Fear and Loathing 2.0

Kuidas päästa Läti majandus

Kuna Läti eksport on üsna napp, siis tekib küsimus, et mis vahendite eest makstakse tagasi praegu välisvaluutas võetavad laenud ja kuidas aitab praegune kurss Läti krediidireitingut hoida. Samas on probleemid lahendatavad ühe nädalavahetusega. Vähemalt nii arvab Marshall Auerback.

Credit Writedowns: Latvia -- the insanity continues: The EU and IMF have told the government to borrow foreign currency to stabilize the exchange rate to help real estate debtors pay the foreign-currency mortgages taken out from Swedish and other banks to fuel its property bubble, raise taxes, and sharply cut back public spending on education, health care and other basic needs to “absorb” income. Higher taxes are to lower import demand and also domestic prices, as if this automatically will make output more competitive in export markets.

But Latvia doesn’t produce much to export. The Baltic States have not put in place much production capacity since gaining independence in 1991. Latvia, like other post-Soviet economies, has scant domestic output to export. Industry throughout the former Soviet Union was torn up and scrapped in the 1990s. (Welcome to victorious finance capitalism, Western-style.) What they had was real estate and public infrastructure free of debt – and hence, available to be pledged as collateral for loans to finance their imports. Ever since its independence from Russia in 1991, Latvia has paid for its imported consumer goods and other purchases by borrowing mortgage credit in foreign currency from Scandinavian and other banks. The effect has been one of the world’s biggest property bubbles – in an economy with no means of breaking even except by loading down its real estate with more and more debt. In practice the loans took the form of mortgage borrowing from foreign banks to finance a real estate bubble – and their import dependency on foreign suppliers.

So instead of helping it and other post-Soviet nations develop self-reliant economies, the West has viewed them as economic oysters to be broken up to indebt them in order to extract interest charges and capital gains, leaving them empty shells.

The sad part about this whole episode is that Latvia’s problems could be fixed over a weekend. Here’s what I would do:

1. Drop the peg to the euro, which functionally acts like an gold standard external constraint.
2. Don’t answer the phone when the foreign creditors call the govt
3. Have the banks declared insolvent, convert their external debt to equity, and then have them reopen that way on Monday with full deposit insurance guaranteed in the now free floating local currency.
4. 0% rate policy (use fiscal policy to regulate demand going forward)
5. Offer a local currency minimum wage job that includes healthcare to anyone willing and able to work as was done in Argentina after the Kirschner regime repudiated the IMF’s toxic package of debt repayment.

Full employment and economic prosperity would come in no time at all.

The last line is the key.  Improve employment and aggregate incomes and demand follows – as does creditWORTHINESS.  At the final stage, credit will follow.

Edward Harrison Rootsi pankadest ja finantskrahhist Lätis

Rootslaste susserdamine oma pankadega on tähelepanu äratanud ka lombi taga.

Sweden prepares for financial collapse in Latvia and major bank losses at home. [...] Note that the Swedish government has secretly been preparing the banks for financial Armageddon, encouraging Swedbank into a rights issue which arguably was conducted under fraudulent pretenses – very reminiscent of Bank of America’s shareholder vote for the merger with Merrill Lynch.  In August, I asked “Why is Swedbank doing a second rights issue?.” Now we know.

This is the kind of thing that topples governments.

Tõepoolest, nüüd me teame.

Harrisoni jutu lõpus on ka tõlge nädalavahetusel Svenska Dagbladetis ilmunud artiklist.

EDIT: Huvitavad arengud jätkuvad. FTA: Lätis toimuv on muutumas üha segasemaks, sellal kui rootsi krooni kurss langeb.

Devalveerimise ootel. Läti eri

Niisiis, Läti poliitikud on otsustanud kreeditoridele hambad säärde lüüa ja Rootsi valmistub Swedbanki ja SEBi beilautima.

Päris huvitav, miks on Läti riigiisad otsustanud end nurka mängida nii, et ainus väljapääs on devalveerimine koos Euroopa Komisjoni ja IMFi poolse näopeksuga. Siseriiklikult ei muuda d-day ka eriti midagi, kuna tavainimese jaoks toob see lõputu õuduse asemel kaasa õudse lõpu. Ainus hea asi on devalveerimisega kaasnev Läti majanduse konkurentsivõime taastumine. Iseasi, kas ka siin ei ole mitte hiljaks jäädud.

PS. Umbes samal teemal jahvatas täna ka EPL. Et aga nemad oma allikatele ei lingi, siis ei hakka ka mina neile linkima...