Thailand has not escaped military coupsCmore than a dozen since 1932, when a revolution transformed the government from an absolute to a constitutional monarchy. Resentment against leaders of the most recent coup, in 1991, sparked demonstrations by a pro-democracy movement. Investments from Japan, Taiwan, and South Korea powered an economic surge during the late 1980s (Thailand's QuikFacts, 1995, 177).

Although turned into a song in the musical, one of King Mongkut's long letters to Ms. Leuenowens, who actually spent more time teaching the king than the children, reflects some of the confusion of a thinking person:

When I was a boy, world better spot. What was so was so, what not so, not so. Now I am man and world has changed too lot. Some things 'nearly so.' Other things 'nearly not.' Now find confusion in conclusion long ago concluded. In my head be many, many facts of which am being wishing to know whether true or not (Leuenowens, 1898, 113).

In a way, that 1867 letter from the King of Siam sounds much like today's economists trying to puzzle out the macroeconomic crisis in Thailand. Let us continue, then, examining Thailand within the model of the "Triangle of Impossibility."

Triangle Leg 1: Thailand's Fixed Foreign Exchange Regime

SouthEast Asia's learning difficulties (1997, August 16). The Economist, 344: 12.

Thailand QuikFacts (1995). National Geographic atlas of the world Revised Sixth Edition.

Gary Ciminero in a thoughtful essay points out that Thailand followed the pattern of its neighbors (Japan, Korea, China, and Malaysia) and exploited its low-wage/low-skilled labor forces, to lure foreign direct investment (FDI) to build plants to build "screwdriver plants" (Ciminero, 1997) that would assemble and ship consumer electronics products and other labor-intensive goods. Ciminero, and other analysts (Crampton, 1997, A2) point out that as long as the baht was pegged to the dollar, Thailand was viewed as even more attractive for FDI and foreign portfolio investment in its securities market (Limsamarnphun, 1997, 4). Given the large influx of investment, "it is no surprise that the country typically runs a large negative balance of payments (BOP) on net investment income" (Ciminero, 1997).

Although the BOT attempted to curb inflation by keeping interest rates high since 1994, "it could not prevent foreign capital from flooding the Thai market to arbitrage for interest rate differentials" (Na Thalang, 1997, 15). The influx of currency speculators usually has an affect on a nation's currency supply since these speculators invest in short-and-long term changes in the currency markets and make the money supply increase; "as a result, money supply grew by more than 20 per cent a year, an indication that an anti-inflationary policy was doomed to fail" (Limthammahisorn, 1997).

These are all inter-related and must be kept in balance, as the Federal Reserve System attempts to do in the United States. The Federal Reserve System is a prime example of a controlled or regulated monetary policy. An "independent" monetary policy such as Thailand has had since the early 1990s is one in which controls are placed on the economic growth in an