Asian Crisis Redux?

[Thailandnotes]

Cheap Dollars Now Growing Scarce...

http://www.nytimes.com/2013/08/21/bu...vXY46xS93eMM4w

Chiang Mai has five new huge malls coming on line in the next 24 months. There's rumors of high speed rail from Bangkok and a second airport. Insanity.

[bill]

Re: Asian Crisis Redux?

Chiang Mai has five new huge malls coming on line in the next 24 months. There's rumors of high speed rail from Bangkok and a second airport. Insanity.

And a lot of debt.

http://www.reuters.com/article/2013/...97513Z20130806

Tue Aug 6, 2013 5:01pm EDTBANGKOK (Reuters) - A growing mountain of debt owed by Thailand's households has sparked a tussle between the country's central bank and finance minister on the best way to steer Southeast Asia's second-largest economy through a period of slowing growth.

Household debt is equivalent to nearly 80 percent of gross domestic product, central bank governor Prasarn Trairatvorakul said last month, up from 77.5 percent in March and among the highest in Asia. A decade ago, it was 45 percent.
At 8.97 trillion baht ($287 billion) as of March, outstanding household debt was up 78 percent from 2008. It rose an average 13.6 percent a year between 2008 and 2012, twice the pace at which incomes grew. The ratio of debt payments to monthly income for Thai households was 33.8 percent in the first quarter, up from 29.6 percent in 2011, central bank data showed.

Tension in Thailand?

http://www.bangkokpost.com/news/poli...itution-debate
21 Aug 2013 at 00.14
Online news: Politics



An angry Democrat MP grabs the throat of a parliamentary police officer called in to restore order on the opposition benches of the Democrat Party. Chaotic scenes erupted during a joint sitting of MPs and senators debating charter amendments Tuesday. (Photo by Chanat Katanyu)

http://www.bangkokpost.com/news/politics/365556/

[ProdigyofZen]

Re: Asian Crisis Redux?

Cheap Dollars Now Growing Scarce...

http://www.nytimes.com/2013/08/21/bu...vXY46xS93eMM4w

Chiang Mai has five new huge malls coming on line in the next 24 months. There's rumors of high speed rail from Bangkok and a second airport. Insanity.

The Baht has been selling off for some time now. When the Fed tapers the EM markets are going to get crushed. Jakarta index was down 20% in 4 days.

Brazil's entire muni market is now shut down due to investment banks taking the Brazilian states for a ride...

"Leonardo Mauricio Colombini de Lima, the finance secretary for Minas Gerais, said that while the state didn’t know that Credit Suisse was going to repackage the loan into notes, the transaction was legal and “beneficial” because the proceeds were used to pay back more expensive debt. "

http://www.bloomberg.com/news/2013-0...lion-fees.html

[GRG55]

Re: Asian Crisis Redux?

Cheap Dollars Now Growing Scarce...

http://www.nytimes.com/2013/08/21/bu...vXY46xS93eMM4w

Chiang Mai has five new huge malls coming on line in the next 24 months. There's rumors of high speed rail from Bangkok and a second airport. Insanity.

1) Apparently rampant mis-allocation of capital by both the public and private sectors is completely unconstrained by national boundaries, political inclinations, religion, language, climate, sexual orientation or anything else.

2) Liquidity repeatedly demonstrates that it will go from apparent abundance to nonexistent in a blink.

3) As long as the lenders feel they can (a) collect on a claim against the asset, or (b) lay off the risk to others, or (c) failing either a or b, will get bailed out by their home jurisdiction taxpayers, the game will go on...

For now income product sells. Big. As ZIRP weary investors reach for yield the banks are creating and selling all manner of products to satisfy that demand, and prices for some of this junk (like hybrid bonds) still do not seem reflective of the ingrained risk despite the recent bond market correction.


With apologies to Pete Seeger:

...Where have all the investors gone, long time passing?
Where have all the investors gone, long time ago?
Where have all the creditors gone?
Gone to graveyards, everyone.
Oh, when will they ever learn?
Oh, when will they ever learn?

[jpatter666]

Re: Asian Crisis Redux?

1)
For now income product sells. Big. As ZIRP weary investors reach for yield the banks are creating and selling all manner of products to satisfy that demand, and prices for some of this junk (like hybrid bonds) still do not seem reflective of the ingrained risk despite the recent bond market correction.


With apologies to Pete Seeger:

...Where have all the investors gone, long time passing?
Where have all the investors gone, long time ago?
Where have all the creditors gone?
Gone to graveyards, everyone.
Oh, when will they ever learn?
Oh, when will they ever learn?

They're starting to learn in China....

The general manager of Fanxin, China's largest insurance dealer, has been arrested (after fleeing the coutry with CNY 500 million) and the entire industry is now under close scrutiny after regulators found that the company was selling unauthorized fixed-income financial agreements. Fanxin offered huge commissions to its staff to sell 'wealth management products' that were merely used to buy more insurance products in what appears a ponzi-like scheme. Investors were 'encouraged' to purchase these with promises of yields up to 20%.

http://www.zerohedge.com/news/2013-0...-high-yield-pr

[Slimprofits]

Re: Asian Crisis Redux?

From the comments section of the NYT article:

Sitting back in the somewhat uncomfortable seat of the Clapham omnibus that I have to take for my daily commute, the following comes to mind.

Many of you are selling the US short and you have got it wrong, wrong, wrong.

It is blindingly obvious that the US is on the verge of re-enforcing its position as the strongest economy in the world, and this strength will probably continue to be the case for the entire lifetimes of most of the people who read these pages.

The reason for this is the cheap energy that is now becoming available through fracking.

When as predicted the US becomes 80% energy self-sufficient there will be no other country in the world capable of matching the US on he cost of manufactured goods and innovation.

The force is strong with this one.

[ProdigyofZen]

Re: Asian Crisis Redux?

From the comments section of the NYT article:

The force is strong with this one.

I thought it was 100% energy independent. Now it is changed to 80% energy self-sufficient? Sounds like global warming, oh I mean climate change.

[GRG55]

Re: Asian Crisis Redux?

From the comments section of the NYT article:

The force is strong with this one.

“It's tough to make predictions, especially about the future.” ― Yogi Berra

[touchring]

Re: Asian Crisis Redux?

Cheap Dollars Now Growing Scarce...

http://www.nytimes.com/2013/08/21/bu...vXY46xS93eMM4w

Chiang Mai has five new huge malls coming on line in the next 24 months. There's rumors of high speed rail from Bangkok and a second airport. Insanity.

Thailand's problem is not just short term but also in the long term where the country will compete for investment funds with the Philippines and Myanmar, both countries with an English speaking workforce, and also Vietnam.

[Chomsky]

Re: Asian Crisis Redux?

How QE’s potential unwind reveals the existence of the currency wars

BY SOBER LOOK / ON 21 AUGUST 2013 AT 22:41 /



By Sober Look
Emerging markets currencies are getting hammered across the board today on the back of the FOMC minutes. Many are touching multi-year or even all-time lows. Here are some examples of the dollar strengthening against some major EMG currencies:

Source: Investing.com

Rumors persist of some very large emerging markets hedge funds taking significant losses, as Brazil’s 10-year government bond yield punches through 12%.

Brazil 10y gov yield (source: Investing.com)

This provides further confirmation that the Fed’s recent monetary stimulus effort and the artificially low dollar rates have been responsible for a great deal of capital flows into emerging markets. Now we are seeing a sharp and to some extent an uncontrolled reversal of these flows. And many of these nations’ central banks find themselves quite helpless in the face of this correction.
http://www.creditwritedowns.com/2013...ency-wars.html

[vinoveri]

Re: Asian Crisis Redux?

I'd like to understand why this is?

[Chomsky]

Re: Asian Crisis Redux?

I'd like to understand why this is?

From another post by Sober Look:

The prospects of higher long-term interest rates resulting from the Fed’s taper is forcing investors out of emerging markets – and these two nations [India, Brazil] are feeling the brunt of this “rotation”. To be sure, we have no way of knowing if this would have still occurred if the Fed had not initiated QE3 a year ago. But the severity and the speed of these corrections would suggest that this is one of those unintended consequences of applying and then trying to exit an aggressive monetary stimulus program within highly interconnected capital markets, operating in a global economy. This has not been a part of the FOMC’s forecast…

http://www.creditwritedowns.com/2013...-tapering.html

[c1ue]

Re: Asian Crisis Redux?

The force is strong with this one.

Yes, the moron side of the force.

The impact of shale oil on US imports? Significant in terms of impact on the US economy, but insignificant in terms of being able to even achieve 80% self sufficiency.

That reader is confusing several issues:

1) Hot money flows into EM all over the world has enabled continuation of the previous hot money based growth. Why should it be surprising that a taper off of the hot money spigot in the US will affect those economies?

It is like a spendthrift has an effect on his friends. While the spendthrift is tossing money around like water, the posse gains all sorts of ancillary benefits. When the spendthrift runs out of money or goes on a budget, the hangers on suffer.

2) US oil production is increasing from its lows, but it is hardly a huge amount such that it would enable 80% self sufficiency.

You can look at the actual EIA numbers here for the entire historical record they have:

http://www.eia.gov/dnav/pet/pet_crd_...c_mbblpd_m.htm

net net: oil production now is nearly back to the early 1990s. Higher than the 2005 low of 4000-ish, but below even the 8000/9000 levels of the 1970s (it is low 7000s now). If we weren't able to be 80% self sufficient in the 1970s such that the Arab oil embargo crushed the US economy, I fail to see how a lower level of production at 7000-ish will suddenly jump to 15000-ish which is 80% of the present US crude oil consumption (all units in thousand barrels per day).

To expand on the above spendthrift analogy:

The change in US domestic oil production from its 4000-ish low to present is about 3000 barrels per day. This translates into roughly $110 billion a year - most of which is now spent domestically in the US rather than going to Saudi Arabia. That's great for the US economy.

However, the overall trade deficit cost of US oil imports has fallen from roughly $550 billion to $440 billion a year.

Sure, it is better.

But it isn't good.

A true reduction of foreign imports to 20% of the US would mean a swing of $300 billion from the $440 billion above to $130 billion trade deficit due to oil.

I agree that would be huge, but I see no indications anywhere that it is going to happen. It means more than doubling this instant US domestic oil production - or tripling domestic production from the 2005 low.

Note all numbers above are assuming 19 million barrels/day constant consumption and $100/barrel - not actual prices and consumption, but useful for meaningful comparison purposes.

[GRG55]

Re: Asian Crisis Redux?

How QE’s potential unwind reveals the existence of the currency wars

By Sober Look
Emerging markets currencies are getting hammered across the board today on the back of the FOMC minutes. Many are touching multi-year or even all-time lows. Here are some examples of the dollar strengthening against some major EMG currencies:

Source: Investing.com

Rumors persist of some very large emerging markets hedge funds taking significant losses, as Brazil’s 10-year government bond yield punches through 12%.

Brazil 10y gov yield (source: Investing.com)

This provides further confirmation that the Fed’s recent monetary stimulus effort and the artificially low dollar rates have been responsible for a great deal of capital flows into emerging markets. Now we are seeing a sharp and to some extent an uncontrolled reversal of these flows. And many of these nations’ central banks find themselves quite helpless in the face of this correction.
http://www.creditwritedowns.com/2013...ency-wars.html

Clearly I am not smart enough to understand why all this is being blamed on the US Federal Reserve. The question I have is just how "helpless" were these same central banks (and governments) when all that money was washing up on their beaches in years just past? I don't recall any howls of protest...in fact I can remember a certain smugness about the "lack of need" for foreign investment from some of these nations; Brazil in particular. India's impediments to foreign investment are the legitimate stuff of legend. Now that capital is leaving, this is a problem?

The cheap US Dollar days are over for now. Commodities have headed south. China isn't going to save them (preferring instead to save itself I expect). The much vaunted BRIC wall is collapsing. Big surprise. EJ said years ago that all the Dollars needed to create an inflationary outcome in the USA already existed in the world at large...the Fed has finally figured out it may not need to print at anywhere near the pace it has been to achieve its target 2% inflation.

"What goes around, comes around". Central bankers and politicians everywhere should stick that on the wall above their desks as a daily reminder...

[jk]

Re: Asian Crisis Redux?

iirc it was brazil's finance minister who uttered the phrase "currency wars" in public some time ago, and iirc brazil took various measures to try to stem or at least limit capital flows into the country. i guess, in retrospect, not enough.