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Thread: TFH crowd - the Thai Central Bank just started the crash of 2007

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    Default TFH crowd - the Thai Central Bank just started the crash of 2007

    TFH = 'Tin Foil Hat' crowd. The Thai CB action was to establish capital controls which will soon prevent 'foreign' investors from freely moving their 'hot money' in and out of Thailand (which includes proceeds from sales of Thai stocks). Arguably, this is a very good illustration of the 'law of unintended consequences' coming into play when a gov't changes economic policy in order to supposedly help domestic industries.

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    Default Re: TFH crowd - the Thai Central Bank just started the crash of 2007

    The Thai's certainly were surprised by the 15% single day crash of their stock market ... and abruptly did an 'about face' on their new currency transfer laws ... however, their stock market didn't bounce all the way back ! A poster on a 'professional' investors' BBS summed up the situation well ...
    -------------------------------------------------------------------------------------------


    (snip)""There must be some way out of here," said the joker to the thief,
    "There's too much confusion, I can't get no relief.
    [Central Banksters], they drink my wine, [PigMen] dig my earth,
    None of them along the line know what any of it is worth."

    Is it so wrong for Thailand to want out of the financial suicide? Consider their motivation for the enacted - and quickly revoked - currency controls.

    Thailand Reaps Hot Money Fury -->

    The Thai authorities' flip-flop shows the level of desperation with a world awash with money.

    Policy makers in emerging markets can see the risks to the stability of their financial systems from a surfeit of liquidity, but they can't do a thing to regulate money supply at its source.

    If these countries give the slightest indication that their appetite for global funds is limited, and so only more long-term money is preferred, they are told they can't pick and choose.

    It's either all or nothing.

    That's the message that yesterday's 15 percent decline in stocks gave to the Thai authorities, who then had to back down.

    Clearly, the Bank of Thailand hadn't anticipated the ferocity of the stock-market reaction to its new rules.
    ...
    Consider the overwhelming challenge for the Bank of Thailand in controlling the growth of domestic money supply in the face of ever-increasing sums of incoming capital.

    From May to October this year, the expansion in the monetary base -- currency in circulation and bank reserves -- remained restricted at about half a percent even as net foreign assets in the banking system grew 6.5 percent.

    Central bank Governor Tarisa Watanagase couldn't possibly have kept her foot on the money brakes forever.

    One option was to let the currency keep rising.

    That would have eventually shut down exports, the only economic engine that's still firing.

    Or, the authorities could let the monetary base expand to a point where they lost control over inflation....
    ---
    Most of the articles I'm reading are portraying Thailands fumbled effort at currency control as some sign of incompetence. But is that really the best way to characterize it? In the current system, hot money with ZERO real value can - and does - rape and pillage the world at will.

    Thailand has apparently been exercising extraordinary discipline in issuance of new fiat. Only 1/2% debasement vs. 10% in most of the "first" world, vs. 15% in UK, 18% in India, and at least 20% in China. Remarkable. Admirable, really, the restraint exercised by the Thai government - they could have created billions out of nothing and spent the billions on "public works" or graft ... or maybe an invasion of Iraq. But, no, they didn't take that cheating path. They exercised discipline. And in the perverted world of "modern finance" any country which fails to keep up with the prevailing rate of debasement quickly finds that its citizens are earning more real money ... and that the industry is all being shipped off to a more debased country.

    Question for the board. Can you think of "some way out of here"? How can a single country NOT inflate and yet keep its industrial base?

    This event in Thailand really showcases how unsustainable "free trade" with fiat/captive money really is. How far can the world go with a system which awards industry to the country which is most willing to commit monetary fraud upon its own people? How can a moral country go along with this system? How can a concerned country opt out of this system?

    "There must be some way out of here"(snip)

    ----------------------------------------------------------------------------------------------

    a point to be taken from the Thai incident is that ANY country who is dependent on investment money coming from foreigners (which the USA is to the tune of an additional 3 billion dollars per day, as well as total equity ownership now approaching 50%) is at risk of severe financial disruption if that country's govt's economic policies change in a way which will negatively affect foreigners' return on that investment.

    Unfortunately, for any country that does not have a 'self-contained' economy i.e. capital, production facilities, consumption funded by profits/paychecks from those production facilities, savings etc. - something that Thailand has never had and the USA arguably hasn't had for at least 25 years - their gov't lacks the jurisdiction to control more than the 'domestic' portion of their economy. As the Thai incident just illustrated, the 'global economy' aspects which are beyond the control of the gov't have the option to simply 'pick up their marbles and play somewhere else' , with devastating results.

    The 'tin foil hat' crowd would say that the author's choice of a Jimi Hendrix quote was valid or even prescient at the time the lyrics were written ... but today an equally famous quote from 'Ren and Stimpy' is more appropriate ... "the book says --- Were DOOMED !#@ "
    ~
    Last edited by Melonie; 12-20-2006 at 04:08 AM.

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