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Thread: 1997 Asian Crisis Redux - Thailand Is Imploding

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    Super Moderator LivinLOS's Avatar
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    1997 Asian Crisis Redux - Thailand Is Imploding

    Worthy of its own thread here I think..

    1997 Asian Crisis Redux - Thailand Is Imploding | Zero Hedge


    "There's no near-term resolution in sight," warns TCW Group's David Loevinger, as "Thailand has entered an extended period of political instability." This uncertainty has led to foreigners abandoning the nation's stock market in record size - and collapsing the Thai Baht at the same time. Why should US investors be worried? Thailand was the catalyst that started the 1997 Asian crisis, broke LTCM, and instigated the most epic experiments in central bank liquidity provision on record. With the Fed Tapering, both Indonesia and Thailand (and Turkey) are already seeing major currency collapses but of course, as long as US equities rise, no one cares (which is exactly what they said last time)...



    Bloomberg's Chart of the Day shows that the baht has plunged 5.1 percent since the end of October to a three-year low as international investors pulled a net $2.75 billion out of equities, the worst outflow in at least 14 years.

    Investors are dumping Thai assets as two-month-old protests against Prime Minister Yingluck Shinawatra intensify, threatening to deepen a slowdown in the second-largest southeast Asian economy. Opposition parties are trying to topple Yingluck after she pushed for a bill that would provide amnesty for her brother, Thaksin, who was ousted as premier in a 2006 coup and has lived in self-imposed exile overseas.


    Yingluck dissolved parliament on Dec. 9, a move that triggered new elections set for February, in a bid to ease tensions. The country’s election commission warned yesterday that the vote could wind up stoking more violence after protesters tried to storm a Bangkok arena where candidates were registering.

    And as a reminder... what happened in the 1997 crisis...

    The Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.

    The crisis started in Thailand with the financial collapse of the Thai baht after the Thai government was forced to float the baht due to lack of foreign currency to support its fixed exchange rate, cutting its peg to the US$, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.

    Indonesia, South Korea and Thailand were the countries most affected by the crisis.

    ...

    The causes of the debacle are many and disputed. Thailand's economy developed into an economic bubble fueled by hot money. More and more was required as the size of the bubble grew. The same type of situation happened in Malaysia, and Indonesia, which had the added complication of what was called "crony capitalism". The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only, not particularly the best suited or most efficient, but those closest to the centers of power.

    At the time of the mid-1990s, Thailand, Indonesia and South Korea had large private current account deficits and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.

    In the mid-1990s, a series of external shocks began to change the economic environment – the devaluation of the Chinese renminbi and the Japanese yen, raising of US interest rates which led to a strong U.S. dollar, the sharp decline in semiconductor prices; adversely affected their growth.

    ...

    Many economists believe that the Asian crisis was created not by market psychology or technology, but by policies that distorted incentives within the lender–borrower relationship. The resulting large quantities of credit that became available generated a highly leveraged economic climate, and pushed up asset prices to an unsustainable level


    Sound familiar?
    Last edited by LivinLOS; 28th December 2013 at 10:14.

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    Super Moderator LivinLOS's Avatar
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    Yeah tho the following just made me smile.

    Sum Ting Wong

    Baht Tu Lo

    Ho Le Fuk
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    It strikes me as a special kind of madness, like watching a very slow motion train wreck that everybody has a chance to do something about but nobody does.

    I saw an article online yesterday with an interview with the head of the army, wish I could find the link, and he says that the army stands ready and the word 'coup' was used several times. It's as if the see a military coup as a legitimate political tool.

    It's hard to see what some of them want, are they seriously saying that they want an end to democracy and a return to an absolute monarchy? That surely can only be because they know that Yingluck will win the election in February. What happens when Elvis leaves the building doesn't bear thinking about.

    Any guesses as to where the currency is heading? And is there any likelihood that there will be moves to stop foreigners shifting their currency like there were in Europe? I can imagine foreign investors running for the hills now, Thailand must be making themselves very unattractive.

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    K2
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    Quote Originally Posted by LivinLOS View Post
    ...... pushed up asset prices to an unsustainable level[/B][/INDENT][/INDENT]


    Sound familiar?
    Oooh .... and you've never been one to extoll (certain [PM's, Bitcoin]) asset prices push up unsustainably :P

    No complaints if Thailand does implode ... certainly needs to find a way of pushing through the current impasse.
    Its My Life .....!

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    Senior Member billpay's Avatar
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    1997 Asian Crisis Redux - Thailand Is Imploding



    Jeez, you are really the voice of Doom
    The sooner you fall behind, the more time you'll have to catch up.

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    Quote Originally Posted by Steve@thaib View Post
    I saw an article online yesterday with an interview with the head of the army, wish I could find the link, and he says that the army stands ready and the word 'coup' was used several times. It's as if the see a military coup as a legitimate political tool.
    Coup possible if situation demands it, Prayuth says | Bangkok Post: news

    Quote Originally Posted by Steve@thaib View Post
    Any guesses as to where the currency is heading?
    Certainly not up in the foreseeable future.

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    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by K2 View Post
    Oooh .... and you've never been one to extoll (certain [PM's, Bitcoin]) asset prices push up unsustainably :P
    But both of which are the opposite of debt driven.

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    Really interesting to see what is going on. I don't pretend to understand the Thai mindset (despite trying... lol). I hope it ends well and the Thai people have confidence in the outcome.

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    K2
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    Quote Originally Posted by LivinLOS View Post
    But both of which are the opposite of debt driven.
    Yeah I know ... its year end ... just a little dig.

    For all these farangs wishing Thailand 'ends well' ... why?? Maximal chaos and Baht collapse is in our interest ... not meaning to be mercenary about things, just that the perfect storm of multicoloured chaos/impasse fused with Elvis leaving the building could well create one of the most unique opportunities we [farang] will have in decades ... be prepared!
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    Its My Life .....!

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    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by K2 View Post
    Yeah I know ... its year end ... just a little dig.

    For all these farangs wishing Thailand 'ends well' ... why?? Maximal chaos and Baht collapse is in our interest ...
    Depends on your level of commitment and or investment already to the place surely..

    No one wants to see this place go dictatorship and madness.. Not good for them or us in anything but the shortest term.

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    Senior Member kaptainrob's Avatar
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    ^ I agree, interesting times ahead.

    First full week in January might see angry Isaan farmers join BKK protests. Suthep has set the stage rather shrewdly as Yingluck's Caretakre Government is unable to pay Rice Farmers (via Ag. Bank and the Mills) for paddy recently delivered. (In fact, late feb looks like the earliest possible payday). Add to the fact most city workers (children, cousins etc) will be talking of little else and in a sense, educating traditional Thaksin supporters about the current state of things.

    Isaan (and Central) farmers are furious at the delay and having to borrow from family and loan-sharks to get by, many well behind the 8-ball already due to increased cost of living and farm production. Harvesting costs have been paid from cash reserves and there's little left for NY celebrations, traditionally the biggest holiday spending spree and party-time in Isaan.

    City workers aren't happy as they've seen costs increase under Yingluck's numerous 'incentives' and most are now worse off than before the minimum wage rise. Easy credit, new cars and homes have added to the burden ... we farangs saw this coming as we've been there before, decades ago in some cases. But young city-dwelling Thai's are NOT happy, jungle-drums are beating.

    This will not end peacefully without a coup, IMHO.
    Cheers, Rob.

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    Quote Originally Posted by kaptainrob View Post

    This will not end peacefully without a coup, IMHO.
    I tend to agree now, and what happens afterwards will be very interesting. If there was an election tomorrow it seems that Yingluck would be re-elected, so the army replace her now and hand over to who? And then of course, what happens when she wins the election after that?

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    The worms are turning.
    Hell hath no fury like an unpaid Thai ...
    Sipping from the Fountain of Youth that is Thailand.

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    Senior Member marc26's Avatar
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    Quote Originally Posted by K2 View Post
    Yeah I know ... its year end ... just a little dig.

    For all these farangs wishing Thailand 'ends well' ... why?? Maximal chaos and Baht collapse is in our interest ... not meaning to be mercenary about things, just that the perfect storm of multicoloured chaos/impasse fused with Elvis leaving the building could well create one of the most unique opportunities we [farang] will have in decades ... be prepared!
    but don't people profess to be in Thailand because they love the people? and then they are hoping all these bad things for the country for their own good
    i think it is pretty horseshit way to think, IMO( not directed at you K, i know you looking at a macro view)
    i get a hard time because i don't genuflect at the alter of Thailand but we still have family interest there, so i'd much prefer a weak dollar vs baht to the detriment of myself and a better life for them

    and i've been hearing/reading this a ton, people salivating at a better rate so their Singha/Chang is cheaper all the while their professed loved one's country is about to be torn about and making it tougher for their "family"
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    Senior Member sundancekid's Avatar
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    Right. Still a number of people living here who may not be as positively affected by a Thai Baht crash. I’ve diversified a bit, but overall I think I’d be losing from it… Need to think about that now... Not to mention the effects on the Thais.

    Still not sure whether this is a unique political issue to Thailand, or potentially a more regional economic crisis akin to the 1997 crash. Certain conditions are different from the 90s in that the SEA countries had their currencies pegged to the dollar. Which I would view as similar to Russia and Argentina around the same time, and the Euro countries today with a comparable constraint.

    Would think China is the first to face problems, but really noidea at this moment. And the possible domino effects are even harder to foresee…

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    Senior Member marc26's Avatar
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    Quote Originally Posted by sundancekid View Post
    Right. Still a number of people living here who may not be as positively affected by a Thai Baht crash. I’ve diversified a bit, but overall I think I’d be losing from it… Need to think about that now... Not to mention the effects on the Thais.

    Still not sure whether this is a unique political issue to Thailand, or potentially a more regional economic crisis akin to the 1997 crash. Certain conditions are different from the 90s in that the SEA countries had their currencies pegged to the dollar. Which I would view as similar to Russia and Argentina around the same time, and the Euro countries today with a comparable constraint.

    Would think China is the first to face problems, but really noidea at this moment. And the possible domino effects are even harder to foresee…
    oh, i see absolute no reverberation throughout SEA, it will be Thailand isolated

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    Senior Member Thin White Duke's Avatar
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    Yeah coz you are married Paulos.....and also just a little jaded about Thailand in general.

    For selfish reasons a foreigner wouldn't want things to be going so great there.

    But on a micro level that would in fact help a person to take 'care' of their extended Thai family no?

    Don't know about saving the whole country tho'

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    Senior Member Pablo's Avatar
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    I feel strongly about it, both ways.
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    Senior Member marc26's Avatar
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    Quote Originally Posted by Thin White Duke View Post
    Yeah coz you are married Paulos.....and also just a little jaded about Thailand in general.

    For selfish reasons a foreigner wouldn't want things to be going so great there.

    But on a micro level that would in fact help a person to take 'care' of their extended Thai family no?

    Don't know about saving the whole country tho'
    how am i jaded about Thailand? because i don't drink the cool aid? i am not jaded at all, i just state facts that people are either blind to or choose to ignore

    but what would that have to do with me feeling it is a bit crap that people are outwardly rooting for the baht to collapse
    sure, they'd be able to help their families, but what about all the other Thai people they don't know?
    you can't profess your love for all things Thai and then sit there and hope that the country goes to shit so you profit from it. and i have seen plenty people sitting by cheering for the baht to weaken in all this
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    Senior Member Thin White Duke's Avatar
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    For a foreigner travelling it is a party destination with all the bell's and whistles.

    Of course they want it cheaper.

    Crap Paul.......you are just jaded with that scene and now want to appear holier than thou.

    I have never met anyone who just wants to pay more for the sake of an entire country.

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