Calls grow louder for action on baht

[Old Hippie]

OK, so it has been a week+ now...has the Bhat weakened...?

[chelseafan]

So where is this crash so many said would happen ala 1997? Is the Bht backed up, inflated for national pride? or is it really that strong? I have read business is pulling out, seeking cheaper labor and safer/more stable governments...so which is it? backed up? or just a strong self sufficent currency? I know th USD sucks, so does the Euro and the Pound etc...why is Thailand doing so well...?

 

Whilst there is pressure on exports in Thailand there is still strong demand for its products. Rice, of which I believe Thailand is the largest exporter, is a higly sought after commondity and with Russia curtailing their exports and India suffering poorer than expected harvests, buyers are having to pay through the nose for it. Poultry is in the same position, I can buy poultry much cheaper elsewhere but I wouldnt get the same consistant quality than I would outside Europe.

I believe that over 80% of exports are traded in dollars and with the greenback so weak (comparitively) its leading to a inflated strong baht.

Of course these are only some of the reasons why their economy is doing so well and I do dream of the days of 80baht to the pound.

 

 

 

[ThaiHome]

You are correct in that there has been continued demand for Thailand’s exports despite the rising baht increasing the cost, but the main focus of that is not agriculture but the manufacturing that lead Thailand’s exports. Agriculture exports are about USD 18 billion, manufacturing is about 130 billion. Of the manufacturing, computer parts alone equal agricultural at some 18 billion, with the auto industry close at about 12 billion.

 

 

TH

[Bangkoktraveler]

I bought tile for our house in Arizona and was surprised the tiles were made in Bangkok. It has been 4 years now and we have had not one problem with the tiles. Very good product.

[Flashermac]

The fellow who owns the tile company - at least the American end of it - is the honorary Thai consul in Birmingham, Alabama. (Good place to get a visa without much trouble too.)

 

 

[cavanami]

So you do not understand gold being up 400% and the dollar being in the toilet....Ok' date=' whatever.[/quote']

It is just that one thing has nothing to do with the other, yet you fail to grasp that concept.

 

To have a modern economy, a fiat money which can be inflated and deflated in inverse to the business cycle is necessary. The gold standard was a primary reason for why the Great Depression resulted in such a collapse of business activity between 1930-1933 -- the gold standard prevented the Federal Reserve from simply printing the fiat money needed in order to fill in the hole of all the money that disappeared due to the stock market crash and resulting contraction of the money supply.

 

This caused deflation, which caused people to default on their debts, which caused banks to collapse, which caused deflation (repeat again & again) until most of the country devolved to a barter economy.

 

This is incredibly inefficient at fostering business activity. A modern economy simply has too many intermediaries for barter to be an adequate method for handling the incredible series of trades needed in order to produce even the simple computer you're reading this on. It is the whole reason the Communist system collapsed, because it turns out that running an economy with currency via the mechanism of the market simply works better than barter.

 

But this only works if the currency has a reasonably constant value, slightly declining in value every year in order to keep it available for use rather than hiding under a mattress creating no economic activity. Gold simply doesn't serve that purpose well if you have fractional reserve lending, thus why it's not used as the primary token of trade in any modern economy today -- NOT because of some secret conspiracy by Jewish bankers yada yada yada. Simply because it DOESN'T WORK.

 

...and why did the "green backs" work so well for Pres. Lincoln?

 

No conspiracy theory required as the facts are readily available.

 

Please check the book, The Creature from Jekyll Island. Lots of FACTS, DATES, etc.

Check this:

 

1. Why was there a Great Crash in 1929?

 

Historians are fairly much agreed why the Wall Street Crash of 1929 happened.

 

1. Wall Street over-heated:

 

â— Between 1924-29 the value of shares rose 5 times.

 

â— Share prices rose way beyond what the firms they were shares were worth; only speculation kept up the over-inflated prices.

 

2. Speculation:

 

â— Many people became speculators - 600,000 by 1929.

 

â— Many people were buying shares 'on the margin' (borrowing 90% of the share value to buy the shares, hoping to pay back the loan with the profit they made on the sale). American speculators borrowed $9bn for speculating in 1929.

 

â— Some firms which were not sound investments floated shares (e.g. one was set up to develop a South American mine which did not exist), but people still bought them, because they expected to make a profit in the bull market.

 

3. Corruption - the Senate Committee set up to investigate the Great Crash found that there was a corruption and 'insider-trading' between the banks and the brokers.

 

4. Panic:

 

â— There were losses of confidence in March and September (when the economist Roger Babson forecast a crash), but the banks papered over the cracks by mass-buying of shares to help the market.

 

â— On Thursday 24th October 1929, nearly 13 million shares were sold in a panic, and prices crashed.

 

â— The banks tried to shore up the market again, but on Monday there were heavy selling; the banks realised it was hopeless and stopped buying shares.

 

â— Speculators panicked at the thought of being stuck with huge loans and worthless shares. On Tuesday 29th October the market slumped again, when 16 million shares were sold.

 

2. Why was there a Great Depression in the 1930s?

 

Many textbooks simply link the Great Crash and the Great Depression together - what caused the Great Crash is assumed to have caused the Great Depression which followed it.

 

Actually there was no reason why a stock market crash need have caused the Depression, so economists have tried to find reasons why the Crash slid into Depression. Their explanations are VERY complicated and theoretical, but some of their main ideas (MUCH simplified) are:

 

1. Explanations at the time

 

a. Basically, at the time, people hadn’t a clue what had caused the depression. Herbert Hoover argued that it was the European financial collapse of 1931 that turned it into the Depression; (so it was Europe’s fault, not America’s).

 

b. The explanation of British economist John Maynard Keynes in 1936, who wrote General Theory of Employment, Interest, and Money, was that the cause was a DROP IN SPENDING, caused by people saving too much. This was certainly what Roosevelt believed, and his answer was simply to pump money into the US economy; increased spending, however, did not cure the Depression.

 

2. Great Crash

 

a. You will often hear it said that the Great Crash didn’t cause the Great Depression. There were only 1.5 million shareholders, and only 600,000 speculators – so why should their misfortune cause a Depression in a country of 123 million?

 

b. However, you will remember that much of the bull market had been financed by loans – in 1929 brokers’ loans amounted to $8.5 billion. Much of this money had been advanced by the banks, and by the big companies (in 1929, 200 companies controlled half of US industry). So when the speculators crashed, many banks went bankrupt, and half of US businesses was damaged, so the whole US economy suffered.

 

 

 

3. The Fed

 

a. (‘The Fed’ was the US Federal Reserve – the American ‘Bank of England’.)

 

In the 1940s, Milton Friedman came up with a theory about the cause called ‘monetarism’ – he believed that price changes were caused by a reduction of money in the economy. He therefore blamed the US Federal Reserve which in 1931 raised interest rates – which, he claimed, led to a reduction in the money supply. His famous saying was that ‘the Fed put the Great in the Great Depression’.

 

b. This was made worse, Friedman added, when the banks began to go bankrupt after 1931, and because the amount of money in the economy was linked to the Gold Standard (meaning that the government would only issue as much money as it could redeem in gold).

 

 

 

4. Tariffs

 

a. In 1930, fearing for the US economy, the government passed the Smoot-Hawley Tariff – a new, even heavier tariff law.

 

b. Sixty countries passed retaliatory tariffs in response and world trade slumped. This damaged US industry, especially agriculture.

 

 

 

5. Maldistribution of wealth

 

a. Nowadays, historians think that a major cause of the depression was the inequality of wealth in America. There were some extremely rich people, and huge numbers of extremely poor people – the top 5% owned a third of the wealth, while 40 per cent of the population were living in poverty.

 

b. It wasn’t that there was too little money, but it wasn’t in the hands of the people who would spend it. Consequently, Americans produced too much and bought too little, and prices plummeted.

 

 

 

6. Weaknesses in the economy

 

You will remember that Agriculture, and the Coal, Iron and Textiles industries were all experiencing problems in the 1920s. When the Depression started, they were not strong enough to cope, and collapsed quickly.

 

7. Cycle of Depression

 

As more banks and companies failed, and people were put out of work, they had less to spend, and so more companies went bankrupt and made their workers unemployed etc. Once the Depression had taken hold, it simply spiralled down worse and worse.

 

http://www.johndclare.net/America6.htm

[cavanami]

Cav, if a weak dollar concerns you that much, you could always move back to the U.S.

I'm in Narita airport as I type!

Back to the USA to get all the things fixed....yeah, Mr. Stupid here will fix it

[Old Hippie]

"...1. Wall Street over-heated:

 

â— Between 1924-29 the value of shares rose 5 times.

 

â— Share prices rose way beyond what the firms they were shares were worth; only speculation kept up the over-inflated prices.

 

2. Speculation:

 

â— Many people became speculators - 600,000 by 1929.

 

â— Many people were buying shares 'on the margin' (borrowing 90% of the share value to buy the shares, hoping to pay back the loan with the profit they made on the sale). American speculators borrowed $9bn for speculating in 1929.

..."

 

 

Sounds a lot like theCaLIFORNIA REAL ESTATE MARKET, IF YOU ADD A LOT OF FOREIGN INVESTORS...

[LizardKing]

LOL,. you say it yourself, in #3, the Uncle Milty quote. Had there been a real monetary system in place, moves could have been made to negate the bank runs, inflation, etc. #5 also proves the point: a good money manager (like a Ben Bernake) can fix some of that with monetary policy.

 

Oh, and there were plenty of crashes with the gold system too. You mentioned Lincoln's time. Well, how about the 1873 recession? A bad one, that.

 

Or the fact that since the mid-1800s, when reliable economic data first appeared, the U.S. has suffered 32 recessions, but the 22 recessions prior to the end of the gold standard lasted an average of 20 months. The 10 recessions since have averaged half that.

 

Why? Because the Federal Reserve has been able to provide countercyclical stimulus  that is, pumping money into the economy when everyone else is pinching pennies (as Obama just did last year). That could not be done under the gold standard.

[ThaiHome]

The 1987 market crash was just as bad as the 1929, but the outcome couldn't have been any different. The intervention of the Federal Reserve is one of the main reasons. If we had still been on a gold standard monetary system, they would not have been able to do this.

TH

 

A Brief History of the 1987 Stock Market Crash with a Discussion of the Federal Reserve Response

Mark Carlson 2007-13

Link

 

Response of the Federal Reserve

In an effort to restrain the declines in ï¬Ânancial markets and to prevent any spillovers to the real economy, the Federal Reserve acted to provide liquidity to the ï¬Ânancial system and did so in a public manner that was aimed at supporting market conï¬Âdence. One of the most prominent actions of the Federal Reserve was to issue a statement on Tuesday morning (as noted above) indicating that it would support market liquidity. This statement was referred to by one market participant as “the most calming thing that was said [Tuesday]†(Murray 1987b), and likely contributed to the rebound that morning.

The Federal Reserve followed-up the statement by carrying out open market operations that pushed the federal funds rate down to around 7 percent on Tuesday from over 7.5 percent on Monday (see Figure 5). This was done to “provide signiï¬Âcant liquidity to relieve the turbulence and tension in the wake of the ï¬Ânancial market upheaval†(FOMC transcripts, meeting of Nov. 3, 1987, comments by Peter Sternlight, p. 2). Other short-term interest rates followed the federal funds rate lower thus reducing costs for borrowers. For the next several weeks, the Federal Reserve continued to inject reserves to buoy liquidity in ï¬Ânancial markets. ...