“Beggar thy neighbor” : Vietnamese Dong devaluation affects Thailand

That’s the beauty with cheating : you always find a bigger cheater than yourself.

And this is exactly what is happening in Asia (and around the world).

The crisis is worsening (see Dubai’s default), tensions and imbalances are increasing, and all the clowns try the same thing : The Beggar thy neighbor policy, in order to save their own exports, at the expenses of somebody else.

That’s the principle of the Beggar thy neighbor policy.

This is why it’sΒ  absurd to pretend that everybody can do it, at the same time. The Beggar thy neighbor policy implies that someone loses.

Someone has to lose.

Vietnam has devalued its currency (by 5,4 %, read here) and increased interest rates. Why ? “To contain inflation“.

The first part (devaluation) is of course totally surreal when you pretend to fight inflation. Sure Vietnam can survive without importing L’Oreal beauty creams for instance… but It can’t avoid to import oil. And already, gasoline prices have increased in the country. And like Thailand (and China), economic growth is based on cheap fuels.

So the devaluation increases the costs, costs are passed onto the consummers : prices rise. Inflation.

The vietnamese government, like the thai government, is living in Lala Land. They just want to boost their exports.

Effect on Thailand ? Overnight, thai goods, like rice, are 5,4 % more expensive compared to vietnamese rice.

Now, let’s see what Korn, the alleged Finances Minister, has to say.

“Vietnam’s decision to devalue the dong will not affect exports or other currencies in the region,” Korn told reporters. “Thailand has no plan to hike its interest rate any time soon.”

The minister said the premium quality of Thailand’s rice insulated it from competition with Vietnam. (Nation)

Insulated from competition ? Korn is an expert in bozoness. Not affecting other currencies in the region ? Ah ah ah, another medal.

[Chart of USD Index]

And in the background… the USD dollar is sinking. And will continue to sink. And Korn will continue to make inane comments, and the economic situation will continue to worsen.

Life is sweet. Let’s have another drink.

[You want to understand the reasons of Dubai’s debacle ? Look here… Asthonishing pictures… Everything was written, on the walls and at the top of hundreds of cranes, and the clowns, as usual, pretend today to be “surprised” ! ]

11 Responses to ““Beggar thy neighbor” : Vietnamese Dong devaluation affects Thailand”


  1. 1 Bob 27 November 2009 at 8:29 am

    Finally a post about economics, with numbers and not just political blunders, I love it.
    A technical question: How can Vietnam devaluate their currency AND at the same time raise interest rate?
    I had the impression that most open currencies will strengthen with higher interest rate and fall with lover interest rate.

    Life is sweet. Let’s have another drink….totally agree and you will find me at the beer garden in front of Central World Plaza for a X-mas beer…ahhh.

  2. 2 Bewdyr 27 November 2009 at 8:43 am

    I wonder if it will be the domino effect. The first one last time was Thailand (whose incompetence triggered the crash but that hasn’t taught anyone in Thailand it is better to shut up and be thought a fool than to say something and remove all doubt). This times is Vietnam.

    I don’t think 2010 is going to be a hugely happy year for Thailand and Thais, indeed, for the whole world; we can only hope that it is the middle and hi-so classes that get hurt the most.

    Dubai is a worry.

  3. 3 James 27 November 2009 at 2:02 pm

    Bad omens! Looks like 2010 will be a rough year for Asia.

  4. 4 ThaiCrisis 27 November 2009 at 2:02 pm

    Don’t forget Bob : everything is politics. πŸ˜‰

    You would agree that the current astonishing mess was and is highly political. Stupid, coward and blind politicians have created it.

    People usually accuse bankers, traders, greed etc… But those are mere symptoms.

    We have to go to the source : and the source is without any doubt politics.

    How do you want to have sound economic policies with people… like Korn and Abhisit (or Surayud, Samak, Somchai, Thaksin whatever) ?

    And with Brown ? Bernanke ? Obama ? Sarkozy ?

  5. 5 Pricilla 27 November 2009 at 6:28 pm

    Indeed TC politics is the source of most of the evil that affects mankind (except the star performer religion of course). Whether it be maniac dictators or the democratically elected with favors to repay, it is always about snouts in the public trough and Mr Common Man that eventually foots the bill for these parasites.

    Last time I was emotional about politics was 30 years ago, when it dawned on me that it really didn’t matter and I haven’t voted since.

    Politicians only do what short term action is needed to get re-elected without any care for the future, as lucrative board positions and public funded benefits await them. Unfortunately many of the voting public only vote for what favors will be tossed their way, they are mostly incapable of objective thought and rely on the media to provide their opinions for them.

    Hence we see inane nonsense like “Change we can believe in” actually being swallowed by the ignorant masses as they cry in joy as their candidate takes his turn to disappoint and sink the country into further ruin as the elite profit. Even sadder perhaps are the Thai forums where farangs fight about which useless corrupt government here is better. Oops, sorry for the rant.

  6. 6 whoopla 27 November 2009 at 7:47 pm

    TC maybe you should make an allegorical chart that measures the rise and fall of the Thai face whenever they remove their heads from the ostrich hole?

  7. 7 antipadshist 28 November 2009 at 10:42 pm

    TC and others

    may I invite your attention to 2 curious pieces of local Thai news (heard / watched on TV, as I recall Nation channel)

    1) Gold Hoarding by traders

    lately there has been a lot of talks on gold. so, in one of programs there was an interview taken from gold traders (well, not a big secret that practically all of them are ethnic chinese). and first several of them said they are going to close their shops due to higher and higher risk of being robbed. then net day there was another program where it was mentioned that there are about 6000 gold shops (outlets?) in Thailand, and apparently many of them are gonna be shut down – only some 1000 shops will remain. πŸ˜‰

    [my comment: these guys are SLY and shrewd ! they DO KNOW what’s coming – HUGE sky-rocketing gold price hike, and thus they simply have ALREADY decided NOT to sell their gold now, but wait till a better days – aka BETTER PRICES ! :)]

    2) profits from Debts

    gov. has started a campaign, highly advertised on TV, inviting people to sign up for the new scheme (or rather a scam?) which is allegedly aimed to “help” them to pay off their debts to all the loan sharks ! this scheme is ONLY for those who borrowed “outside the system” – in other words, not from all those official “legal” companies (as Big Brother, easy Money, Citi etc etc) – but from private lenders (aka “loan sharks”) – mostly because huge number of people are not considered eligible for taking official loans, so they borrow from those who eagerly overlooks all such legal formalities.

    wow! what a brilliant idea, huh? taking into consideration that A LARGE number of people are ALREADY in debts (and many are being killed for that regularly) and many more continue to borrow.

    so, in other words, gov. has figured it out – that it is VERY PROFITABLE to tap into that GIGANTIC “underwater part” of the iceberg – all the unofficial/ illegal loans ! why, buying of DEBTS has ALWAYS been a “daily bread” for banksters, as that saying goes (now it is my favorite): “Money is Debt; Debt is Money”.

    imagine – even MINIMAL (and that’s what they use to persuade the naive public – low percentage) interest percentage from those “helping loans” would be a VERY yummy morsel for all those banks !

    by the way, the rumour is – that the present Abhisit’s government didn’t actually “discover the America” by inventing this whole idea – but themselves merely “borrowed” it from … old buddy Thaksin ! πŸ˜€ (who reportedly has been trying to adopt this plan several years ago)

    oh, and perhaps worth to add another thing, a real fact told to me by one friend, who was told by his parents upcountry : RICE prices are not simply rising, but apparently brokers/ traders/ middlemen now are hoarding it. people came to buy rice and were told by trader : “I am not going to sell now, because price will rise very soon – so, come back in Jan-Feb and you can buy then for those NEW prices”.

    cool, huh ? πŸ˜‰

    so, the conclusion is: those who hold their finger on the pulse of REAL business (as gold and food traders and all sorts of other middlemen and parasitic elements) -they ALREADY DO KNOW that pretty soon something BIG is coming. that is why they employ good old trick of all the speculators: they HOLD (= hoard) their goods, waiting for SURE much higher profits !

    “welcome to the desert of REAL” (Morpheus to Neo)

  8. 8 ThaiCrisis 29 November 2009 at 3:23 am

    Desert of scarcity.
    Yep.

  9. 9 Bob 29 November 2009 at 10:19 am

    The rice and gold traders don’t know anything, they might just THINK they know something, but in reality they are just greedy retailers.
    If your rice and gold hoaring statements are true, the market will just over-react for a short while and then fall back to normal, especially for local rice, it is damn hard to store for more than a few month.
    They sky is not falling, so come out and have a beer with the rest of us!

  10. 10 antipadshist 30 November 2009 at 11:35 am

    Bob,

    well, that’s funny that you think these are “my statements” and are considering whether they are true or not. because actually these are facts.

    yeah, gold traders did not say it themselves (that they are hoarding gold) – that’s my understanding and I’ve mentioned it. however the rice trader said it plainly.

    now about whether prices will “fall back to normal” – that is open for opinions of course. however another fact is: USD is overvalued already (in fact, quite for a while, min 1-2 years), and there is already consistent effort to devalue it. and since in this globalistic world till now most of countries are still dependent on $ in their trade (as I recall was mentioned that Thailand for example has 70% chunk of its income coming from export) – naturally all the local currencies are also being DEVALUED πŸ˜‰ – thus the subject of this post by TC (“competitive devaluation“)

    so, when local currency exchange rate is being artificially kept on a steady “fixed” rate (towards $) while all the fellas in banks and big companies as CP (major trader in agri products) DO KNOW that local money ARE being devalued – then how to compensate that? naturally – by increasing the prices on everything.

    that is pretty evident in daily life, not requires guesses and statements.

    so, will all those prices “fall back to normal” ? πŸ˜‰
    aha, yeah – sure !
    especially taking into consideration that according to increasing number of opinions and observers – USD is gonna drop so much eventually (coz Fed can’t simply keep printing it without its loss of value, while at the same time all the debt grows) – what will happen to all the other local currencies, as Thai Baht ?

    therefore – yeah, let’s enjoy a beer while it is still cheap!
    sky falling – no, it is sunny and shiny and blue. oh, and plenty of “green shoots” all around ! πŸ˜€

    meanwhile, all those Thai gold traders continue closing their shops, and rice traders – to hold their goods …
    coz they do know – now sky is not falling (YET), but better not to wait till it starts to fall.

  11. 11 Bob 5 December 2009 at 4:40 pm

    antipasta,
    I guess these “smart” hoarding gold traders wished they had stayed open a little longer and sold before gold dropped $50…….


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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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