The Thai economy is strong, one of the stronger performers in a strong region. The US dollar, because of crazy economic policies, is declining. Consequently, American expats that rely on income from social security, pensions, rental income from US properties or any other US income or assets is taking it on the chin again.
Americans are not alone. Brits had some big drops last year in their currency in relation to the Thai Baht, and those on a Euro basis are also feeling a pinch.
Every time there is a weakening of the dollar, we (expats living in Thailand) pay for it with an immediate higher price for local goods. Americans living in America also will be getting some grief from the weaker currency, but it is not so obvious on a daily basis as expats see it. What can be done? It’s a gamble to switch currencies to one represented by a more stable government than what is currently ruling America. Change the US government? Well, we keep trying to get the bureaucrats and elected/purchased politicians to do the right thing back in the USA, but have only had mediocre success. If I could, I would require all US politicians to read my blog daily, but I think that is not going to happen. Second best idea would be just to have them simply wake up.
Just last week, the dollar fell 2 to 3 percent in relation to the Baht. “In the first half of last year, investors might have been uncertain after Thailand’s flood problems but started gaining confidence in the latter half, helping the baht – with less appreciation than its regional peers. This year, the improved economic figures show the country’s strength, and that could have resulted in the baht’s appreciation,” BOT (Bank of Thailand) Governor Prasarn Trairatvorakul said.
From the beginning of last year to date, the US dollar has depreciated about 5-6 per cent against the Thai Baht, while South Korea’s won strengthened 9 per cent against the dollar, BOT Governor Prasarn continued. The Philippine peso appreciated 7 per cent against the falling dollar, while the Singapore dollar and Malaysian ringgit appreciated 5-6 per cent in relation to the US dollar.
Meanwhile, it appears that Americans are oblivious or simply don’t care about the weakening of their currency worldwide. Little media coverage within the US is bringing this matter to the public’s attention, and there are no mass protests, and no massive public concerns are being shown. The government is touting a housing recovery, which many savvy economists are saying is simply not happening (see Zero Hedge, 01/25/13 “The ‘Undisputed Housing Recovery’ is unmissable on this new home sales chart”). The US federal government seems to be saying that the depression is over and everything is cool, so it’s OK to raise taxes a bit and offer more free money to bankers (QE III), but non-governmental economists like Peter Schiff and Marc Faber are predicting a major currency crises with the US dollar. These two economists correctly predicted most of the recent past problems, including the housing bubble burst (more correctly it should be called the mortgage bubble), the internet bubble, upticks and downticks in the market, and movements in gold and silver.
In Thailand, there is concern that the increased value of the Thai Baht could affect exports as the major market areas (primarily the US) will now find Thai products more expensive. Of course, the yin with that yang is that American goods will be less expensive in Thailand. “Currently, the prime minister is considering relief measures for the affected groups [in Thailand]. The impacts are different for them. One idea all agreed with is that those [Thais} who invest abroad [outside of Thailand] will benefit, especially those who have to purchase capital products or machines from abroad,” Prasarn said.
Despite the appreciation of the Baht (and depreciation of the US dollar), Songtum Pinto, the BOT (Bank of Thailand) Director for Monetary Policy estimated that exports for Thailand will increase by 9% during 2013.
In this first month of the new year, Thailand has lowered the income tax rate for most categories (and increased none), while the US is punishing their citizens with a massive income tax increase, leading up to many new federal government seizures of income through the Medical Industry Control program (“Obamacare”) that is nearing full operation.
Meanwhile the US has the private bank, The Federal Reserve, print up more money (diluting it) and adding to the federal government debt (every new dollar printed creates a new dollar of debt for the US taxpayer).
Here’s the reaction of a local American expat living in Thailand:
It’s quite simple. The US is handling its debt problems by inflating it’s money supply. They call it “quantitative easing.” Now that’s a nice term and it might even work, but simply put, it is a deliberate and managed inflating of the money supply. The Thai baht on the other hand is healthy and inflation is controlled. Since the exchange rate is based on the relative values of currencies, when one is inflated and another stays steady, you are going to see the kind of change in exchange you are seeing vis a vis the dollar and baht.
I am an American. I finally qualify for the Social Security retirement supplement I have paid for all my life. What the US government is doing with its managed inflation scheme is stealing a portion of it’s citizen’s wealth. Government managed inflation is nothing but a hidden wealth tax. To those Social Security recipients living in the US, the tax is not so apparent, though the benefit has lost purchasing power at a greater rate than the cost of living increases. But when you live overseas and convert the benefit to a stable currency like the baht, the theft (or tax) becomes painfully apparent.
Bottom Line: Thailand is becoming a richer country and the United States is getting poorer.