More Thailand

Apparently, Thai armed forces have leveled the protester camp and a curfew has been put in place with violence escalating in the aftermath. The BBC has this.

Here are also some close-range pictures of what by now looks like civil war in Bangkok

Surprisingly, Thai equity markets have actually held up (in USD terms):


The possible good news that may come of this is that Red Shirt leaders have asked protesters to "go home." While I do think that their concerns need to be heard and while I support their right to force government to listen to them if the democratic process fails them, I do want the violence to stop. The downside is that there are multiple equilibria into which the situation could diverge:
a) protesters lay down arms and government and protesters come to the table.
b) protesters lay down arm, "go home" and are marginalized. Problems fester and re-erupt in a few months'/years' time.
c) without a leadership protesters split into violent factions and violence increases.

Here's a theory of why financial markets' interests can be anathema to peace. Short-term traders are interested in volatility. If Thai equity markets crap out--especially if it is on risk aversion while the fundamentals of the Thai economy remain intact--that provides a good buying opportunity, only to sell stocks when political tension has settled. You can see from the above graph that at least there is potential for Thai equities to reach 55 USD (this is the ETF that seeks to replicate the MSCI Thailand Index). The recent dip as a result of violence was a welcome buying opportunity. I would not be surprised if some traders were to hope for outcome b) above so they can sell and buy another dip in markets.

No Plan B for the European Currency Union

Today Secretary Geithner was on CNBC (which, as you probably know, I think is, in general, idiocy squared) and Erin Burnett interviewed him regarding the prospects of the Euro.

MS. BURNETT: And do you have a plan if it falls apart, I mean,
Paul Volcker again today was saying he thinks that there are some real
risks to the European Union as a concept and others, perhaps, even to
the Euro itself? I know you're a believer that Europe will stay
together. But are you working on a contingency plan in case there is
a dissolution of the Euro?

SEC. GEITHNER: Again, I'll say what I said before, absolutely
Europe has the capacity to manage through this. They made a decision
to do it and I believe they have the capacity to do that. Obviously,
they're going through their challenges, but they can manage those
challenges.

Michael Mussa, former chief economist at the IMF, in his book “Argentina and the Fund” makes the argument that one reason why Argentina was such a shitshow was b/c there was never a plan B considered, an orderly exit from the currency board. So if what Geithner says is true and not just to calm markets while behind the scenes IMF and European Commission are working hard to formulate an exit strategy for Greece and others in their position, then that could be very bad news if the ECU does find itself in a tight spot and needs to break up.

Thailand

The Atlantic Monthly has this on Thailand:

"Inside the Red-Shirt Camps The Atlantic's Jessica Olien relates, "When I first went into the camp, I was surprised by the orderliness and the industriousness of the people inside, who'd set up shops to sell food and red-themed merchandise, pharmacies, and even a massage parlor within the tent city. But the area still resembles a refugee camp: dwellings made of plastic sheets and bamboo; garbage strewn across the ground; the smell of rotting food and unwashed bodies permeate the air. Conditions will only get worse, assuming the government shuts off the water and cuts off supplies after the Thursday deadline."

A massage parlor.... omg, I love Thailand so much! I hope the violence stops soon.