How will this war on spread impact your wallet-well you decide. But like would it not be great if lets say the spread is narrowed and savings was like 3% and lending was 5%?
Check out KriugThai Bank, the policy arm of the Thai Finance Ministry and under close wraps of the Thai central bank, and see that rate spread-with the savings rate for people is about 1% and the lending rate is about 7% (http://www.ktb.co.th/th/main/).
At the same time the government is blasting away how its Strong Thailand Bond, a really nothing amount compared to the amount of business banks are doing, with a 4% savings rates is doing Thailand a great favor. How strong is the demand for higher rates, the Bangkok Post reports about 200,000 people were left empty handed.
So from Krung Thai Bank rates, it looks like a pretty hefty spread doesn’t it? Well Thaksin also thinks it is.
Like would it not be great if lets say the spread is narrowed and savings was like 3% and lending was 5%?
Thaksin Wants it Narrowed:
Thaksin just went on community radio and said the government should get the banks to narrow their lending and savings spread. Community radio reach the grass roots people who are at the bottom of the Thai economic pyramid.
So Thaksin must be trying to get their favor, by bringing up an issue important to them-because who else is listening to community radios? And this probably mean that those Thais at the bottom of the pyramid are being hurt by the banks.
Well the message came out just about the same time the government just sold its “Strong Thailand Bond,” stressing over and over and over, that the bond will be made available equally to all Thais.
On TV, every channel went interviewing people who bought the bonds and that said in sum, “The greatest thing paying a very high interest rate.”
What The Bottom of the Pyramid Wants:
But what of the poor who live month by month or a little bit better than that, and usually end up borrowing from loan sharks? No there is no way they can even dream of saving with those very “Pay very High Interest rates” of the government bonds.
These people at the bottom of the economic pyramid depend on the grace of banks to lend to them and very humbly accept whatever the rate the banks give them. And whatever savings they may have, goes into the bank at whatever rates the banks are kind enough to give them.
So Thaksin touched on a subject that communicates his well intention-for whatever reason-to the those at the bottom of the economic pyramid.
Did the central bank listen-since Thaksin speaks for millions and millions of Thai at the bottom of the pyramid?
Well what does the Thai central bank say to Thaksin? Well today the central bank gave a bunch of statements-maybe it is unrelatedand coincidental-but both was in the news on the same day.
So what about the Thai central bank?
The Thai central bank can be as nutty as a mad hatter and to get a sence of that just visit http://thaicrisis.wordpress.com/ to see the extreme level of twisting by a mad hatter in action.
So in Thai Rath http://www.thairath.co.th/ print version, it went writing about all that statement the central bank made. The central bank talked about a lot of things-but the central bank said in sum that it is doing the right thing.
One of that right thing, for a very long time now, is saying that while in pure numbers, the savings and lending spread of Thai commercial banks, while it looks big, in fact if one considers this and that, it actually is very small. The mad hatter even compared the pure number with the rest of the region and said, “See, Thai banks are not greedy.”
Well, if you actually follow the actual bank performances-which is still great as everyone is hurting badly-right there in the statement are the facts that in sum-expense from interest paid grew lets say 5%, and the income from interest earned grew 20%.
In answering this question, that seems to mean banks are greedy, the mad hatter said, “Its because the bank have been putting money into bonds.”
So there you have it-banks are not lending but putting the money into bonds, and whatever lending to the public they do, they are making a killing with the spread-because believe it or not anyone who walks into the bank just sees it right there on the wall the big fat spread.
Like really, where is that little bank spread? Because when I save its 1% and when I borrow its 7%.
Why Should Economist Worry
But what is this matter to economist and economic planners-and even those in NGO community? Well in much of the developing world-Micro Credit is important because it drives entrepreneurship.
From Individual Loans comes Micro Credit comes Small and Medium Enterprises (SME) that provides all sort of healthy things to the economy. making it available at not too greedy a price, helps spread these small engines of entrepreneurship.
Well wake up people, because globally-micro credit is the in thing-and nobody is slapping the type of spread on it the way Thailand is. Check out the microcredit importance at: http://en.wikipedia.org/wiki/Microcredit