Economics

[Gaybutton]

I don't pretend to know anything at all about economics. I really don't. I'm posting the way I see it in hopes that someone else who does understand economics will point out where I'm mistaken in the way I see it and clarify the situation as it truly is.

 

For quite some time the exchange rate was hovering around 31 to 32 baht per US dollar. Once the political crisis began in Thailand a rapid drop in the baht's value began to occur until the exchange rate was getting close to 35 baht per dollar. As the turmoil continued in Thailand it was expected that the baht would drop even further.

 

Then came more economic troubles in the USA, so far culminating with the collapse of Lehman Brothers. Stocks plunged in the USA, but right along with it stocks have also plunged in Thailand, to the lowest point since January 2007, with Thai banking stocks taking the biggest hit.

 

In the meantime, the controversy over who will be Thailand's next Prime Minister still rages. The PAD protests continue and show no signs of slowing down. A second arrest warrant has been issued against Thaksin. Cambodia is calling for Thailand to hand over chairmanship of ASEAN to either Singapore of Vietnam because of the political turmoil. The Asian Development Bank is predicting a slowdown of economics throughout all of Asia that will last at least two years.

 

In other words, Thailand is in Chaos both politically and economically, and the USA is in much the same boat.

 

What's going to end up happening to the exchange rate as a result of all this? For the time being it all seems to be just about status quo. The value of the US dollar is weakening, but so is the value of the Thai baht, almost concurrently with each other. The exchange rate at the time of this post still hovers right around 34 baht to the US dollar (34.06 at this moment).

 

Is it going to continue to be status quo? Will the US dollar weaken against the baht? Will the baht weaken against the US dollar?

 

Obviously I'm hoping the baht will weaken against the dollar, but for now it's just a hope. I don't have the economic knowledge to predict what will happen next, so I'm wondering what you think is going to happen.

[Guest fountainhall]

I love it when pundits on the TV financial channels keep posing interesting observations: "Have we reached bottom?" "Is the bottom in sight?" "Perhaps this is a bottom we can build on." Like most readers, I can recommend dozens of places in Bangkok and Pattaya where bottoms are regularly within reach.

 

Seiously though, I am a serial mis-reader of economic events and have lost a considerable amount of money over the years trying to outguess markets. But when Alan Greenspan and others are calling this the worst economic disaster of their (long) lifetimes, it does make me really nervous. In such circumstances, I don't think anyone can predict what will happen - or when. In past crises, the Baht has weakened against the US$ and like GB I hope it will do so again. With foreigners piling out of the stockmarket and repatriating funds, there ought to be a significant weakening. But there seem to be no rules in this crisis - and no end. I await others observations with interest.

[Guest slackersam]

I suspect that the dollar will become stronger over the next few weeks. Even with the Lehman stuff on Monday the dollar didn't take a huge hit and I don't think that another shock will happen soon. At this point the Lehman stuff is already built into the market.

 

The good news for the dollar is that while shit is going on in America, the Euro and Asian markets are also taking a hit, so there is no reason to pull money out of dollar securities and put them elsewhere.

 

If anything I think the dollar has the advantage at this point - because most of the bad shit in the states has already happened, while the Euro and Asian economies seem to be lagging about nine months behind on the recession wave - in other words the US will start to stabalize but the repercussions will hit Europe and Asia and their banks and securities firms will start falling, throwing money into dollar securities as people figure that of all the economies the US is the safest in the long term.

[fedssocr]

A problem for the dollar is that all of this bailout money has to come from somewhere. And that "somewhere" is largely thin air. So, putting that much more money in circulation drives down the value of all the rest of it.

 

This latest scheme to have the taxpayers buy all of this worthless debt is probably just prolonging the inevitable. I think the long-term prospects for the dollar are not so good. But then again the whole world economy is going to be slowing down so maybe it is all just relative.

 

I plan to enjoy this year's vacation to SE Asia as much as I can because it could very well be the last one for a while.

[Guest slackersam]

But if all the other world economies also have to manufacture money out of thin air, won't it all balance out in the end?

 

Money is theory.