Guest Post: Thailand: Not Letting A Good Crisis Go To Waste

Tyler Durden's picture

Submitted by Simon Black from Sovereign Man

Thailand: Not Letting A Good Crisis Go To Waste

Parts of Thailand have experienced terrible flooding lately, and much of the country’s production shut down as a result. Thailand makes everything from tire factories to hard disk drive manufacturers to rice… and given the slowdown in the economy, it couldn’t have come at a worse time.

Not to worry, though, the government has a plan to fix it. Let me explain:

Thailand’s central bank is sitting on roughly $212 billion in net foreign reserves right now. That’s up 37% from last year and nearly 80% from 2009. Curiously, it all starts with Ben Bernanke.

When Ben Bernanke conjures trillions of new dollars out of thin air for QEx, that money has to end up somewhere… usually the Treasury Department or banks. (you may recall that banks were able to swap their worthless toxic securities for Bernanke’s worthless dollars– a truly bizarre trade…)

As funds make their way into the banking system, money managers often deploy those new dollars overseas to developing markets where the expected rate of return is much higher than in developed economies.

Thailand is one of the largest economies in Asia and is capable of absorbing large capital flows. Neighboring Laos, for example, only has a $6 billion economy. You can’t move $10 billion into Laos without seriously moving the needle. Conversely, Thailand’s GDP is $247 billion, making it more suitable for large investments.

Even with the size of Thailand economy’s, though, the inflow of foreign funds has pressured the Thai baht. As Thailand is an export-oriented economy, nobody here wants a strong baht.

Thailand’s central bank has aggressively fought the baht’s appreciation. Taking a page from Bernanke’s playbook, the bank has suppressed interest rates below the rate of inflation while simultaneously creating billions of new currency units with which to buy all the new US dollars flowing into the country.

This is how the bank ended up with an 80% surge in foreign reserves from 2009– it simply printed new baht to purchase the newly printed dollars.

Thai people are not fooled by this trickery. Unlike brainwashed westerners who believe in their worthless paper, Thai people know that fiat money is a scam. Even the poorest Thais occasionally buy a few grams of gold with whatever savings they can scrap together on expectations of inflation.

They’ve turned out to be right; prices are rising. All of the new money ends up somewhere, and with interest rates below the rate of inflation, businesses, consumers, and banks all have an incentive to constantly redeploy funds.

The real estate sector has been the net beneficiary of this frenzy. Hell, everyone knows it’s a bubble… the government, the developers, and even all but the most dim-witted customers.

Developers are feverishly building as quickly as possible, sacrificing quality for speed, so that they can finish and collect the customer’s money before the bubble bursts. It’s like watching a live game of musical chairs.

Thailand now finds itself between a rock and a hard place. On one hand, the country is faced with rising inflation and a number of bubbles. On the other, it faces a declining economy. Orders from China, Europe, and the US have slowed, and the domestic economy isn’t developed enough to tighten the slack.

Production shutdowns from the recent flooding certainly haven’t helped.

The government’s solution? Print money and put it directly into people’s pockets by overpaying peasant rice farmers.

Under the government’s new plan, local farmers will receive the equivalent of roughly 40% more than the market price for rice. Anyone who slept through high school economics can tell you that price controls don’t work. This is the stuff that feeds inflation, creates shortages, and misallocates production resources.

Needless to say, there are global implications when one of the world’s biggest producers and exporters goes down the path of inflation.

This is exactly what happens when a government with access to cheap credit meets with an opportunity to launch a populist agenda. As President Obama’s former Chief of Staff Rahm Emanuel said, “You never want a serious crisis to go to waste.”

Thailand’s flooding is a crisis, no doubt. Populist-driven inflation will be an even greater economic crisis. Make no mistake, when inflation comes home to roost in North America, it will be exported from countries like Thailand.

This is an early sign that Mr. Bernanke is about to get some of those dollars back.

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Deadpool's picture

you'd almost think God or mother nature or whomever was really mad at the global economy.

john39's picture

more like really mad at the satanist cabal that is trying to help enslave humanity partially through a global fiat currency scheme.

nope-1004's picture


"We are not printing dollars and current fears of inflation are largely overstated.  Increases in food prices in developed nations is largely a result of the people in those nations having more sophisticated diets."


- 2011 Liar of the Year, Ben Bernanke





Popo's picture

"As Thailand is an export-oriented economy, nobody here wants a strong baht."


I stopped reading there.  Simon is an uneducated, inexperienced idiot.   I thought the gold article about where to find cheap gold coins in HK was the epitomy of stupid -- but Simon is a never-ending surprise. 

redpill's picture

Knock, knock


Who's there?


Strong baht


Strong baht who?


Strong baht that this won't end well hee hee!


slewie the pi-rat's picture

hahaha!  they just printed paper coupons with which to buy the dollars and ended up with:

strong baht, BiCheZ!

Spitzer's picture

A strong currency is a good thing.

Germany has a stonger currency then the US yet it has trade surpluses with China

BigJim's picture

A 'strong' currency (like a 'weak' currency) is good for some people, but bad for others.

deez nutz's picture

Germany hasn't implement "trickle down" theory in their country.   It also has China on a tight leash - China can only export up to 5% of what Germany makes.   

Germany has no clue how trade works.........  their people are enslaved to work where in America you get entitlements like free healthcare and SNAP for participating in globalization.

Sokhmate's picture

God is mad at usury. Aka ether-based money aka making money from money aka interest

BigJim's picture

There's nothing wrong with charging interest on money lent.

There is a problem with money created out of thin air, however.... but the two aren't necessarily the same.

TooBearish's picture

What do u mean price controls dont work ?- Bens levitating bond prices and back stopping the stock market daily with wonderous success

youngman's picture

Hmmmmm..a rice farmer...I can do that...or should I say..I can do will be big in an elephant

papaswamp's picture

Except unfortunately for the Thais....their rice paddies got too much water. Huge crop losses.

"Officials at the Agriculture Ministry said 1.17 million hectares of rice fields might be damaged. Thailand, the world's biggest rice exporter, has about 10.9 million hectares planted with the staple grain.

Another 283,279 hectares of land planted with other crops is also likely to have suffered damage, the ministry said."

Lost about a 10th of their fields...maybe more.

Papasmurf's picture

Ben Bernake will drop rice from helicopters. 

Ahmeexnal's picture

"Let them eat -made in China- melamine rice"

Did you know each individual melamine rice grain has the legent "made in China" engraved on it??

LawsofPhysics's picture

And yet another opportunity for those of us in agriculture in the U.S. 

GeneMarchbanks's picture

'Make no mistake, when inflation comes home to roost in North America, it will be exported from countries like Thailand.'

WHoa Fella! Lets get through this deflation phase and if we survive, I'll worry about Thailand's reserves being 'exported' to North America(wtf?)

kito's picture

DONT EVER question simon black. he knows everything about everything. if he says there will be a massive wave of inflation headed our way because thai peasant farmers are getting overpaid for rice, then it must be true. just the other day, i flew to hong kong to buy some really great gold coins because simon told me prices were soo low. then i went to south africa to do the same. and then i flew back to my new home in chile (simon told me to buy there) and bought some more chilean inflation protection bonds (simons great recommendation). where would we ever be without simon black?!?!?!?!?

Ahmeexnal's picture

Hey Kito, funny how the MSM is deafmute about the civil war going on in Chile.

And Bachelet, Chile's previous dictator, is now siding with the rebels. Funny, it was her who destroyed Chile's economy and as reward she got a post at the UN.

"Never let a good crisis go to waste...indeed".


kito's picture

tis true. nationwide violent student and now indigenous protests/riots have been going on for quite a wihile but ALL is WELL IN CHILE!! that jackass simon never mentions these problems when touting his chilean shitholes for sale.


bank guy in Brussels's picture

Great video on the UK Telegraph link above, from the riots in Chile this week. - Yes it is funny in the context of Simon Black and others touting the Chilean 'paradise'.

On the other hand, to a certain degree - like here in Europe - the vibrant demonstrations, and sometimes borderline rioting, that we have in Europe, are actually a sign of democracy and the much better life we have here, versus the much more repressed United States, where people are much more (and justifiably) frightened of the cops, the police, and America's crooked mafia legal system.

My own experience living on both sides of the Atlantic, has shown me that democracy is not 'voting', which can be a manipulated farce and fraud in many countries. It is people power, people in the streets, which is by its nature untidy, that is the only guarantee of freedom.

Pretty words on paper are not the answer; Americans already have seen their Constitution and Bill of Rights become worthless pieces of paper, as the last President Bush pointed out, with Obama now smirking in devious agreement. The US Constitution is so dead, almost no judge in the US honours those old documents.

The riots in Chile, though, reflect much deeper social problems than we have in much of Europe. Yet the truth about Latin America is that, current growth pains and upheavals aside, it is already a great place in many ways, and perhaps indeed the great continent of opportunity for the future - amid its diversity, there is a real healthy trend of populism and toward the best of Western values, combined with the best opportunity for growth outside of Asia. If I was much younger I might well be headed to some country there.

But much of Europe, Belgium included, still is pretty wonderful, in many ways that most Americans find it hard to understand, partly in virtue of our half-'socialism'. Minimum-wage people in Belgium have a reasonably sweet life in a nice place. Paradise enough for this middle-aged guy.

Simon Black over-sells a bit, and gets hilariously caught doing so, but his main theme and point is right: The Americans should wake up that the grass really is greener outside of the USA. The typical American will need some modest nut to make the move, but any American with 50K liquid is in a position to improve lifestyle radically by getting out of there.

redpill's picture

For some reason it's tough to relate to someone who has no wife, no kids, no home, and apparently no plans for any of the above.

laosuwan's picture

The riots in Chile, though, reflect much deeper social problems than we have in much of Europe.


Are you serious? I was just in france and it is hopeless. it will be completely muslim in 20 years. the riots and car burnings there last two years (do you remember those) makes the namby pamby mommy boy chilean wanna be che, emo protestors look like the Beaver compared to what I saw in the streets of France. in my opinon its inevitable that europe will go down but south america and chile will do well. okay, maybe the government will have to give everyone a free university education instead of medical care but if that is what the emos want, then I guess they will get it. but that is nothing compared to what is happening in europe.

laosuwan's picture

it is true, i am in chile right now and i went to the bolsa to buy 100 peso gold coins like simon said to do. they have five coins for sale in the entire stock exchange of chile. five coins. that's it. they trade at approximately equivilent to 2100 dollars per ounce. he knows everything, just like you say. lol.

kito's picture

no wayyy lao---in chile, the streets are paved in gold!!!

Papasmurf's picture

Who is he, some sort fo Chuck Norris?

Migrated Bird's picture

Thailand has faced the exact same scenario before. Except in that case, it was cheap money coming in from Japan and this time it is US. The last time it id not end very well. Hopefully everyone has learnt the lessons and this time it will be different

Spitzer's picture

It was the exact opposite. They had current account deficits then.

As far as I know, a capital account surplus, whether in Asia in the 90's or the USA in the 2000's comes in the front door of the central bank denominated in a foreign currency and goes out the back door in the local currency. So the US's current account deficits are funded in foreign currency (Yen, RMB, Ruble, Baht , anyone who is buying US debt)but denominated in dollars. Just like SE Asian debt(current account deficit) was funded in mainly dollars and denominated in Baht, Peso , Ringgit ect.

Asian crisis covered here-

defencev's picture

 That is correct but not only that. People, you really need to undersand that SB is an absolute fraud. Who is this jerk after all?

What value has that permanent spewing of nonsense from this uneducated (economically), ignorant, stupid charlatan?

 Thailand has a very special situation where , in essence, for various reasons the country was not able to complete transformation from feudalism to capitalism. In particular, quite comprehensive land reform has been proclaimed in 1974 but never implemented

(it included redistribution with compensation of huge chunks of land from local feudal elite-so-called amat that was totally unreaistic goal under concrete political circumstances). The result of it is huge gap between poor landless peasants (who provide most of sex workers in places like Pattaya so that shits like SB can enjy themselves paying essentially nothing) and ruling country elite. The Thaksin government undertook a substantial effort in narrowing the gap and implementing land reform.As a result, they were overthrown in military coup organized by ruling elite. Two years later new elections gave another victory to Thaksin party but the next two governments were also removed through various machinations involving special courts established by junta. The new recent elections gave another landslide victory to Pro-Thaksin party and his sister Yangluck became first female PM. She essentially reinstated Thaksin economic program which involve stimulus of internal consumption

 and elimination of poverty as immediate goals. The measures include rise of minimal wages, stimulative prices for rice, tax exemptions on new cars and first home mortgages. ALL MEASURES MAKE A LOT OF SENSE and take into consideration global economic slump. Besides, the program involves a number of important infra structure projects in cooperation with neighbours,

important Bangkok projects, further development of tourism. If new government manage to get overwhelming support of population (which is not easy under current economic circumstanses), they will undertake the decisive political reforms (including putting the Army under efficient government control). Thailand has excellent economic fundamentals and only outdated political system prevents the country from quantum economic leap.

 Why, why you allow this f...cking idiot SB to post his absolute shitty garbage over here?

Chicken_Little's picture

defencev, you are a very dangerous person and I hope you don't vote in whatever country you're in. Are you Che Guevara reincarnited? Many of us "farangs" (foreigners) don't come here to exploit the poor Thai kids that get sent here to get money for the family. Does it happen? Chai (yes), but it happens everywhere in a very small percentage of cases. Thailand is much better than most countries.

laosuwan's picture

thailand has no special situation, it is the same corrupt model of fake democracy the rest of se asia enjoys. you make me laugh so hard i cried reading you talk about thaksin and land reform. his idea of reform was building golf courses and tourist attractions in the national parks, thaksin was overthrown because the middle class could not stand him any more after he sold off AIS without paying any taxes at all through fake offshore companies, and he made a move on the military and royal insitutions. it was too much for the people to take. where does this talk of elites and amat come from? it is a strawman argument. it was the middle class that hated thaksin not the elites, whoever they are (name one, I dare you). The elites were very happyt working with Thaksin in the beginning. They are all chinese with fake thai identities busy raping the country and turning the country into a place where the brown worker bees toil to make the white chinese fatter and richer. And for that matter, who is more elite than Thaksin? Family was civil servents who made their money dealing heroin, loansharking and repossessing farmers land in chiang mai then making them into sharecroppers on their own land. Who has their own jet, can give burma an interest free loan to buy his satelites, all paid for by the taxpayer. on and on. if Thaksin and his sailboats are not elite then I dont know who is. And apparantly neither do you. 

by the way, you are insane if you think thailand has excellent fundamentsls. the country is bankrupt, tourism is on the ropes, agriculture has been wiped out by the floods, manufacturing is also under water and the governnment is reducing corporate taxes, raising the salaries of all loyal civil servents, and pushing megaprojects as corrupt as they come. Almost half the SET market cap comes from two companies and they are in trouble. on and on. Thailand is on the edge of a collapse that will make 97 look like the roaring twenties. no one in their right mind would keep their wealth in Thailand including the elites like thaksin who have gotten everything out of the country. why do you think they changed the laws on moving money abroad and making it legal to hold offshore companies_

Let me be the first to tell you that you belong in the same category as simone black.

chindit13's picture


What happens when the King passes?  Ninety-nine percent of the people now alive have only known him, and even absent lese majeste it seems he would still be revered.  There is no bench in the Royalty, at least not one who will be called in from the bullpen.  Like many people, I've often wondered about post Bhumipol Thailand.  It seems he has been the referee in a street fight, trying to impose Marquis de Queensbury rules.  The combatants humor him to some extent, but might be expected to drop all pretense when he is gone.  Once he is no longer on the scene, what keeps the political elite factions apart, what keeps the red and yellow shirts apart, what keeps half the country from going batshit crazy from the loss of their anchor?

I'm no expert on the country, but I always keep an eye on the obituary column because I suspect I will want to avoid passing through the country for a year or so after the man passes.  Your thoughts----if you are on Tor or the equivalent.

laosuwan's picture

hi chindit, what happens is something we dont want to think about. the thai will go with whoever appears to have the most power and wealth. it has always been like that. we sided with the japanese in 43 because it looked like they would win. then we sided with the allies when it didnt. thais will go with whoever emerges strongest and the parties jockeying for position - the prince, thaksin, other lines of the royal family, the wives and mothers of all these people who are usually the ones driving things - you can be sure they have already made their deals and plans, so it remains for the rest of us to just wait and see what happens. many people will tell you that they would like to see the princess take the reins or it can be the prince, but thaksin has too much money and influence to let a once in a lifetime opportunity for his family to become a dynesty go to waste. We love the king and the royal institution as a force for good so we hope it will continue. But, to answer your question, there will likely either be civil war with the country likely splitting into two or three pieces, or it will all go smoothly and quietly according to someone's plans. we just have to wait and see. and it is the waiting that makes it all so scary. 

chindit13's picture

Thanks, laosuwan.

I know people are required by law to respect the King, but I'm not Thai.  That being said, I happen to greatly admire him, especially for the exacting and pithy comments he makes when the country is on edge because various factions want to go at each other.  He has diffused many a situation about to go bad, and no doubt saved a lot of needless slaughter.  I'm a cynic and not easily impressed, but some of the things he has said or written when tensions were high are simply masterful.  In addition, I know someone who has on occasion done late night jam sessions with him, and he reports that not only is the King a mean clarinet player, he is quite the nice and unassuming sort.  I'm no fan of royalty on principle, but he has served Thailand far better than Thailand has served him.  When time catches up with him, I will mourn his passing.

From what I can gather I think one of his daughters would make a heck of a Prime Minister, but it will never happen.  I also doubt she would be able to jump in front of her brother.  I think she is the only one with the clout to keep the various factions from each other's throats.  Thailand has a lot of potential, but too many people there want too much for themselves, and I don't mean the general population.  I suspect lots of innocent and unecessary blood will flow when the shift of Royal power takes place.

BigJim's picture

...The measures include rise of minimal wages, stimulative prices for rice, tax exemptions on new cars and first home mortgages. ALL MEASURES MAKE A LOT OF SENSE and take into consideration global economic slump.

Yes, all these measures make perfect sense... if you've been duped into believing Keynesian crackpottery.

Marigold's picture

Defencev. You are clueless and obviously took part in the senseless red shirt burning of Bangkok. Everything the Taksin government is doing is imitating the mistakes of the PIGS and is inflationary inluding mandating minimum wage increases by over 40% setting prices for rice and house and car buying incentive schemes ie buying the future forward... Sound familiar. If you knew the slightest thing about Thai politics you would know that Taksin is the most undemocratic politician Thailand ever had. Your pathetic plea for the plight of the Pattaya working girls just demonstrates your intellectual understanding of the situation and this is surely your level.Your the jerk and need the lessons in economics 101

You are the Farang keenok and SB makes fine reading compared to your invective outbursts.

SilverRhino's picture

I wonder how the hookers and bartenders would react to being paid in silver.  LOL.


Ahmeexnal's picture

You'd get a sterling service.

Chicken_Little's picture

I've been over here in Pattaya Thailand for over a year but I keep an underwater townhouse in South Florida as my primary residence. I brought a 10 OZ bar of silver back last trip and the few silver shops here don't want it. Rhino you're absolutely correct about how the short term girls and beer bar Thai woman owners would react to being paid in dee (not good). Before you leave another obviously uneducated post about Thailand, maybe you should come visit.

Fake Jim Quinn's picture

Off topic completely -- apologies -- but I thought you guys would enjoy this

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papaswamp's picture

I'm thinking of getting the ZH symbol and 'Zero Hedge' lazer engraved on my SA .45 Operator.

Ahmeexnal's picture

ZH  IPO about to be announced, same conditions as FB IPO....and same dealer: GS.

BigJim's picture

I've had the ZH logo tattooed onto my forehead.

Melin's picture

I've tried to donate several times.  Enter donation amount then click the Paypal button, error message.


topcallingtroll's picture


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Good job Tylers.

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Fake Jim Quinn's picture

I guess this does not include the revenue share from Graham Summers. But 90% of nothing is still likely small /sarc off