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IMF: A Demon or a Saint? 50

This post is inspired by yesterday's conference "Latvija uz Sliekšņa" (Latvia on the Verge) organized by a somewhat mysterious National Resources Institute (NRI). The keynote speaker was Mark Weisbrot of a Center for Economic and Policy Research (CEPR), which, according to the conference invitation, is "one of Washington's two most cited think-tanks" (wow! I will get to this later). The opening speech was given by noone less than Prime Minister Dombrovskis. Let me make two observations here.

Iesaki citiem:

My first observation is about the degree of provincialism in this country. What is this CEPR, that was presented to us with such a great pompousness? Some made a mistake of confusing this Washington-based think-tank, founded in 1999, with London-based Centre for Economic Policy Research, a network of European economists founded in 1983. This latter CEPR is often viewed as Europe's NBER, a very well known and respected institution. So, Mark Weisbrot is of www.cepr.net and not www.cepr.org. Needless to say, I am a bit suspicious of an institution that names itself after a well-known institution. So how reputable is Washington-based CEPR? Hard to say, but that "one of Washington's two most-cited think tanks" stuff is, at best, a huge typo. According to Wikipedia, "CEPR ranked first or second for cost effectiveness in 2004-2008 among the 25 most widely-cited think-tanks, in terms of media citations and web traffic per dollar of budget. On its 2006 budget of $1.3m, CEPR achieved 197 media citations." [emphasis mine]. What does this mean? Its efficiency notwithstanding, CEPR is fairly small for a U.S. think-tank. For comparison, Cato Institute's (another think tank) 2008 budget was $24 million. Brookings institution's (a more well-known think tank) 2009 budget was $80 million. Further, CEPR is also known to regularly criticize IMF. How do I know this? I googled it in less than five minutes! Now here comes the question. Would Prime Minister Dombrovskis agree to give an opening speech at a conference organized by an obscure, almost never previously heard of National Resource Institute and a tiny Washington think tank known for its proclivity to bash IMF policies? I doubt it. Couldn't anyone at his office make an elementary background check? I also wonder how many journalists would connect the dots in their reporting of this event.

My second observation concerns the IMF-bashing itself. I am not really talking about Mr. Weisbrot. His major criicism of IMF's policy in Latvia was leveled at allowing to keep the exchange rate peg. That's kind of funny, because it's quite obvious that IMF never wanted to keep the peg in the first place. It (grudgingly) agreed because the Latvian government and the European Commission were so keen to keep the peg. But lets leave Mr Weisbort alone. What I am really talking about is the demonising of the IMF that seems to be so popular in Latvia these days. For example, today's Dienas Bizness featured a cartoon with IMF being a horned demon. Is IMF really engaged in a vast conspiracy against developing countries and Latvia specifically? Lets examine this Second addendum to the Memorandum of Understanding between European Community and the Republic of Latvia (which is probably largely drafted by the IMF) that is so much talked about lately. What is it that the IMF wants from us? Well, there is a whole list, actually:

  • Their main demand is that we live according to our means! How very wicked! How dare they tell us we can't pile ourselves up with more debt and run around with budget deficits of around one tenth of GDP??!

  • They want us to "put in place effective sanction procedures for individual misuses of public funds" by public officials. How cruel! Doesn't IMF have any pity of our bureacrats?

  • They want us to prepare "a new Fiscal Responsibility Law", and "perform analysis of all functions and services provided by the public institutions...". What? They want us to perform an "analysis", like to actually start thinking? How fiendish...

  • They want us to "improve effectiveness and scope of public procurement, including by applying standardized methodologies and guidelines... centralizing public and municipality procurements....". Wait a second! How do they think our businessmen and public officials are supposed to rig public procurement contracts??! How mischievous!

  • They want "the Government... to discontinue interest payments on subordinate debt contracted by Parex Banka prior to the government's entry into the bank's capital." Oh no... They can't mean those Mr. Kargin's and Mr. Krasovickis' deposits at Parex, can they? Well that would be really evil! How dare they impoverish our oligarchs?!

  • There are many more monstrous strings attached to the IMF/EC loan. Help for the unemployed, effective absorbtion of EU funds, help for the small businesses,fighting shadow economy, reducing administrative barriers to businesses, etc.


  • But let me stop fooling around and summarize my thoughts here. I think IMF's presence is a blessing for us. IMF knows that the best way to get their money back is to put a country on the fast track to growth and this requires reforms. Sometimes these reforms can be quite painful - often not so much to the general population as to some elements of the political elite, which find the old ways extremely lucrative. When Latvia would return to the sustainable economic growth path, it would be largely thanks to the IMF dragging us through the reforms, while we are screaming and kicking and cursing like children caught up in a nasty tantrum. The truth is that this is as close to good governance as we would get in the near future. Too bad we can only get these guys at a price of a nasty economic crisis. They should visit more often.

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    Komentāri (50) secība: augoša / dilstoša

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    govs from Latvia 17.01.2010 14:17
    VAT is normally not imposed on goods exporters, it can influence in some sense only services export. However, VAT on imports is also very easy avoided in Latvia in the supermarkets and gasolines where all operations occur in intransparent computer programms. Nobody knows the exact amount of goods transported to Latvia, because there are no customs controls anymore.

    My opinion is that banks must be not bailed out, there must be just cleaning of the market. Otherwise we will go to permanent wwwwwwwww tupe recessions, because if the banks are bailed out, they start the gambling game immediately.

    And the fact that exports soared 04-08 proves that the PPI were sustainable then. It is not sustainable now because of tax increases (3% income tax punishes every PPI) and costs of loans.

    Lithuania was unhappy to be just raped by EU atomic energy policy, which is a tool in hands of big EU rapists, the gap caused by closing of Ignalina NPP is not possible to close.

    I agree with Weissbrot fully on the argument that the internal devaluation is just insanity, and a normal devaluation of lat must be done. Latvia has no institutional problem with this, other than Greece, Spain, Italy.

    Maybe you remember if you are old enough there was an extremely strong pressure after the 2001 crisis in Italy to get out of Euroland. The situation normalised only because rebound after 2001 recession was very rapid and strong. Now there is nothing to expect similar.

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    john 17.01.2010 12:56
    a VAT increase in an enviornment where taxes are sometimes easily avoidable is in a way a tax on imports since it may be easier for exporters to avoid it.

    `But it is true that a political system which allows for something like PAREX bailout, is unsustainable and must perish.''

    you mean pretty much what governments did around the world to stop the crisis from accelerating? so now you're calling for pretty much all of europe and north america to perish? seems a bit radical.

    ``If you talk about your theory about budgetary increases, sorry, but in the period 2004-2008 Latvian exports soared,''

    yes but imports soared even more, the current-account deficit was the biggest in europe and historically huge even for middle income countries. that can imply a lot of things, could mean an overvauled exchange rate, could also mean there is a serious problem with exports, and that goes to a tax regime that encouages speculation in a real estate sector which does zero for exports.

    btw, your analogy with estonia is just false, you should instead look at Lithuania which also had no bank bailout but still the deficit rose to about 10% of GDP in 2009, since they were also running unsustainable budget policies during the boom times and now a shock to GDP has opened a massive gap.

    the funniest thing about your argument is that on the one hand you praise Mark Weisbrot, but on the other hand you seem to not have really read what he was writing. he was calling for countercylical policies, but instead we end up with procylical which is damaging. I think we can all agree that ideally that is what we need, but if thats the case why do you think the boom period, which in latvia was completely procylical in fiscal terms had nothing to do with the bust? makes no sense, you praise Weisbrot but you seem to not have bothered to actually understood what he said.

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    govs from Latvia 17.01.2010 12:08
    What can really help to Latvia, if there starts very serious inflation. No matter, in which currency, because the strong EUR is anyway not sustainable.

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    govs from Latvia 17.01.2010 12:00
    PAREX costs are 1,2 bn related to budget, and here you have at least some part of the budget increase.

    But it is true that a political system which allows for something like PAREX bailout, is unsustainable and must perish.

    If you talk about your theory about budgetary increases, sorry, but in the period 2004-2008 Latvian exports soared, and also export of services (at CPI of course) boomed. Nothing of that is true at the moment.

    Germany and France indulged enormous budget increases directly, together with guarantees to banks - about 30%, still they are sustainable and due to their public finance strength are making new gigantic protectionistic measures (read about the new Clio!) and are montig huge trade surpluses with other EU countries. This is the real problem, and therefore such a Union must fail.

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    govs from Latvia 17.01.2010 11:54
    to john: don't forget that in 2008 the VAT was just 18%, and now it is 21%, this has very direct effect on CPI competitiviness

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    john 17.01.2010 11:03
    govs,

    for the arithematic to be simple you actually have to provide some. where is it written that thats how much parex costs and that the total cost, minus whatever the EBRD is putting in, was borne only in 2009.

    as to fiscal policy, if you're increasing the size of the budget by more than 20% a year than that is only sustainable in an environment where growth and inflation are very high, and we know that sooner or later that policy will fail and leave a huge hole at the heart of public finances. what was going on during the boom is why latvia was criticized by credit rating agencies, the world bank, the IMF, the European Commission and the ECB, Issing was in Latvia and publicly called for a budget surplus. it was the most irresponsible fiscal policies in the whole of EEU and thats saying something since policies in this region were bad to begin with. if you want to rewrite history and just blame parex and excuse the govt then provide some evidence.

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    govs from Latvia 17.01.2010 10:50
    to G.D.
    Do not forget that the 100 LVL sheme applies only to self-governments, and it is highly subsidized. The low competitiveness accumulated by Latvia is without discussion obvious, because there were no productivity improvements in those 5 years, but the increase in PPI was for 46% (vs. 6% for Germany). I can not catch your idea why PPI does not matter, because there are also PMI, and other direct methods, and all of them show down. On the other end, the rapid increase of trade surplus of Germany with the Eurozone is making rounds not only in our province, it is very dangereous to the whole EUR and EU, because Germany is the 4th most protectionist country in the World.

    to john:
    there are not anymore loans to businesses for 4% or 4.6% pa.

    As to Estonia, the arithemtics is simple: if bank bailout costs are at 7%, then its evident that the Estonian 3% will be 10% in case of Latvia.

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    john 17.01.2010 09:56
    to govs,
    yes income tax rose 3 points, but its only 1 point higher than the rate in 2008. If you're going on a purely rate level then just look at the capital gains tax, there wasnt one before and now there its I think 10%.

    risk premium here is the charge added to whatever euribor or rigibor is, and in some cases its 3 to 3.5 now, before joining the EU it was 4, during the boom it was below 1. so if Euribor is itself below 1, i dont see how the current price is that much different than it was during the boom, though when the ECB starts raising its rates then that will be pretty expensive. But are you saying Latvians are not worse borrowers now than they were earlier? and that this type of increase in risk premiums is not happening pretty much everywhere to a greater or lesser extent?

    as to Estonia they had big surpluses going into the crisis, and sure they dont have a Parex, but that is not the only factor. conservative fiscal policy played a big role, they did not increase the size of their state sector as much as Latvia did during the boom, and now they dont have to cut as much. They have a deficit likely below 3% last year, compared to Latvia's 10%, they came from a better base for sure with a surplus and they cut expenditure but it shows you what latvia should have done.


    ``Then tell me, people, does it matter if our CPI index compared to e.g. Swedish CPI index had amassed a huge difference during 2003-2007 if we have 20% unemployment?''

    well one could also say the level of high unemployment may have been the result of an uncompetitive or undeveloped export sector and possibly an overvauled exchange rate. i dont know where equilbrium was in the exchange rate, but i'll just say the latvian tax structure during the boom, where capital gains and real estate transactions were not taxed, kind of herded all investment into real estate since that was the easiest and most lucrative field with virtually no price to pay to the govt for it until the whole market burst. So money went in to develop non-tradables like real estate and not an export sector. Which against goes in some way to public policy during the boom time.

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    G.D. 17.01.2010 05:09
    First, "loss of competitiveness" indicators are just indicators... calculated with certain, not quite theoretically strong, methods and using a heap of dummy variables (as it is done at the ECB and IMF and I have not seen any better)... However, if applied correctly, I would not be so sure the results would unanimously point to the famous "huge overvaluation". Try it out yourself dear economist-friends, methodologies are available on the web, do not be just Krugman-referrers.
    Second, even if some methods point to overvaluation, what exactly does it mean? I guess the whole idea is about competitiveness, isn't it? Then tell me, people, does it matter if our CPI index compared to e.g. Swedish CPI index had amassed a huge difference during 2003-2007 if we have 20% unemployment? The opportunity cost of one additional labor unit is exactly 100 LVL per month (the amount of the stipend) and that is a huge change compared to the 2007, isn't it? The existing staff in firms or wherever have very, very weak bargaining power. If it is not so, one should assume that entrepreneurs are somehow stupid...
    Third, purely and alone PPI (or any other price index used for REER) has nothing to do with the problem and usually noone tries to derive from them significant results because the conclusions depend very much on what we assume about equlibrium and the export structure of an economy etc. E.g. in commodities markets prices are uniform - therefore, it is profits and market shares that matter, not prices... And there are many other considerations but this is not a school.

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    govs from Latvia 17.01.2010 00:18
    But this is just absolutely wrong what you say! The biggest hike (by amount) is exactly in the income tax: from 23 to 26%. And it is flat! For self-employed persons, which represent in Latvia very poor class, the tax hike is from 15 to 26%.Regarding RIGIBOR, whats the point, if banks just do not offer loans in lats? The standard terminology "risk premium" is vague here, in reality thats a retrospective surcharge for their bad management in the past.My point was absolutely not about mortgages, but about loans to businesses which are either not extended or re-negotiated on progressively worsening conditions.The link to Eurostat PPI Nov/2009 is working very well. I do not propose it as a counterxample, but as an illustration that the loss of competitiviness by Latvia calculated w.r.t. to 2005 has been so gigantic, that the present austerity measures have changed too little. And during the 2010 energy prices will go up, the gasoline price as a factor price in Latvia increased for 10% already this year. Most market segments become more and more monopolised.Regarding wage increases, Estonia has suffered similar processes, and GDP fall in Estonia is not much better as in Latvia. The big difference is that Estonia did not have to spend any single cent on bank bailouts. So they are authomatically better for 7%/GDP only by this difference.

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    john 16.01.2010 23:46
    sorry but your first point makes no sense, you are saying that they are raising taxes because of future bank bailouts? there is no evidence of that, the tax increases, the majority of which fall on capital and are normal across advanced economies, like taxes on real estate, deposits, capital gains are pretty standard. i'd like to hear an argument against these taxes, since not taxing them overwhelmingly favors the rich.

    rigibor is not `childish' in a fixed exchange rate one measure of risk is the spread between interest rates in euribor and rigibor, which hit more than 25% at the peak and are now quite low. what you're referring to is called the risk premium, and it has risen, but thats for new loans, not old ones. people with floating rate mortgages now, which is the majority of them, are benefiting from ultra-low euribor levels.

    as to ppi, i couldnt click on your link so dont see a counter example. check csb.gov.lv if you have a question on the data, its all there.

    i'd also like to know what official data source you're using for wage cuts, because csb.gov.lv is not showing anywhere near the wage cuts of 40% to 80% that you mention. I dont believe that to be true of the whole economy and have seen no evidence to suggest otherwise.

    as to the budget, anyone with even a basic education in economics would know that its crazy to raise wages 30% a year when you have a fixed exchange rate, you may have been able to get away with it in a floating enviornment and have the value of the currency fall, but what was done during the boom was deeply irresponsible. if you want a counter example look to estonia which didnt raise wages and the size of the budget like latvia did, ending the boom period with substantial surpluses that they can now rely on. If you're economy is growing at 10% a year and you're still in budget deficit, as latvia was for about three years, then there is a serious problem with fiscal planning.

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    govs from Latvia 16.01.2010 23:32
    Taxes must be increased due to costly bank bailouts. PAREX ist just the beginning.

    Argument about RIGIBOR ist just childish. Lat loans are absolute relicts. But the surcharge on EURIBOR for real loans is increasing exorbitantly because banks must somehow try to cover exorbitant losses on nonperforming loans. Nonperforming loans are unavoidable no matter, is there normal or internal devaluation.

    THe fall of PPI for -14,9% is not visible for me in this table. IF you compare vis-a-vis Germany wrt to base year 2005 as in http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-06012010...
    you see that there are minimal improvements for Latvia.

    Regarding the RealEER - CPI data of Wiessbrot of course I am accepting it, it is a standard method. And PPI / internal base will be interesting, but there is no data.

    But being here in the epicentre and seeing whats going on, and all the EU influence, I would like to expect that PPI for Latvia drops much more for some month, because wages are cut already for 40-80%, and there are not more control variables and/or valua ranges left!

    The doubling of the budget must be treated with attention, because EU Structural funds are also counted as part in Latvian budget. And it would been much better if during this abnormal boom period the lat could appreciate as in CZ, this could take away much of the problems.

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    john 16.01.2010 22:37
    meant to write REER-CPI based, sorry for the error.

    now on to your points.

    ``because TAXES and interest are going up in Latvia to satisfy the appetite of the banking sector"

    interest rates on the rigibor are now at pre-crisis levels, and the banking sector was not advocating taxes and I cant think of a reason why they would.

    As to Hong Kong, I said there are few good examples, and in fact as I already wrote the IMF gave all the recent examples when they published their first report and the challenges to the program, and thats mostly what Weisbrot used in his presentation, IMF reports and data. whether it will work in the end or not, i have no idea.

    ``The extreme hole in Latvia's budget is caused by bank bailouts and has no connection with earlier policies. ''

    if the size of the budget doubled in the boom years during a time when wages were increased 30% a year and GDP expanded 10% a year, then you have a contraction of almost 20%, in what world do you have to live in to see that that wont create a gigantic hole on the fiscal side? indeed, despite all the cuts the deficit was still close to 10% in 2009, thats not all Parex.


    and ppi has been falling a lot, on an annual basis they seem to have peaked at -14.9% in August for exported products, thats citing csb.gov.lv it was -6.3% annually for exported goods in Nov. so i have no idea what data you're looking at.

    but I'll leave it with the final question, asked once more. If you say on the one hand that Weisbrot's presentation was good, then how can you say that when he talked about the exchange rate using cpi data that that cannot count towards competivness, when that is the main measure everyone uses. there are others of course, there is a ppi basis ect. but updated data are no longer available at the bank of latvia web page and i doubt you have access either.

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    govs from Latvia 16.01.2010 21:57
    THe motives of this unhappy programm are well presented in the Guardian article.

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    govs from Latvia 16.01.2010 21:46
    This issue has been discussed - Hong Kong is a feudal hierarchycal society, and nothing similar is true for Latvia. If democracy will be stopped in Latvia, maybe this internal devaluation could succedd, if the Dictator will exert power on banks and monopolies.

    The issue about evading tax hikes is the New Orthodoxy itself, as formulated in IMF SBA with Hungary. What the sense of public spending cuts if there are no summary positive effects?

    The extreme hole in Latvia's budget is caused by bank bailouts and has no connection with earlier policies. Latvia is much more similar to Iceland as to Estonia (where GDP contracted at the same scale, but there is by far no such hardship and panics as in Latvia).

    About PPI and extremely bad PMI values unfortunately I have only one source in Russian: http://www.gazeta.ru/business/2009/12/21/3301846.shtml

    Official PPI statistics is also not very promising. See http://www.csb.gov.lv/csp/content/?cat=2214
    It will last 35 years until Latvia will return to 2000 levels. Vis-a-vis Germany PP are increasing in Latvia even now.

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    john 16.01.2010 21:20
    Weisbrot's presentation showed a graph of the exchange rate using REEF-CPI based over the nominal rate, thats the most common usage. why do you on the one hand bring up this presenation and now say its irrelevant? and besides that ppi has been falling very fast in latvia.

    ``I disbelieve as well that everybody knew the problems of internal devaluation because there are no successful examples of it. ''

    if you read the inital IMF report you'll see that they laid out the pros and cons of this strategy as well as gave the successful examples, which include places like Hong Kong ect., but there are not many great examples thats true. but the authorities and the international lenders knew very well going in what this strategy entailed.

    ``Now this New Orthodoxy has proven itself to be wrong because internal devaluation produces tax hikes, not evades them.''

    when did anyone say that this strategy would evade tax hikes? the problem is you have a shock to GDP, and during the boom years the size of the expenditure in the govt budget doubled. so when GDP collapsed the hole in the budget was huge.

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    govs from Latvia 16.01.2010 21:15
    "because TAXES and interest are going up in Latvia to satisfy the appetite of the banking sector"

    sorry for error

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    govs from Latvia 16.01.2010 21:14
    Sorry, but what the sense of local CPI? The goods are not exported by CPI, but by PPI. The CPI is maybe more useful for services, but services export is not expected to change at all during internal devaluation. The problem is that action on wages seems barely to have effect on the PPI. And there is nothing which can be lowered besides the wages, because wages and interest are going up in Latvia to satisfy the appetite of the banking sector.

    I disbelieve as well that everybody knew the problems of internal devaluation because there are no successful examples of it. At begin of this experiment in anima vilis there was absolutely a different talk, also by IMF and their New Orthodoxy. Now this New Orthodoxy has proven itself to be wrong because internal devaluation produces tax hikes, not evades them.

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    john 16.01.2010 20:57
    (And not CPI, CPI is not about competitiviness)

    sorry, this is just false when it comes to a fixed exchange rate. if you're CPI is running higher than trading partners who have the same exchange rate, the euro in this case, and you dont have productivity to match, then you erode competitivness. thats basic economics.

    and as I said, everyone knew this going into it, you need a lot of deflation and productivity gains to rebalance the exchange rate, though i think the actual figure of equalibrium is very much open to debate.

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    govs from Latvia 16.01.2010 20:28
    It is a final diagnosis, because internal devaluation does not work. There is just not any microeconomic mechanism leading to PPI decreases. (And not CPI, CPI is not about competitiviness) I have already commented about that on afoe. Even as wages fall for 40-80%, enormous increses in payments for capital and indirect costs overweiht that. The dying of firms due to consumption death causes monopolisation in many sectors - so we can not speak anymore about "prices" in these sectors.

    It is already announced that natural gas and electricity prices will peak in spring for at least 30%. Without visible reason.

    The Latvian PPI vis-a-vis Germany has even worsened and continues to worsen, as you can read in this link.

    Fortunately, extreme doubts about internal devaluation mount up recently everywere. Here an article form FT: http://www.ft.com/cms/s/0/cd89c236-0141-11df-8c54-00144feabd...

    Surprisingly, statistics show competiviness increases in countries with expansive countercyclical policies.

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    john 16.01.2010 19:40
    The Article in Guardian is excellent. The proposition „Unemployment in Latvia has passed 22%, and despite its world record decline in GDP, the real exchange rate, as noted recently by the IMF, has barely moved” makes a final post-mortem diagnosis to internal devaluation in Latvia.


    i dont see this as a final post-mortem, this was the main concern from the very begining. as Weisbrot said the REEF CPI-based one that was used in the presentation has not moved much, its about Nov. 2008 levels due to falls in the exchange rate of trading partner currencies in general low inflation everywhere. Latvia has had only three months of deflation and its going to take a lot more than that, but we knew that from the start, so dont see how that point can be a post-mortem if everyone knew that going into the program.

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    govs from Latvia 16.01.2010 17:04
    Actually, the presentation of Mr. Weissbrot was very impressive and very helpful. He structured very well the problem, and also was keen in selecting the right terminology.

    The Article in Guardian is excellent. The proposition „Unemployment in Latvia has passed 22%, and despite its world record decline in GDP, the real exchange rate, as noted recently by the IMF, has barely moved” makes a final post-mortem diagnosis to internal devaluation in Latvia.

    Weissbrot successfully structures the interests of IMF and EU. He clearly states about EU countries: “These governments have an enormous conflict of interest in this case.”

    Not a surprise that Mr. Rutkaste was so extremely perspirating at the conference. He looked foolish and his arguments were not structured.

    In addition, Weissbrot was clearly representing a prestige think-tank, and able to build trust into the audience and also television watchetrs.

    A problem in Latvia is that due to various reasons persons as Oslejs and V. Dombrovsky will never build any trust in themselves, for any average Latvian. Despite the fact that their arguments are more logical as LB and MK.

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    V Dombrovsky -> Armands Strazds, RTFL 16.01.2010 13:31
    Hello Armand. Thanks for dropping by. I will start with your last question.

    I obviously don’t know why Stiglitz and Solow are on the advisory board of CEPR.net I might have a good guess about Stiglitz though - he is a very well known IMF-basher himself. What matters, however, is that you might be confusing the cause and effect here. Are these respected scholars on the advisory board of CEPR because its [CEPR's] intellectual prominence, or, are they there because they want to support its cause? CEPR is a partisan think-tank. Most, if not all, U.S. think-tanks are. Thus, the presence of Stiglitz and Solow tells me they want to support a liberal/progressive/leftist (whatever you wish to call it) cause, but not much about the quality of CEPR itself. Put it another way, I'd listen to what Stiglitz or Solow would have to say on this very carefully, but to anyone who knows what an "advisory board" it's well, not that much of a factor. Otherwise, CEPR.net is small, as measured by budget or the number of "citations", and not very well known. I am afraid these are the facts.

    It doesn't have to mean it's "bad", of course. Actually, I found the talk of Mr Weisbrot to be quite sensible, as one would expect from anyone with decent economics training. It's just that there was nothing new in it for me, personally. Apart from his attacks on the IMF, Mr Weisbrot wasn't terribly original. Ironically, nearly all of his graphs and tables and data came from the IMF itself. He hasn’t done any of his own work on that matter - but ok, it's hard to do any real work with such a small budget.


    As to your first question about double standards, I understand it's quite an obsession to you and your colleagues in - how would you call yourselves? (if I do it you'd just accuse me of ad hominem offences). Lets agree on this: I'll make a note to myself to write about this some time in the near future. If your'e really impatient, try thinking about the following lines. As well noted by john, your assertion is not really based on evidence. If I am not mistaken, you have observations on IMF policies in developing country crises but not that much on developed countries. Could it be that there are some differences between the nature of the crises that afflict developed and developing countries? Or, differences in the available options to fight these crises, rooted in what makes developed and developing countries different? We'll definitely talk about it at some point!

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    Aija Uzulēna 16.01.2010 10:30
    Hallo, gentlemen, from virtual non-neoliberalist camp!
    Would the author care to describe his terms of comparison that have prompted, obviously, "metropolitan" weighing of "pain" inflicted by package structural reforms on the way in our "province"
    [sorry, for not being Moscow, sir]
    as greater for the "elements of the political elite", which must be numbered and powered few, against suffering and development postponed for decades in future for hundreds of thousands of men and women here?
    How about allowing people, the nation, into Your picture? In other words, how about adjusting your "pain"-weighing scales? Or having a courtesy of just editing such speculation out?

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    just for fun 15.01.2010 23:34 http://www.guardian.co.uk/
    commentisfree/cifamerica/
    2010/jan/15/latvia-economy-eu-imf
    Weisbrot's column.

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    govs from Latvia 15.01.2010 20:41
    Generally, there is too much modelling in the whole story. All the models are deficient.

    Better use historic methods. All deflations and debt containments during Great Depression were unsuccesful. They will be without result also now.

    However, the real problem in Latvia is the banking sector. If the banks will be not allowed to fail, there will be no improvements. The PAREX bank must be just liquidated, because there are too much criminal stories around it.

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    ha 15.01.2010 20:15
    another beautiful post G.D. but who are you talking about? the author of this blog, or Weisbrot who isnt Russian? And arent you the one that said Krugman isnt a top economist and says `bullshit'? so its really anyone that disagrees with you is an idiot, not russians right?

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    G.D. 15.01.2010 17:27
    Yeh, sure there are certain axioms widespread among the Russian minority, the main of them is: Latvian governments are always stupid. Fuuu… That simplifies life a lot, then we can take any document and push it through this filter and easily find the truth! In this example all the good things come from “IMF guys”, and what we consider bad things (“the evil peg”) –well the the “nice IMF guys” have nothing to do with it. Except that it is somehow also THEIR program and they had the option to stay at home if there is something sooooo idiotic in the Latvian authorities’ demands.

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    john 15.01.2010 16:58
    to RTFL-

    i didnt read anyone saying poor IMF, and you didnt address any of the points raised, just hurled accusations. If Latvia is to run a countercylical policy, then how is it to do it? if the budget deficit is 10% in 2009, what would have been counter cylical? a 30% deficit? and if thats the case i think we really need to be concerned about long term debt levels and what is sustainable.

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    Armands, RTFL 15.01.2010 16:52
    Poor IMF! They were trying sooo hard, BUT the bad government of Lavia and the bad EU (alias Swedish finance minister) had really twisted their arm and dictated their own rules. And at the end the poor IMF had no other choice than to pay. This sounds likely.

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    Mentor 15.01.2010 16:26
    Great blog! It has been obvious from the outset that the IMF would become increasingly vilified and that the general "consensus" would slowly be twisted into a make-believe world where it was the IMF that came to Latvia, not Latvia that went to the IMF. Stay alert for more gobbledygook from certain newspapers and "think"-tanks.

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    Jānis -> Eldars 15.01.2010 16:05
    IMF is like a doctor in the hospital where only very ill patients are being treated - most of the patients die because of their condition. Would you like to put the blame on the doctor as well???

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    ha 15.01.2010 15:41
    to eldars, i think it was latvia that went to the IMF no? its not like the IMF said, here take this money. and if latvia didnt have the money in december 2008, what would have been the outcome? the government at the time said there wouldnt have been money to pay salaries ect. pensions, so i guess without the IMF we would have gone bankrupt and defaulted.

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    Eldars Loginovs 15.01.2010 15:28
    IMF is the same blessing for Latvia as it was for Argentina, Russia and other IMF "patients" that all went bankrupt and defaulted.

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    Normunds 15.01.2010 13:45
    These guys are just bunch of nuts. I do not want to name any names, but they seem like basically a collection of third rate students and what Americans call community college teachers. Not exactly the intelligentsia.

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    Adam 15.01.2010 13:35
    Too many questions. Your english - bad. Aren't you just fooling around as you say it yourself in the end, don't you?

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    john 15.01.2010 13:11
    i think we need a bit more evidence than an allegation on a blog that someone is a paid lobbyist and therefore his ideas should not be listened to.

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    Observer 15.01.2010 12:53
    As for Mr. Weisbrot - he is a very interesting person as a paid lobbyist of Chavez in the US: http://daniel-venezuela.blogspot.com/2008/05/sunday-morning-... http://daniel-venezuela.blogspot.com/2009/02/arria-vs-weisbr...
    His point of view and Latin-american lobbyism is clear, if you look at his work: http://www.cepr.net/index.php/mark-weisbrots-op-eds/

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    Jānis -> Strazds 15.01.2010 09:26
    Dear Mr. Strazds

    I would suggest that you choose your task force acronym not RTFL, but ROFL for Rolling On Floor Laughing.
    That is because by reading that you and your guest speaker insist on the lie that it was IMF who forced us into maintaining a peg at all costs just makes me wanna laugh. It shows that all of you ROFLers are either liars or just stupid and heaven't read the agreement between IMF and LV government.
    Therefore don't expect that someone will take you seriously.

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    john 15.01.2010 07:08
    To RTFL:

    1) isnt it obvious that the IMF cannot tell the U.S. what size of budget deficit they can run? so in fact the IMF cannot dictate to rich countries any policy since they have no leverage and are in need of no loan. so i'm not sure how thats a double standard.

    and as far as the peg is concerned, isnt this what was written from the above:

    ``that's kind of funny, because it's quite obvious that IMF never wanted to keep the peg in the first place. It (grudgingly) agreed because the Latvian government and the European Commission were so keen to keep the peg.''

    j.

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    Armands Strazds, RTFL 15.01.2010 02:12
    Two questions:
    1) regarding: "I think IMF's presence is a blessing for us." Can this "blessing" explain why they are applying double standards in cases of poor (holding the peg at ANY cost, internal devaluation) and rich (allowing huge budget deficits) countries?
    2) How this "tiny" and "obscure" think tank tricked the Nobel laureates Dr. Stiglitz and Dr. Solow into their Advisory Board?

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    Glens 14.01.2010 20:03
    Good blog. I am just surprised you have not been arrested yet for daring to tell the truth.

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    P. 14.01.2010 18:47
    Thanks for the blog post.

    IMF is neither, it depends more on the point of view (anti-globalization anyone?). I just want to repeat "The road to hell is paved with good intentions".

    As for their effectiveness, I highly doubt that they can really achieve positive results. At least it would be extremely hard and painful, especially for Latvia. IMF will fail until Latvian people will truly understand and believe in democracy, and most importantly start acting on that belief. Until that not much will change and Latvia will continue slipping down.

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    x 14.01.2010 15:50
    however, the last para does not look like imf main conerns

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    Tom Schmit 14.01.2010 12:54
    Memorandum ec.europa.eu/latvija/documents/pievienotie_faili/29.01.09.mo...

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    Robert 14.01.2010 12:33
    Thank you for your view. What about full text of the Memorandum? Is it available anywhere? Was there memorandum just with EC? Or a separate one with IMF exists?

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    Reinis 14.01.2010 10:37
    I should admit I also googled and read this text also cited by you: "...among the 25 most widely-cited think-tanks...". What is this supposed to mean? Is this true?

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    Veiko Spolitis 14.01.2010 09:14
    Good and timely comment. Latvian journalists and the PM press secretaries should do background check up more thoroughly!

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    Janis 14.01.2010 09:12
    Thank you for trying to drag us out of provincialism ;)

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    Piiters 14.01.2010 08:39
    Thumbs up!

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