The PM tells us today that a weak Baht is good for exports, which it is and it isn't!

There is no evidence to suggest that a weak baht is good for customs exports and there are several studies by BOT that confirm it is not. But International Tourism is classified as an export within GDP so in this respect yes, a weak baht is good for exports. The problem here is that most people aren't aware of the last part of all of that and think that just because the Baht is weak, the country will sell more goods overseas. But the decision to buy more is almost exclusively dependent on the buying country, not the selling country, or the sellers currency cost factors because export bills are settled in USD.

An overview of where we are, perhaps appropriate at this juncture:

Equities markets are forward views of the how well business will do in the future. The economy on the other hand is rearwards looking since all reported economic data refers to things that have happened in the past.

US equities markets are currently over priced and many, if not most, think a markets correction is under way or at least due. Companies report their earnings during earnings season which is four times each year, this reporting will confirm whether equities are over priced or not - earnings season reporting begins next week! It’s worth noting here that equities markets typically bottom out and begin to turn up, before the economy does.

Bond markets however are also forward looking and focus mainly on what interest rates are likely to be in the future. The bond markets are currently saying, very very loudly, that interest rates will be higher in the future than they are today.

So, when interest rates increase, as the bond markets are saying they will, equities will fall and USD will strengthen….this appears to be the direction we are headed.

There are some added complications: the price of oil is rising and is now far above where it might reasonably be expected to be. Because oil is priced in USD, this makes imported oil very expensive and quickly causes inflation to increase.

A second problem is that the US House has removed its speaker, a rare move by the extreme right. The consequence of this is that a new battle for the speaker role will ensue and little real business will be done in the mean time. It also means that the US government once again runs the very real and very serious risk of being forced to stop paying its bills because of lack of approved budget, this will come about in around one months time. This will impact negatively on the markets, along with all the other bad things that are impacting them negatively.

Meanwhile, Japan has said, enough is enough, we’re tired of the lousy YEN/USD exchange rate and is talking loudly of FOREX market intervention, some believe it may have already begun. The YEN/USD exchange rate is driven mostly by US interest rates and the value of US Treasury Bonds which today is being stressed because of US rate increases and increasing Treasury bill yields.The Japanese currency is important because the Japanese economy is important to global trade, tinker with either and a very important status quo is disrupted.

As can be seen, not all is well down t’mill., where this might lead is very uncertain but a continued strengthening USD (and weakened EM currencies), lowered equities values and increased inflation seem almost certain. Above and beyond those things it looks like waiting to see what breaks and nobody really knows what that might be. If you have a tin foil hat, it might be a good idea to dig it out and keep it handy, just in case.

I had always imagined that a true Northerner would have more nouse than to live in the South in the first place but I suppose there will always be exceptions.

An interesting and informative article in the Post yesterday by a Mr Chartchai Parasuk explaining the growth and dangers of "negative excess lquidity and exploding household debt delinquency."
He feels strongly that the Government should solve these problems sharpish, but unless I missed it does not suggest how.
Does the changers led think-tank here have the answers.?

Regarding NPL's: The latest figure is that 2.84% of consumer loans are NPL but Special Mention loans are around 7%, almost certainly, some percentage of SML's will become NPL's in the future. The more important figure perhaps is that around 35% of all consumer loans are unsecured. From the banks perspective, consumer loans is good business, even after NPL's are taken into account. More importantly, if banks didn't make those loans, where would they earn their income from!

Monopsony, firk me there's another new one. The problem is how do I manoeuvre the bar conversation to a position where I can use it and impress the gits. Something I need to ponder. Currently up in the Nakhon enjoying a quiet night as yesterday I kept forgetting I don't drink anymore.
45 to the £, well it's an ill wind etc and out of our control.