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Published on September 7, 2007

This might sound bizarre but they do have something in common. They share an element of gesture. Let me try to explain: I am now reading Charles Rosen's "Piano Notes: the Hidden World of the Pianist". It is an excellent book, very intellectual and covering the various aspects of piano playing. The piano is a very mechanical instrument. If we leave out a pedal, the most we can do on the piano is to play louder or softer. When you push a key on the piano, a hammer, through joints and springs, will hit the strings with greater or lesser force.

So how do we produce a beautiful tone on the piano? Rosen writes: "A singing sound on the piano is not given by the instrument but by the way it is exploited with a specific musical phrase, and this exploitation is not mechanical and not a simple matter of technique: it requires at every moment a sense of the music. Beautiful tone production does not exist on the piano apart from the music."

There is also a relationship between physical tension on the mood and the interpretation of every musical passage. "The heartbeat quickens and the body tenses during passages of raging fury: The body imitates the music. It goes the other way as well: the music that one produces will inevitably imitate the bodily state. Above all, because of the way so much of the body of the pianist comes into action while playing, this reciprocal mimesis is greater with the piano than with any other keyboard instrument. The gestures of the pianist are inevitably a visual translation of the musical sense."

The gestures of a tennis player are even more apparent. Most players do footwork constantly as they prepare to return serve. This has nothing to do with the return, but it helps the player prepare their mind and body as they wait for the ball travelling at 120 kilometres an hour. When Sharapova roars on the court, her gestures become part of her playing. She lets her psychological drive do as much work as her physical extension to overwhelm her opponent. The "ahhhh" that accompanies the racket becomes the aural translation of her mental and physical performance.

Monetary policy management is about raising or lowering interest rates, injecting or sucking money out of the financial system. It sounds mechanical and boring. Once the banking authorities ease interest rates, they go for easy money to stimulate the economy. Banks automatically cut interest rates. Borrowers enjoy cheaper funds. Businesses get buoyant. Consumers feel relief at lower credit burden. If they raise rates to curb inflation, the opposite happens.

But things do not always go smoothly with monetary decisions. This can be explained by the lack of proper gestures that accompany crucial decisions. If the financial markets can't understand the banking authorities' gestures, they are bound to panic. Alan Greenspan was good at making gestures to the markets with his monotone. He practised it like high art. But I don't see gestures accompanying the Bank of Thailand's monetary or administrative decisions. If the gestures are there, they are confusing.

When the BOT imposed capital controls in December last year to curb the baht's rise, it failed miserably to communicate with the markets about its real intention. The markets could not understand the BOT's gestures. "What the hell is the BOT doing?" was the common cry of fund managers and financiers. Would the Bank of Thailand want any foreign investment?

A Goldman Sachs official said in hindsight there was nothing wrong with the BOT's attempt to stabilise the baht because other countries had also resorted to capital controls. The problem was the BOT failed to communicate that its action only meant to maintain exchange rate stability. International money managers were afraid the BOT might prevent them taking their money out of Thailand, hence the panic withdrawals of investment.

Since the BOT failed to cut rates in the final quarter of 2006 to stem the baht's rise because it misread the financial situation, it opted for the harsher measure of capital controls. This dampened confidence from both local and foreign investors. Since then government rhetoric on monetary policy has become louder. Gestures from Dr Kosit Panpiemras, the deputy prime minister, are more visual than those from Tarisa Watanagase, the BOT governor. The BOT has become sloppy in its monetary policy meetings to determine interest rate direction because political gestures are stronger.

When the BOT decided to keep its policy rate unchanged at 3.25 per cent earlier this week, the markets were caught by surprise. A day earlier, Kosit signalled that he would like to see an interest rate cut. Tarisa tried to regain the BOT's credibility with this stand on the interest rate policy. Thanomsri Fongarunrung, at Phatra Securities Co, interprets the BOT's non-action as a pause in order to cut rates twice before the end of this year.

The BOT may want to look at the indirect impact of the US sub-prime loan problems on Thailand before it makes any moves. If the sub-prime crisis does hit Thailand, it will have more room to cut rates to ease financial turmoil. That's the slight gesture given out by the BOT; a so-far-so-good gesture after all the mishaps. Tarisa and her team need to play the piano or tennis more to improve their gestures accompanying their crucial decisions. Gestures, which might have nothing to do with the mechanical side of the financial system, cannot be separated from monetary policy making because they signal the direction ahead or reflect the current state of thinking. In this sense, gestures may at times speak louder than economic and financial data.  

Thanong Khanthong