As the market has already started to poke holes in Draghi’s promise, I thought it would be good to continue the series of posts that I began with the British version “We Will Do Whatever it Takes” with my favorite article written during the Asia Pacific crisis in 1997.

The Economist, “The baht spills over”: May 22, 1997

Too soon to crow

“Even if Thailand’s troubles are in a regional class of their own, its neighbours still have reason to fear the knock-on effect of a successful onslaught on the baht. For now, Thailand has been crowing about a victory over the speculators. Mr Amnuay has even promised to bring interest rates, which have been kept high to protect the baht, down by two percentage points this year. It is as if a little guy, having survived one round with the big bullies, was dancing around with his fists up, saying, go on, hit me again.

They almost certainly will. The defence of the baht was achieved by a series of extraordinary measures that will be hard to sustain…”

A little graphical perspective might help us remember when this article was written.

For the entire set of Economist articles on Thailand during this period, go to http://www.economist.com/topics/thailand-1?page=33&%2524Version=0&%2524Path=%252F&%2524Domain=.economist.com.  Also, please read the incredibly thorough account of the 1997 crisis at The Nation blog.

If throughout financial market history, the central banks and politicians ever defeated the markets (greedy speculators), please let me know.  I am absolutely amazed at the confidence in central banks and politicians, especially in the United States.

R code:

#plot Thai baht
require(lattice)
require(latticeExtra)
require(quantmod)
getSymbols(“DEXTHUS”,src=”FRED”)
DEXTHUS <- 1/DEXTHUS["1995-01-01::1999-12-31",]
asTheEconomist(
  xyplot(DEXTHUS,
       panel = function (x,y,…) {
         panel.xyplot(x,y,…)
         panel.abline(v=index(DEXTHUS)[which(index(DEXTHUS)==”1997-05-22″)],col=”black”, lty=3)
         panel.text(x=index(DEXTHUS)[which(index(DEXTHUS)==”1997-05-22″)], y = 0.025, labels=”Economist article The Baht Spills Over”, col=”indianred4″, srt=90, pos=3)
       },
        main = “Thai Baht Before and After Crisis (1995-1999) \n source : Federal Reserve Bank of St. Louis”)
)