CNBC: The Growing Risks from ASEAN’s Asset Bubbles

EVEN mainstream media appears to have caught up with my warnings. This lone nut's insights have began to spread. 

Here is the CNBC:

The risk of asset bubbles in Southeast Asia's fastest-growing emerging economies is rising, warn economists, pointing to red flags including surging domestic credit growth and rapidly rising property prices.

"We have long argued that monetary policy has been kept too loose for too long in Indonesia, but the policy authorities in the Philippines, Thailand and Malaysia are in significant danger of making the same mistake. In our view, evidence of overheating is set to become more obvious," said Robert Prior-Wandesforde, head of India & Southeast Asia economics at Credit Suisse.

Prior-Wandesforde, who expects central banks in the region will start tightening monetary policy in late 2013 or 2014, says policymakers are getting a false sense of security from benign inflation levels, and ignoring the excesses being built elsewhere in their economies.

"We expect interest rates to move higher and it is at that point that history suggests we should worry about possible bubbles turning to bust," he said.

The mix of U.S. monetary policy and relatively low levels of inflation have led many ASEAN nations to adopt "inappropriately" low interest rates, according to economists.

The World Bank and the IMF has recently recommended that easy money policies be reversed.

As I noted yesterday on the IMF’s prescription:

This means that putting a brake or policy tightening would also expose on the mirage brought about by statistical growth pillared from "strong credit growth". Doing so would effectively takes away the foundations of the “defied” status from which the political class and central bankers have been piggybacking on.

In short, reversing the “easy financing conditions” would go against the political and personal interests of those involved, particularly the political class and their cronies, and therefore will most likely be rejected or dismissed or ignored.

Easy money conditions will likely be pushed to the limits until the markets expose on them.

Developing events seem to be upholding my theory. 

Thailand’s government will likely address the rising baht mostly perhaps by paring down interest rates.

This is fresh from the Bangkok Post

The MPC is under pressure from the Finance Ministry and exporters who want it to implement measures to weaken the baht. The Federation of Thai Industries (FTI) chairman Payungsak Chartsutthipol has called on the MPC to cut its policy interest rate from 2.75% by 1% to weaken the baht.

He said the central bank will use foreign exchange and capital inflow management as the main instruments to keep the baht from rising too high.

Translation: Risk of bubbles? Who cares. Blow more of them.