Help Khun Tarisa Merlin is back at BOT

Help Khun Tarisa Merlin is back at BOT

Posted by Tawan , Reader : 468 , 14:37:32 Print

I love articles with numbers gives me something to work with. That being said, I have a real big problem with today’s numbers from a macroeconomic program that says “Economist Raps BOT over Baht”. The conclusion from these numbers leads me to believe the magician Merlin is haunting the BOT. Merlin is not interested in Thailand’s economy but has another agenda in mind. I may have missed something in the article that has leaded me to the wrong conclusions if so I sincerely apologize and stand corrected. Let me first summarize the numbers from today’s macroeconomic model and let me know so that I can gain knowledge if my mathematics does not add up.

These numbers are from July 2, 2007 – July 6, 2007 tracking the BOT’s balance sheets in minute detail following the BOT’s foreign exchange operations. That week current account surplus $ 155 million, net foreign direct investment $ 125 million, net equities $ 598 million, net debt $ 40 million, and net loans $ 200 million for a total of $1.11 billion. That week produced a Bt 0.52 appreciation and a FX book loss of Bt 42.910 billion that week.

Without repeating the step by step details of the transactions, which was covered excellently in the article, that week’s strategy was the BOT bought $578 million in the spot market and the forward market. The BOT issued Bt 18 billion in bonds to cover 100% in the spot market.

Now this is where the numbers do not add up and when Merlin appears. The macroeconomic software inputs the above data for the above dates. Then suddenly keeping all other market factors around the world as constant, two variables enter the equation posing as would be fact for that week in history.

First, the amount of intervention is changed to $ 2.45 billion, July 2 - $431 million, July 3 - $ 632 million, July 4 - $ 556 million, July 5 - $ 445 million, July 6 - $ 390 million.

Second the bonds issued were changed to a 50% intervention in the spot market and 50% in the forward market. The total bond issued was changed to Bt 84.65 billion.

The above would result in no foreign exchange loss and gaining Bt 3.49 million in U.S. dollar interest increasing foreign reserves to $ 84.974 billion. Wow Disney World here I come what a wonderful life.

So Merlin would have us to believe by changing these two variables in history in other words instead of intervening by $500 million a week and intervening instead $ 2.5 billion a week the markets will be reversed. Never mind if a billion dollars flows out of equities that week or any other of a thousand things happens in the world that week changing these two variables is a winning strategy.

It does not take much to see that Merlin or even any kid can take two variables in historical data and keep manipulating them until you reach the desired results. No one in any Central bank in the world goes to work knowing exactly what will happen in the world’s markets that day and thus what percentage of intervention will be enough. It is also easy to spend billions of dollars every week to get results in a simulation because the money you are spending is not real it is a big difference when you are spending real money.

I do not know about anyone else but when I was in school my teacher would not let me manipulate historical data to get a good grade.

Now, if the dates in Merlin’s example is wrong and should read August 2, 2007 – August 6, 2007 I sincerely apologize and I want to be an investor and I also want to know what is tomorrow’s winning lottery number is. But if not I feel insulted Thai people are not stupid we do know the difference between yesterday, today and tomorrow. Finally, may I apologize for any directness but I think in English that is allowed.