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Latvia in Great Depression 8

This recession is often compared to the Great Depression of the 1930s. According to some interesting data here, Latvia has done vastly differently back then. Check out the indices of industrial production in the table below. From a base of 100 in 1929, the index of industrial production decreased to 82.4 in 1932, then recovered to 111.9 in 1933, and then jumped to a remarkable 161.1 in1937. Latvian economy has done very well compared to most other countries in that period. Sweden, for example, experienced only a modest contraction, but by 1937 it only got back to it's 1929 level of industrial output.

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By the way, in this global recession Latvia's industrial output experienced 23.4% year-on-year drop in March 2009.

Going back to 1930s, I really don't know what explained the recovery of industrial output in 1933, but I might have a clue to what explained this really spectacular performance in 1937. On September 28, 1936, Latvian lat was effectively devalued by some 40%. It seems the contemporaries of Ulmanis knew a thing or two about economics.

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Komentāri (8) secība: augoša / dilstoša

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diMka 13.05.2009 01:09
This is a blog and it does not have to be objective. This here is not really an opinion to my mind, more a stylized fact. We have to look more in those times to draw conclusions; I suppose that devaluations were a rather frequent event. At the same time we have to admit that Ulmanis administration was successful in the economic field, at the same time one has to pay attention to the USSR, gravity model…

Does this example add to the pool of arguments in favor of devaluation? Not by itself, but it can remind you that large economic partners of Latvia (Russia, Byelorussia, Ukraine, Sweden, UK) have devalued their currency, so we feel the pressure coming also from that.

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mikelis 07.05.2009 13:44
just because you cannot challenge them doenst mean they cant be challenged.

as i said, one of the most obvious drawbacks may be that there is no global economic recovery to buy up latvian exports at reduced prices and there may be some problems with rolling over corporate debt.

i'd hope we can have a debate on this issue, not throw up our hands and accuse the person of having an economic incentive which is tantamount to saying intellectual dishonest.

if you dont agree with him, give your version of events.

your argument 3 is pretty weak though, if you cant buy as much energy because your currency is worth less you'll just use less of it. if you cant affort imported clothes then you'll mend old ones, and food? time for a latvian locally produced diet then, no more exotic sushi or argentinian steaks.

m.

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Trauts 07.05.2009 13:29
Well he kind of all time says devaluation would be great because of these three arguments:
1.It won't be better if we won't do it;
2.There are worldwide known economists who think that we should devalue lat;
3.It will increase our export (forgetting that we live on import -food, energy, clothes etc.)
And now he wrote fourth argument - because we already did so in 1936 (I agree it was right thing to do back then).
These arguments are dogmatic and not based on facts and therefore can not be challenged.

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mikelis 07.05.2009 09:26
its a blog not a scientific paper, you dont like the conclusion then challenge it. asking if he's paid in euros seems like you're suggesting the only reason he could be in favor of a change in the exchange rate is for personal gain and not because he thinks thats where the evidence takes him.

why not instead ask would the effect be the same today if there isnt a global recovery, or about indebtedness, how would corporate loans be rolled over in that event, ect. instead of impugning his motives.
m.

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Trauts 07.05.2009 09:04
My point was that author gives narrow-minded conclusion without any arguments. There have been a lot of changes in economy since 1937.

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Jaņdžs 06.05.2009 20:21
A perceptive conclusion.

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mikelis 06.05.2009 15:25
do you recieve your salary in Lats?
GBP? Yen? maybe lithuanian litas?

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Trauts 06.05.2009 14:28
Do you receive your salary in Euro?

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