Currency nonsense : “THB is too strong” dixit Chamber of Commerce

The baht is currently too strong at 34 to the US dollar and the Bank of Thailand should step in to stabilise it at a realistic rate, Archava Taolanond, honorary chairman of the Thai Chamber of Commerce, said on Tuesday.

Mr Archava suggested the central bank maintain the currency at a suitable rate of 37 baht the US dollar.

That would give the export sector a much needed boost. (Bangkok Post)

Archava’s statement is idiotic. But it’s like a perfect symbol of the madness of our world.

I’ve got a suggestion for him : hey, let’s wish 340 THB for 1 USD ! By a simple pen’s sign, thai exporters would become ten times richer. Instantaneously. That would be great folks !

And why not 3400 THB for 1 USD ? Hundred time richer ! Holy Virgin, that would be awsome ! And they could probably increase ten times the volume of exported goods. Crisis solved. Honey would flow uppon us. Peace. Harmony. And love of course.  Thank you Mister Archava and Miss Alice.

Alice in Wonderland of course.

More seriously : it shows that the “beggar thy neighbor” policies used (and abused) by many asian countries (Japan of course, but China also etc.) is totally stupid.

It’s even more stupid to ask a central bank to set exchange rates for currencies. Yes I know, the Chinese are doing it. Openly. The japanese are doing it (openly, but without saying it too loud)… And the thais are doing it (secretly, and with shame like often with thais)…

But during a global recession, a crisis of demand, a crisis of solvency, a crisis of debts… exchange rates manipulations, “beggar thy neighbor” policies are not the proper answer. Those are selfish and eventually counterproductive, short sighted policies.

Archava should tell us what would happen to Thailand’s oil bill with an exchange rate of 68 THB for 1 USD for instance…

The thai economy would just collapse. Inflation would explode (and we’ve had last summer an “avant-gout” of this, just peruse my “oil” and “inflation” categories…)…

But Archava can’t. Because with his 3 neurons he’s hopeless. Because he can’t see beyond the small turn over of his small export company…

Honorary chairman ? You bet.

15 Responses to “Currency nonsense : “THB is too strong” dixit Chamber of Commerce”


  1. 1 antipadshist 4 June 2009 at 10:00 pm

    looks like the “competative devaluation” of Asian currencies is at full swing already.

  2. 2 fall 4 June 2009 at 11:10 pm

    Agree that oil is the weak-point of Thailand(or any non-oil producer nation). The 1997 crisis was not worldwide, hence devaluation help export and boost recovery. This time, the same solution wont help due to slump demand.

    Making recommendation from only a partial picture without looking at the full picture is scary.
    May be his statement is taken out of context?

  3. 3 Jaap 5 June 2009 at 12:40 am

    This would be great! A lot of dollars to sell my business to some ignorant other person !

  4. 4 ThaiCrisis 5 June 2009 at 12:58 am

    Out of context ? I doubt it. I know those selfish people : he owns an export company… with a falling USD (let’s say 20 %), a large chunk of his margin has just vanished. It hurts.

    But instead of trying to find other and real solutions (find new markets not in USD zone for instance, cut costs, increase productivity, developp new products etc.), the “honorary chairman” just wants the ultimate lazy solution :

    “let’s trim 20 % of the THB versus USD, and voila ! I will be happy happy again with my business.

    Of course, the world around me can fall, the country can suffer, I don’t give a shit. What is important is my Mercedes Benz, my villa, my golf, my maid, my driver, MOI, MOI, MOI, MOI, MOI”

  5. 5 George P Tuckeer 5 June 2009 at 10:06 am

    It’s not the Baht that is strong, it’s the Dollar that is weak.

    Maybe Archava can go over there and strengthen the dollar by solving the United States’ financial mess, end their recession, revive their economy, reduce their deficit and, while he’s at it, find a cure for cancer.

  6. 6 ray 5 June 2009 at 11:46 am

    at the same time the thai govt are still holding usa t-bills.. like tc said lazy way out. why dont we learn from china/brazil.. talk to other nations and do business in the local currencies and bypass the dollar. imagine to get richer we have to make the vaue of money we hold worth lesser!!!!

  7. 7 ThaiCrisis 5 June 2009 at 2:25 pm

    I would add to the list : tackle global warming. Yeah, global warming is an important matter. And what about amending the law so foreigners could buy (a small) piece of land in Thailand ?
    Now, this would be really too much asked.
    😉

  8. 8 InPhuket 5 June 2009 at 4:33 pm

    “Economy to pickup in second half”

    Wow, that is great i feel so much better now!

    From Bangkok Post:

    “Economy to pickup in second half

    By: BangkokPost.com
    Published: 5/06/2009 at 03:15 PM

    Thailand’s economy would pickup in the second half of the year as there were signs of recovery in several trade partners of the country which relies heavily on exports, Kirida Phaophichit, a senior economist at the World Bank’s Bangkok office, projected on Friday.

    In April, the World Bank had predicted that the country’s economy would contract by 2.7%. Ms Kirida said as there are several factors, her bank would revise its economic shrinkage projection for Thailand once again in October. She went on to say that over the past five months, the government had performed good duties, quickly coming up with stimulus measures, enabling to restore confidence and distributing seed money to people as planned, even though it had failed to cover all groups of people.”

  9. 9 ThaiCrisis 5 June 2009 at 5:00 pm

    Yeah, it gives me a warm feeling. 😉 I think I’m going to buy a new condo. And a new car (GM perhaps ? ) !

    Anyway, we’ll see. 6 months… that’s not long.

    I continue to believe in the “1 bullet boost” (inventories that need to be replenished and some effects of the ocean of money injected through various “stimulus plans” around the globe)… In any case : the fundamental imbalances of the financial systems are still there.

    To give you one example : the bomb in Estern Europe is not defused ! Read here… It’s easy to forecast very nasty secondary effects on the whole european banking system…. Plus the USD problem, plus the new upward pressure on interest rates (read here) etc…

    We are still deep into the black hole.

  10. 10 ray 5 June 2009 at 5:43 pm

    i think we are past looking at companies going bankrupt. its time to look at countries.the dollar is being devalues by stealth. the chinese students burst into laughter when little tim said the us treasuries the chinese are holding are very safe.i listen to the politians and when the speak i am sure the opposite is going to happen. eg.
    1) bush sr,, read my lips ( not going to raise taxes.
    2) clinton.. i did not have sexual relations with that woman.
    3) bush jr the is wmd in iraq
    4) obama,,, i will withdraw troops from iraq right away. then it was 16 month and now its till 2012 and then us will have 50,000 advisors stationed in iraq. obama signed to close gitmo but cannot close because the congress voted there was not enough funds. wonder cant bernanke print a few billions to take care of the problem??

    latvia problem affects sweden financial institutions because they loaned alot of money to latvia. it will have a domino effect. also when dr ron paul said on 3rd june that now the govt has manages to change the financial crisis and turned it into a currency crisis. the dollar is doomed and so it alot of savings of most countries in the world..

  11. 11 sammy 5 June 2009 at 7:13 pm

    Central banks cannot manage exchange rates but they can intervene in the market. But this just wipes out their foreign exchange reserves and never works. Anyway, the question I have is why is the baht so high? I assume its because of all the money flowing into the stock market and lack of imports. The dollar’s decline alone does not explain it. Manipulation?

  12. 12 antipadshist 6 June 2009 at 8:40 pm

    Korn joins (or may be rather conducts?) the chorus :

    Korn: Strong baht a concern

    Liquidity to be used on raw material imports
    http://www.bangkokpost.com/business/economics/18001/korn-strong-baht-a-concern

    The US dollar is likely to weaken in the near future…

    Public debt will rise to 60% of gross domestic product over the next two years, which we think is acceptable…”
    [stating the obvious ?! ]

    We will use domestic liquidity to import raw materials. This will reduce pressure on the baht…

    M.R. Pridiyathorn said purchasing power in rural Thailand could decrease in the second half of the year as merchants expect the government to sell paddy from its inventories at a cheaper price than it paid farmers

  13. 13 ray 7 June 2009 at 12:13 pm

    sammy

    yes the decline in us dollar alone is quite possible for strong thai baht. the us dollar is in the trenches. any ther is alot of chatter about a second stimulus bill. also i believe the fed/ben bernanke are monitizing debt and conciously devaluing the us dollar. america has to default its debt. but they will default by printing more currency and pay off debt.

    after the us dollar index comes down to mid seventies( us dollar index is us dollar against six other currencies) other nations will follow suit and devalue as well first being china,japan.
    second half of 2009 we will see debasement of alot of currencies.

  14. 14 sammy 9 June 2009 at 9:55 pm

    Ray:

    Granted about US but it seems impossible for all countries to devalue at the same time because exchange rates are relative. there would be no net effect, just cancellation of effect.

    I dont think Thailand can devalue alone, unless demand for Thai baht declines or there is monetarization of the debt being acculumlated right now through stimulous. Maybe the baht is high because they are holding onto their FC reserves?

  15. 15 ThaiCrisis 9 June 2009 at 10:32 pm

    I’m currently cooking an article about the foreign reserves (an update actually, because I wrote several times about this issue). Thai politicians talk again about using those reserves… and the BOT starts again to buy USD… the data show a strong increase in may, following what other BRIC’s central banks (China, Brazil etc.) are doing.
    Stay tuned.


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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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