like that. We experienced a 10 percent economic contraction in 1998, but it will certainly not be like that this time around for many reasons.

The problems did not originate here; we have only been affected [by outside events]. We are currently strong enough [to withstand the shock] and are not staggering as we did during the 1997 crisis. We have adjusted ourselves both in terms of the macroeconomy and financial institutions.

A nice nonsensical fireworks… The problem didn’t started in Thailand, therefore the country would be insulated ? It’s totally meaningless. The crisis is global. And Thailand rely on exports, like all the asian countries.

As for the “strong enough”… she should add “until now”. What if the crisis is worsening ?

More importantly, we do not have a bubble economy problem in either the property sector or the stock market. The impact of the crisis will not be large if the economy does not bubble up. If a bubble were to develop and burst, then the economic situation would abruptly worsen – but it is not like that now.

Sure there is no bubble in the stock market… because it has already exploded (read “5 years wiped out“) ! As for the property sector… again what is important is not now… but tomorrow. I’m still wondering who is going to live in the thousands of new condos under construction in Bangkok…

In 1997, the economy contracted by 10 per cent, pushing the overall unemployment rate to 6 per cent. Unemployment will certainly not reach 6 per cent this time, but it does stand at about 1 million people. There is a similarity with the 1997 situation in that the business sector is affected and unemployment is rising, but the degree of the problem is different.

Last time, the unemployed went back to the rural areas, but they did not [have the opportunity to] do much farming. This time the sector’s ability to cope with the crisis is higher. Although many farm prices, such as rice, rubber and corn, have declined, they are still higher than in the past.

Nonsense. In 97, people lost their job and went back upcountry but had problem to do farming… Tarisa should explain us how 10 years later, such reversed exodus would be easier !

In 10 years, a lot of people started to work in industry… and actually it would be much more difficult for them to go back now to farming !

This is a sign : the thai elite is overconfident and believes in a “thai model” that simply doesn’t exist anymore… They think that if unemployment explodes, mai pen rai, they will send back the people in the fields to grow rice, and all the problems will be solved.

It’s wishful thinking.

If it is necessary, yes, as has been experienced in many countries such as the United States and Japan. But if it’s not necessary, this should not be done. A near zero rate has many disadvantages. If we do anything, it is like the bullet is already away. We then have no tools [left] and must find others, which has many disadvantages and is impractical.

This is a pearl… What a nice ingenuity. Indeed, zero interest rate has “many disadvantages and is impractical”. 😉

4 Responses to “Being Tarisa, the Bank of Thailand’s governor”

  1. 1 antipadshist 7 January 2009 at 6:54 pm


    I agree that elite are overconfident. but then it is understandable: they main (if not the only) concern was, is and ever will be – to make sure that they stuff their pockets to max while their bunch runs the country, and that all their relatives, “sponsors”, patrons and buddies prosper too, and perhaps even profit on ongoing economic crisis. never mind all those “stupid uneducated rurals” – screw them, let them handle themselves.

    it was in 97/98 (and before), and it will be during this crisis too – nothing much changed really.

    therefore, those “stupid uneducated” baan nork already take care of themselves – which perhaps is truly an actual ‘Thai model’ (unlike what Tarisa or elite consider as such). and I think it is quite relevant to your this post, especially to this part:

    what does “find solutions” mean

    apparently, villagers are not that stupid at all – even though they have never studied economics and finance in Oxford as Abhisit and Korn (whatever Tarisa’s education?).

    I find it quite interesting. in fact, I recall reading the first mentioning of this “alternative money” phenomena back in 98-99 in newspaper. now apparently this matter surfaces again, and I bet villagers at very least would be able to PROTECT themselves from Thai Baht possible devaluations as well as their savings, however meager those might be (comparing, say, to the assets of Vejajiva family – BP recently posted about Abhisit’s dad Athasit being an independent director of CP 😉 )

    so, here it is :

    When It Comes to Cash,
    A Thai Village Says, ‘Baht, Humbug!’

    One way to beat the world’s credit crisis: Start printing your own money…
    The villagers of Santi Suk launched their currency, which they called “bia,” the local dialect word for “seedling,” in the wake of the 1997-98 crisis. At the time, many were struggling with debt problems and were receiving fewer and smaller remittances from relatives working in the Bangkok area because of the financial crisis.

    Two young foreigners from international volunteer organizations, Canadian Jeff Powell and Dutchman Menno Salverda, visited the area and suggested the villagers adopt a local currency to better manage their problems.
    [woops! again those stupid farangs ! 😀 ]

    The villagers agreed…

    “We’ve learned to depend on our own work,” says Buasorn Saothong, a robust 54-year-old rice farmer…

    Santi Suk-style currencies have since begun to slowly spread across the rest of northeastern Thailand as neighboring villages adopt the idea. Other villages are switching to barter trade for business instead of using Thailand’s national currency, says Ms. Pattamawadee, the economics professor.

    Today, interest in Santi Suk’s monetary experiment is picking up again. Visitors from other parts of Thailand and nongovernment organizations are streaming into Santi Suk to see how it works, despite the currency’s murky legal status.

    “It was a big coup for us when the local rice mill began accepting it,” says Ms. Buasorn, the hangover expert. “The mill is the focal point of the local economy. It means other people now realize our money is a real alternative.

    meanwhile – let pop-Korn, Abheesit, Tarisa, Virichai (i.e. Tanit of CP) and others continue being in illusion that farmers are “stupid uneducated” buffoons. villagers at least always have something to eat – unlike middle class city dwellers (aka PAD participants and supporters) who will be hit THE MOST by this economic crisis AND by Abheesit & Co government’s policies …

    Amazing Thailand indeed!
    reconciliation, unity, blah blah blah …

  2. 2 Frank 8 January 2009 at 8:44 am

    As much as I find Tarisa incompetent, I believe your criticism on her replies to the interview is utterly unfair. In fact, it seems that you purposely put words into her mouth.

    For instance “The problem didn’t started in Thailand, therefore the country would be insulated ?”

    Nowhere did she say that Thailand would be “insulated” from the current crisis. Being able to “withstand the shock” is very different from being completely protected from it. I hope you can see that the former implies exposure while the latter does not (or, at most, to a very limited extent).

    On the stock market, you are utterly mistaken. Just because a stock market’s capitalization goes down does not necessarily imply that there has been a bubble. There is such a thing called ‘overreaction’. At currently levels, for example, Thai–and for that matter many Asian–stocks are pretty cheap considering their multiples and profitability. Yes, they profit levels will go down. But unlike their Western peers, the bulk of them have not been and will not be in the red (at least in the medium run).

    On unemployment, it is obvious you have failed to understand her message. What you should have highlighted was this: “Although many farm prices, such as rice, rubber and corn, have declined, they are still higher than in the past.” Her point is that unlike during the last crisis where commodity prices were at low levels, present commodity prices are relatively fine. In case you are about to quote recent price collapses, please keep in mind that these declines were a result of record gains. Prices have merely restored to long-term levels.

    I am not denying that the Thai elite has a vested interest in keeping the masses under their jackboots. However, I believe your interpretation of Tarisa’s interview is simply unfair.

  3. 3 ThaiCrisis 8 January 2009 at 12:38 pm

    Of course I’m unfair. Because I’m opinionated.

    Having said that, I don’t think I’ve changed her words.

    Don’t be panicky: it will not be like that. We experienced a 10 percent economic contraction in 1998, but it will certainly not be like that this time around for many reasons.

    The problems did not originate here; we have only been affected [by outside events].

    She draws a parallel between 97 and now.

    I’m sorry but there aren’t many differents ways to understand this…

    -97 was bad because the crisis started in Thailand
    -today it’s going to be okay, because Thailand faces only outside events
    -therefore, thailand is insulated

    It’s a totally flawed logic.

    Stock market.
    Look at the chart. If you don’t call this a bubble… The SET is at 450.

    And I’m tired to hear again and again the same argument : PER are so cheap, buy stocks.
    PERs are linked to… the past. PERs are a rear-view mirror. It’s meaningless. It’s for the people who believe in constant growth, and reproduction of past events.
    You should read the books of Nassim Nicholas Taleb (Black Swan, Fooled by randomness…)

    What are you going to do and to say if a company with a PER of 10 today, see its earnings divided by 2 next year ?

    Do you believe that the current (starting only) crisis will have no effect on businesses and their bottom lines ?

    Profits are going to melt like butter under the sun, it’s plain logic. Therefore, blue chips, small caps are still too expensive.

    Read Is The Stock Market Cheap?, a brillant article from Mish.

    Unemployment. I understand very well her message, and this is why I’m scared.
    Again she’s using a totally idiotic logic : people in the cities loosing their job now could go back up country, it would be easy for them to farm because prices are higher… Sure. Khmer rouge style.

    Ask a blue or white collar working since 10 years in Bangkok to go back into the rice fields…

    The point is not to know if the market could absorb those new workers thanks to higher commodities prices… but if those workers would be WILLING and ABLE to do a farm job.

    This is the only intelligent question to ask. And obviously, Tarisa can’t or doesn’t want to ask it.

  4. 4 Frank 12 January 2009 at 10:43 am

    Unfair and opinionated are too different adjectives. I won’t get into the semantics, but look them up in the dictionary. An opinionated person need not be unfair.

    I’m sorry to say it’s your logic that is flawed.

    “-97 was bad because the crisis started in Thailand
    -today it’s going to be okay, because Thailand faces only outside events
    -therefore, thailand is insulated”

    First of all, look up what ‘insulated’ means. Secondly, you need to understand that the macroeconomic environment is very different this time around compared to the last crisis (this by no mean NECESSARILY implies that it will be less painful for Thailand during this ‘crisis’). I am sure you have sufficient knowledge about the last crisis. As such, surely you must agree with that at present Thailand will be able to withstand the current external shocks better than back in 1997-98 when the local economy was bloated with debt and inefficiencies. For one thing, the baht is not as distorted (if anything it’s the greenback that is overvalued). Negligible foreign-currency-denominated debts means Thailand can afford to let the local currency depreciate.

    I am familiar with the book you have suggested. I also agree with you that both PER and profitability are reflections of the past. What you seem to have missed though is that stock markets across the globe have fallen roughly by the same amount (in percentage terms). The question is: why should the value of companies in CONTRACTING economies be falling LESS than companies in expanding economies (this comparison effectively removes the PER discrepancy as the declines are compared in percentage terms)? For that matter, may I remind you that many wise investors including Warren Buffett are of an opinion that investors tend to panic during times of stress just to realize after things have turned all right that they have been mere victims of overreaction. After all, it’s prudent to be cautious. But it’s foolish to panic and jump ship without being sure that the ship is really sinking.

    I think you are exaggerating it too much by bringing up the Khmer rouge comment. Introducing such a tragic event to this discussion is not only irrelevant, but also an insult to the Cambodian people. Millions of innocent lives were lost, please do not trivialize it.

    Back on unemployment, I agree with you on the willingness part. But consider this:

    1) The agricultural sector in Thailand expanded in both absolute and relative terms in 2006 and 2007;

    2) Thailand has been experiencing severe labor shortages in various agricultural sectors from seafood to rubber for the last 4 years; and

    3) Hundreds of thousands of workers in Bangkok where about 70% of economic output is generated already have second jobs in the agricultural sector. (thus any increase in farm output prices will benefit them directly)

    Together they mean that they are 1) the current commodity price levels provide a benign situation (This can be further substantiated by conducting a price analysis on recent statistics); and 2) there are jobs available in the agricultural sector. Granted some of these jobs will disappear in coming months, but the situation now is nowhere as bleak as back in late 1990s.

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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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