You know I’m not talking about the temperature.  I’m talking about the exchange rate of the baht to the dollar.  Today, September 30, 2010 marks the first time since July 16th, 2007 that the Thai baht dipped down below 30 (to 29.85) since July 2nd of 1997 as the baht soared from the historical lows in the 20-25 baht range of the early 1990’s, to over 56.1 on Jan 12th 1998 after the Thai economic crash of 1997. 

From there it began a slow decent back into the 40’s which we enjoyed for the next year (1999) before it was back in the high 30’s, where it stayed until June of 2000 where it once again broke 40 and stayed there until mid-2006 when we started the sharp decent into the 30’s ending today, September 30th 2010 under 30 at 29.99 Thai baht to the US Dollar.

As many western currencies and some Asian currencies are pegged to the US Dollar we can assume expatriates from other countries have seen a decrease in their spending power as well.  The big question everyone is asking is how low will it go, and when can we expect to see a return to more reasonable exchange rates?

It depends who you listen to.  With the Thai economy soaring at 7-8% a year and other Southeast Asian economies following right along, and our deficit ridden western countries not doing nearly as well, some are predicting exchange rates in the low-20’s which we haven’t seen since the late 70’s.  25 doesn’t seen that unreasonable by this time next year.

Ultimately what this means for expatriates living off western based retirements and annuities is a sharp decrease in their standard of living IF they choose to stay in Thailand.  The exodus started several years ago with many Brits choosing to return home, and now American’s are feeling the pinch and have been leaving as well. 

Other factors such as historically low home prices and mortgage rates back in the west contribute to the expatriates decision to return home and get in on the low prices and low interest rates while it’s still possible.

Everyone’s situation is different.  I’ve always felt the psychological impact of 30 would be the deciding point for many and I still think it is.  It’s where I set my personal limit in 2004 which I’ve since reevaluated.  I won’t be leaving Thailand for financial reasons unless the baht drops below 15.  If I leave, it will be for the rewards of family or the pursuit of my career and not because the exchange rate has become too dire.

Five years ago I wasn’t on the same financial footing that I am today, so my decision would have been different.  What about you?  What’s your number before you pack up and return to your home country, or perhaps another SEA country with a more promising standard of living for your personal income? 

I have a different view on Thailand’s economy than most.  My feeling is there are undercurrents of Thailand’s power brokers over extending, trying to artificially compensate for the effect the downturn of the global economy should have had on Thailand.  Meanwhile, big business is pushing for rapid expansion where perhaps caution is better exercised.  My personal feeling is a re-run of the 1997 crash is entirely possible in the next 20-24 months. 

Am I right?  Only time will tell either way.  The trick to surviving or even taking advantage of whatever future economy we are certain to have, is to not repeat the mistakes of those who have failed before us.  Be cautious, maintain an overly generous cushion, study and monitor trends, and don’t hesitate long hoping a bad situation will get better.  Set your limits and then be true to them.  You can always return when things improve.

Until Next Time..