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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Joseph G. who wrote (7331)	11/7/1997 1:18:00 PM
From: Thomas M.	Read Replies (1) \| Respond to of 18056

By cause and effect, you mean that inflation causes devaluation, not vice versa as I was thinking, right? Let me try to talk it out: It all started when they printed extra bahts while keeping the baht tied to the dollar artificially. This peg prevented the markets from repricing the baht to match the increased float. Thus, Thailand's total money supply incresed in $ terms (more bahts, same price), and the country gained in net wealth. This whole inflationary trend was corrected by the devaluation of the baht. So when Thailand devalued, they kept the same # of bahts in circulation, but made each one worth less in $. Tom