Some time passed since the last post in this blog. One might say – nothing happened in Latvia, despite all the effort of the author, and things are going well. Despite huge drops in real GDP, budget deficit, all those real estate and labor problems, or IMF’s bickering regrading credit – Latvia will eventually get out from the hole. God bless those people. But the Latvian government will not. Neither will the central bank.
Now i started to believe that Latvia’s problems emerge due to lack of reliable official information. Let me explain.
Firstly, on 2 of April the Bank of Latvia (BoL) decided that it would be most convenient for all not to disclose where and how much foreign FX reserves of the country are held. It seems of low importance, BoL says, and will protect the country against the speculative attacks of investors. Yes, right, speculators most probably will invade into the financial system, but primarily due to its shitty fundamentals. Show me somebody who cares about where saving are of Latvia are held? Unless they are distributed to the local banks! This subsequently leads to the second thought.
Check one revealing graph:
This is how Latvia’s FX reserve change in how they should have changed according to the officials. The BoL says they only sold EUR 155mn in March. However, comparably FX reserves dropped more than EUR 1bn. Where do money flow? Nobody knows, I won’t be surprised if Mr. Rimsevics also doesn’t know. But I can assume from the current environment that this money is transfered to troubling local banks. The BoL intervenes into the market not directly, but through those arrogant little institutions, I assume. In exchange of being speechless, the banks could be allowed to use some of the FX reserves to sustain liquidity and minimize panic… Ah right! This money could also be stolen or missed in accounting! This leads us to the third and final (oh thanks) point – accounting in Latvian.
Today the press mentioned that foreign creditors of Latvia decided to audit its budget financial performance. Funny and sad they discovered two things. One – the Latvian government does not have any centralized database of revenue collection, its simply doesn’t know from which sources the money is fulfilling the budget. Two – it doesn’t know how many people are currently working in the government and each ministry in general, thus, the government doesn’t know how it spends its money. But they certainly know that devaluation is not possible and fat Santa Claus will visit them in December. I don’t know how they are going to tackle the crisis – cutting somebodies’ heads?
Preamble
I have never seen a country where political wings are formed according to nationality. Yet, Latvia has succeeded in this field with right-wing parties being comprised almost completely by native Latvians and left-wing parties – by native non-Latvians. Using nationalistic slogans, twisting the truth and playing on the dreadful memories of Latvian folk, right parties have accounted for the major part in Saeima (state parliament) for already 15 years. The global financial crisis gives Latvian citizens a unique chance to check if the ruling parties are seeking prosperity for the state or just personal welfare.
Read the rest of this opinion »
Encouraged by a message from Bank of America with precise projection of Baltics devaluation I have decided to summarize why the analysts could be right in their estimations. Apart from inflation, economic recession and credit crunch, as stated by the BoA, I would like to stress other interrelated macro economic phenomena, which theoretically should be ended by a change in currency rates. Mainly, these are:
1. Hot money effect
2. Current account deficit
3. Reserves/ M2 + Gross external debt coverage
4. Low competitiveness
5. Parex Bank… and international relations
Read the rest of this opinion »
From today you will be assigned a criminal status in Lithuania, if you demonstrate the symbols of former Soviet Union, or cite the lyrics of the Soviet anthem. This is to bite Russia. Irrationally. Probably this is a respond to Russian ban on imported Lithuanian cheese products. But instead of finding a jointly beneficial solution, they lift guns. All this is another example demonstrating that here economics is a thing which is discussed equally much as reproduction of wheels or Renaissance influence on Italian international relationships in 16th century.
There are still some people in our government who would spit in any face to raise their rating before 2008 parliament elections of Lithuania. And this post is mostly addressed back to them, reminding some facts of the history, which are too miserable to mention compared to success of few carriers.
Read the rest of this opinion »
Mr Andris Skele, once the prime-minister of Latvia and the founder of the currently ruling Tautas partija (Folk’s party), delivered a speech yesterday at the ceremony of awarding the Spidola prize in the field of economics. During this speech he has presented another set of suggestions on improving economic situation in Latvia. I will not consider all his peculiar solutions; however, two of them seemed quite interesting for me to present and to analyze.
Read the rest of this opinion »
Hi everyone!
With this post I would like to announce the beginning of the modest project – sse.lt. As you have probably noticed, it will take the form of a blog with all relevant posting and commenting opportunities.
The blog will be discussing various economic and business issues, presenting independent and creative viewpoints and comments of its authors, each of whom will do his or her best to deliver clear, intellectual and challenging opinion. Apart from that, every interested reader of the blog is very welcomed to argue or support particular statements to have an enjoyable time for all the participants of the project.
It is also vital to give thanks for all those who helped us to implement this idea: every author, who have kindly supported the project with their valuable knowledge; Anatolij, who have set the account and have been maintaining the technical issues; Wordpress, who have provided an easy engine to the web.
All in all, I wish productive and pleasant time spending for everyone who is involved in sse.lt!
BR, on behalf of the authors, Aleksej
Recent Comments