Cambodia after a huge dollar fall.
Cambodia after a huge dollar fall.
What would happen to Cambodia and the Riel if the dollar devalues significantly?
I'm aware that Cambodia wasn't hurt as much as the rest of Asia after the crash in 97 but is Cambodia more entwined within the global economy now and susceptible to extreme fluctuations in currencies?
Just pondering.
I'm aware that Cambodia wasn't hurt as much as the rest of Asia after the crash in 97 but is Cambodia more entwined within the global economy now and susceptible to extreme fluctuations in currencies?
Just pondering.
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Defending the current KHR soft-peg to USD should be much easier with a falling dollar than with a constantly strengthening dollar --- to weaken KHR in lock-step with a falling USD, "simply" expand KHR supply in lock-step.YaTingPom wrote:What would happen to Cambodia and the Riel if the dollar devalues significantly?
((Although "defending a currency peg" only becomes necessary or gets challenging under "speculative attack", and as the KHR doesn't seem very integrated into the global financial/monetary infrastructure and currency markets (just try buying or selling KHR for any currency outside of Cambodia..), the danger isn't too real. The majority of users accept the fixed price of both currency vis-a-vis each other as long as the local and global economy don't show extreme moves up or down leading to a collective re-evaluation of the currency pair.))
If the USD were to devalue significantly vis-a-vis most other currencies, the country would initially for some time become even cheaper to tourists and investors from (and local export-oriented industry bound for) other currency regions. However imports from there would of course become substantially more expensive, adding soon to the rising cost of living that a falling currency brings. (A strengthening USD has the opposite effects.) Simple stuff.
For the few who hold "significant life-time savings" in USD-denominated cash or income instruments, of course their par value vis-a-vis real-world goods & services (not originating from dollarized or pegged economies) would become but a fraction of previous/current perceptions, expectations, calculations. But many somewhat affluent Cambodians seem to prefer "saving some of their wealth" / surplus income outside of currency and in physical assets, whether land, property, jewellery or luxury cars --- "hedging the currency risk" that is in the long run inherent in any currency issued by a single sovereign.
Of course the above would apply to "USD-denominated cash or income instrument" savers & holders world-wide -- including most banks, insurance companies, pension funds, sovereign wealth funds, family offices. So "all bets would be off" (literally). However these entities tend to diversify and since all other types of assets would automagically revalue upwards in nominal terms (falling currency = rising price levels; and then some more, due to self-perpetuating currency flight), they should do OK.. "in theory"
If you're talking really extreme movements, say reaching parity with the Ruble or something outlandishly crazy, I'd suggest to expect major dislocations worldwide, double so in dollarized economies, tenfold so in the US. There's a hundred scenarios circulating in doomer/prepper circles but I don't think most can predict realistic outcomes --- I certainly can't..
Back then I think the issue was a too-strong dollar resulting in debt servicing pains and resulting in leveraged finance (didn't exist in Cambodia then or now) troubles leading to contraction/recession in the "real economy"? There's no real precedent for your scenario, ie. the massive world-wide loss-of-confidence in the global reserve fiat currency either causing or immediately following a sudden "huge" crash in value.YaTingPom wrote:I'm aware that Cambodia wasn't hurt as much as the rest of Asia after the crash in 97 but is Cambodia more entwined within the global economy now and susceptible to extreme fluctuations in currencies?
Why? Unlike 2007-2009 this possibility doesn't seem to be on anyone's radar nowadaysYaTingPom wrote:Just pondering.
Last edited by metaleap on Sat Apr 18, 2015 4:05 pm, edited 3 times in total.
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- Wun Gwo Pee
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I think Cambodia(ns) is (are) somewhat "sheltered" from a dollar black-swan due to it simply being still so very close to ground zero actually. I mean any scenario you can ponder is already half here or was not so long ago. "People lose their savings and purchasing power"? Most of them don't have any to begin with. "Infrastructure, public services, delivery of education & health care, administration of justice might be badly impaired"? Not sure anyone would notice..... or at least people are still quite adapted to such circumstances.
That's not to say if 90% of garment and tourism jobs (and businesses) were to vanish there won't be lots of headaches on the streets, of course. Crikey, I'd rather stop pondering OP's doomsday scenario....
That's not to say if 90% of garment and tourism jobs (and businesses) were to vanish there won't be lots of headaches on the streets, of course. Crikey, I'd rather stop pondering OP's doomsday scenario....
Not doomsday but the majority of people seem to think the dollar is artificially high and is due for a correction. Maybe not a sharp one but a correction all the same.
Thanks for the excellent reply ML.
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- K440 Acolyte
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Lets talk about the whole world after a huge dollar fall,
if and when it actually happens ..
if and when it actually happens ..
Who cares about the world. We're in Cambodia!
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Not sure about "artificial".. any one asset that acts (or is widely perceived) as the world's prime wealth reserve asset is bound to forever appreciate in a self-sustaining feedback loop (barring interventions by central banks or market makers) --- even a single nation's currency and its debt IOUs can for a long time fill that slot and perform that role, as we see.. But, a select few even liken it to "the bomb shelter that's rigged to blow up once everyone has made it safely inside"YaTingPom wrote:people seem to think the dollar is artificially high and is due for a correction.
2007: "House prices won't ever possibly fall on a nation-wide basis.."pablomiguelgarcia wrote:if and when it actually happens ..
2013: "We won't ever see sub-$100 oil again.."
2014: "SNB is fully committed to their CHF-EUR peg and anyway they won't just cave in a flash without prior warnings"
Lesson, on a long enough timeline anything can happen
FOA, late 90s wrote:We like to think that the dollar is what it is because we are so good. (smile) But, the truth is that for over a two decade period +, none of our economic policy, our trade financing policy, our defense policy or our internal lifestyle policy has pleased anyone outside these borders. We managed the dollar for us (U.S.) and the rest could just follow along.
Our fiat currency has survived all these years because others (ML: Europe/Japan 60s-2000, China/Japan 2001-today) have supported our dollar flow in a way that kept it from crashing its exchange rate. We talk and think like we are winning the tug-of-war when, in fact, they just aren't pulling very hard.
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Isnt there the possibility that the asian markets could crash similar to what happened with the states and the western world not so long ago? when i go to look at a new place to rent, and im told 5,000 dollars a month for a small villa, it reminds me of the ridiculous prices quoted to me in the states just months before the crash.
if the asian version of this did come, wouldnt all the investment tied up in cambodia come to a halt, and weaken the riel? and is this a possibility?
i dont know too much about international markets, but just have heard hearsay of this, and it seems plausible. any thoughts?
if the asian version of this did come, wouldnt all the investment tied up in cambodia come to a halt, and weaken the riel? and is this a possibility?
i dont know too much about international markets, but just have heard hearsay of this, and it seems plausible. any thoughts?
Goodbye America, if anyone asks, say we were shipwrecked. Goodbye to your junk and your old hideola. Have a nice day.
-Paul Theroux
-Paul Theroux
Yes, I think the sub prime mortgage scam has just been a nice little model for the new mega-global world to implement. I suspect that new Chinese bank may well have a few ideas on how to capitalize on history. Let's lend lend lend, coz we are hot hot hot.?DeanWeen wrote:Isnt there the possibility that the asian markets could crash similar to what happened with the states and the western world not so long ago? when i go to look at a new place to rent, and im told 5,000 dollars a month for a small villa, it reminds me of the ridiculous prices quoted to me in the states just months before the crash.
if the asian version of this did come, wouldnt all the investment tied up in cambodia come to a halt, and weaken the riel? and is this a possibility?
i dont know too much about international markets, but just have heard hearsay of this, and it seems plausible. any thoughts?
K440 : Lucky cheese for the gentry; poultry and death for the peasants.
"Reading made Don Quixote a gentleman. Believing what he read made him mad."
"Reading made Don Quixote a gentleman. Believing what he read made him mad."
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