Atslēgvārdi:

(Un)real money 45

Today’s Neatkariga Rita Avize, also sometimes referred to as Lembergs Times, has a big interview with Armands Strazds. Mr Strazds is an ex-musician who lately joined the swelling ranks of Latvia’s many self-styled economists. He is also a coordinator of RTFL, a Harmony Center think tank, and as I understand it, a devout disciple of Mr. Hudson. Knowing all this, I had certain expectations for what Mr. Strazds had to say. And yet, Mr. Strazds did manage to surprise me. Astonish, even, I’d say. Here are my favorites.

Iesaki citiem:

First, according to Mr. Strazds, Parex was a perfectly fine, “strong” bank who just had a bit of short term difficulties. Mr Strazds has an unbeatable argument here - after all, Parex was one of the largest banks, he says. It would do fine if the Swedish government wouldn’t see a good chance to get rid of a competitor.

Second, for the Latvian state to default on its loan from the international community, according to Mr. Strazds, is “normal”. Everybody is doing it, and everybody, Latvia, IMF, EU - everybody, would be better off as a result of this.

Why? Here comes the greatest one. This [lenders’] loan “is not real money”, says Mr. Strazds. “International lenders have not earned this, but taken out of thin air...” Here I have to say that first part of this statement is technically correct. IMF, for example, lends out of contributions my member states - shareholders, including Latvia. So, if Mr. Strazds is right, I suggest you check your wallets. I mean, Latvian government borrowed all these billions of euros made out of “thin air”, which were then used to pay public sector salaries, pensions, etc., which were then spent and received by some other people and so on. So who knows, maybe some of these money found their way into YOUR wallet. So be careful - they might not be real!!!

There is obviously little point in arguing with Mr Strazds on issues of significance. I might suggest him reading up on some Econ 101, but he would probably dismiss it as “neoliberal” propaganda.

What is of real significance in this story is that this interview appeared in Neatkarigai, and everything appears there for a reason. That Greens and Farmers made a step to embracing the rhetoric of Mr Strazds and the likes suggests there is hardly a limit on how low they’re prepared to go. And we haven’t even got to any real consolidation yet...

Iesaki citiem:
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Komentāri (45) secība: augoša / dilstoša

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leberāls 17.02.2011 15:01
@John W
Pēc būtības diskutēt nav par ko. Socialistam Strazdam ir sava religija - bankas ir elles sūtni, naudu var taisīt ar datoru, prātīgas investīcijas var nākt tikai no valsts ieredniem.
Tam nav nekāda sakara ar realitāti, bet ticība jau ir irracionāla.
RTFL receptes Latvijai (un jebkurai citai valstij) ir inde. Defolts, naudas drukāšana un birokrātijas investīcijas novedīs mūs līdz 1989-1990 gadiem - hiperinflācija un milzīgas rūpnīcas, kas ražo nekam nederīgu produkciju.
Kad es kaut ko tādu dzirdu, man gribās raudāt. Bet raudāšanai esmu pavecs, nu tad paliek tikai ķiķināt.

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John W 17.02.2011 14:13
One should never post when pissed off, but.. What a crap response (comment no 41). I don't think I will bother coming back here. I had wanted to see some argument and counter argument from economists on a blog that is also by its nature accessible to non economists, but all we seem to get is some academic pissing competition.

By the way, it seems as the aspect of trust (trust in money, trust in banks, and who provides that trust - (governments and taxpayers ensuring deposits of up to 100,000 euros I believe in the event a bank runs into difficulties) is key and is related.

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'This guy' -> Armands Strazds 17.02.2011 13:54
Thank you, Armands. I suppose I should be flattered :)

If you thought about this a little bit, you would realize your ‘master’ had nothing of substance to say on the issue that I raised. Rather, he dismissed my argument as coming from some agent of the banks. Does he strike you as someone who, using your own words, “exposes his own assumptions to further interrogation”? Or, does he seem a bit like a religious fanatic, whose blind crusade against the banks (capitalists, whatever) makes him dismiss any dissenting ‘pleas’ as coming from the enemy, who he sees as heretics to his faith?

I think I understand the attraction of Mr. Hudson to you. Simple view of the world. Clearly defined objectives, as well as enemies. ‘Us’ vs. ‘them’. Complete with a halo of ‘Copernicus’ of this time.

On the other hand, you have a gray mass of these ‘neoliberal economists’ (whatever you choose to label us). Most of these are really involved in long and painstaking elaboration of small pieces of evidence about how this world probably works. These are then aggregated via ‘academic journals’ so that the leaders of the profession can make better guesses about the big picture. No Luke Skywalker roles here (for most of us), I am afraid, just lots of hard work. Occasionally, the profession makes mistakes, of course. Sometimes big ones. But I think it is also flexible enough to acknowledge the errors and make itself better. Economists like Raghuram Rajan, Paul Krugman, Kenneth Rogoff, Joseph Stiglitz, Dani Rodrik, even, and many others are making an impact and changing the profession. I suspect people like Mr. Hudson will not have any effect on the profession.

The choice is yours, Armands.

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John Doe 17.02.2011 12:08
Any chance to see the transcript of the interview online?

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John W -> leberāls 17.02.2011 11:21
Manuprāt būtu interesantāk ja Jūs piedalītos debatē, nekā ķiķināt. Iespējams, ka mēs te daudz ko varētu macīties no jūms.

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leberāls 17.02.2011 11:05
"just wanted to let you know what Michael Hudson commented on your "trust"-plea:" - Strazda kungam ir sava misija - viņš ir starpnieks starp Latvijas tautu un pravieti.

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John W -> Kapars Gasuns 17.02.2011 09:43
Kaspar, isn't it then interesting to examine which agents in the economy are saved when the bubble bursts, and by who?

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Kaspars Gasūns 17.02.2011 03:22
Ar nožēlu nākas konstatēt, ka bez argumenta "bankas ir apriori morāli sliktas" Hadsona partijai nav praktiski nekā, ko pateikt.

Būtībā sanāk, ka bez iespējas atrast "vainīgo" (kas viņu gadījumā ir bankas) makroekonomiskie modeļi nedarbojas un iestājas pilnīgs kolapss.

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Kaspars Gasūns 17.02.2011 03:21
Ar nožēlu nākas konstatēt, ka bez argumenta "bankas ir apriori morāli sliktas" Hadsona partijai nav praktiski nekā, ko pateikt.

Būtībā sanāk, ka bez iespējas atrast "vainīgo" (kas viņu gadījumā ir bankas) makroekonomiskie modeļi nedarbojas un iestājas pilnīgs kolapss.

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Armands Strazds / RTFL -> Vjačeslavs Dombrovskis 16.02.2011 15:44
Dear Slava,

just wanted to let you know what Michael Hudson commented on your "trust"-plea:

This guy (Dr. Dombrovskis - A.S.) tries to switch the focus off commercial banks. Talk about "trust"! In the US, people ONLY trust the banks because the government promises to bail out the crooks, and not prosecute banks for financial crime. The government promises to make the gamblers whole.

And this guy is trying to blame governments for trying to do something GOOD.

The point to be made is that commercial banks lend money for bubbles that end in bankruptcy. Governments are supposed to invest in infrastructure and protect the economy. Banks don't WANT the economy to be protected. They want to siphon off what they can, leaving their customers holding the empty bag – wiped out by bankruptcy often, while banks say they are NEEDED for this parasitism, and demand bailouts because they're "the economy."
Amazing.

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Gudrais Jānis for Prezident 16.02.2011 10:37
Whatever the finer points of Dombrovskis vs Strazds (and I see that they have many points so fine that no ordinary man or woman can understand them), my point is that Latvian politics has been shaped all these twenty years by a high-end lumpenprolitariat vs the low end, the latter which is running away from Latvia as fast as it can, because the high-enders are leaving them both broke and unemployed.

The end result is fast approaching if not already here: a radically misshapen Latvian society awaiting for the misshaped Egyptians to come and save them.

This is why I argue that not only should Latvia rethink its foreign policy in terms of becoming the capital city of the European Union in the future, but failing that to rent Riga out to the highest bidder. Not long ago there was some talk of the Chinese buying the Greek debt. Why not outright rent Riga for a hundred years, pay off Latvia's debts (not all that significant to China, Germany, Sweden, or even Russia in terms of money), and let Latvians use the down payment to leave the EU, and use the income from Riga in later years to reshape their country ahead of the reshaping that awaits Europe as a whole. Yes, sure, I believe that the Greens will rule in the long run.

I think that it is time for the European Union to have a heart attack if it is to get over its romance with romanticism. Brussels needs first aid from Riga fast. Unfortunately, Riga is united (Vienota?) in holding fast to the romantic hook cast by the West. One possible way to get the EU to get real may be for Latvia to begin preparations to leave it. If the threat does not work, well, then leave it, and see what happens. The happening will be far more interesting than a lumpenprolitarian physician and physics major explaining to the people of this country (however one sees them) all about democracy and how they need no vision to get out of this mess.

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fino -> info 16.02.2011 08:40
Ok, let's be Singapore! When are we going to erect our consecutive skyscrapers, does "Saules akmens" meet the definition? I'd say until 2021 the job has to be done! :)

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info > A.Strazds 16.02.2011 00:22
Ahaa, "Shveices un Singapuras celja" piekritejs esat....Un tas notiktu ar latu ieguldishanu "energijaa" (nez kas taa tada?) un partikaa? Atvai nojiet, bet manuprat jums ir visai maza sajega kas un kaa pasaulee notiek, bet lai nu paliek. Vispar jau sho taku var izmeginat, aiznems kadus 20 gadus. Man gan likas, ka jau izgajam sho skolu lidz Parex kraham, bet nu ja vel vajag...

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Armands Strazds -> info 16.02.2011 00:15
Ja Jūs vēlaties, lai Latvija nekad nepievienotos attīstīto valstu klubam, tad Jūsu ceļš ir apsolūti pieņemams. Tomēr, ja mērķis ir attīstība, tad īstais ceļš ir maksimāli investēt vietējos resursos (g.k. enerģija un pārtika). Šādām investīcijām nav nepieciešams parāds ārvalstu valūtās, bet gan investīcijas nacionalajā valūtā. Latvijas lauksaimnieki ir priecīgi par investīcijām latos. Latvijas Bankai ir jāsāk investēt vietējā ekonomikā tapat kā to dara veiksmīgās Eiropas valstis. Jārada attīstības moduļi komercbankās, piemeram, pēc KfW principa. Eiropas Komisija ļoti labprāt atbalsta šādu praksi, ja tā domāta jaunu darba vietu radīšanai, un nav diskriminējoša ārvalstu investoriem. Diemžēl Latvijas Bankā nav atbilstoši kvalificēta personāla (jo esosajā neoliberalajā paradigmā nekad nav bijusi pēc tā nepieciešamība!), lai profesionāli runatu ar Eiropas Komisijas attiecīgajiem direktorātiem. Bet tas nenozīmē, ka tādu speciālistu nav. Kad valdība mainīsies uz sociāldemokrātisku, mainīsies arī Latvijas Bankas politika. Tā paversīsies ar seju pret sabiedrību un sāks realizēt nacionalās ekonomikas attīstības programmu. Kā rakstīja Terrijs Dvaijers: Latvijai nekas netraucē ātri sasniegt augstaku labklājības līmeni nekā Šveicei, vai atkārtot Singapūras vai Honkongas attīstības modeļus. Ir jābūt tikai politiskai gribai un labam menedžmentam (nedaudz pārfrāzēts Pīters Drukers).

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info > A.Strazds 15.02.2011 23:47
Nu beidziet runat mulkibas, nav verts turpinat izgazties. Sistema ir vienkarsha, SVF SDRs pec butibas ir “tiesibas aiznemties” kada no lielajam valutam. Lidz ar to reali mes visdrizak aiznemamies eiro vai dolaros. Ko ari no mums sagaida atpakal. Lai SDR rastos, savukart, kadai no lielajam valstim ir jauznemas shis saistibas un jaapsola, ka vini pienems SDR. Un parasti valstim taisni vajag kadu no rezerves valutam, jo vinam taisni ir “ieberziens” uz normalu naudu (par kuru var nopirkt normalas preces, piemeram naftu), nevis kaut kadiem vietejiem tugrikiem. Pasakas par to, ka eksistee daudz vienadas valutas pasaule vajadzetu taa kaa aizmirst. Ir rezerves valutas, - parejais viss ir iluzija. Tapec LV gadijuma mes izlaizham eirobondus, jo bondiem latos likmes butu tadas, ka zustu velme to darit. Nav pilnigi nekada nozime, ko mes rakstam uz saviem papiriem, varam pat uzrakstit "miljons Atlantidas tugriki", tapat nozime ir tikai tam, cik daudz par to var nopirkt, - lielakoties resursus. Un latus vajag maz ne tikai cilvekiem arpus valsts, bet ari pasiem latviesiem. Tapec taa nekad nebus pilnvertiga valuta un procentu likmes taja bus stipri augstas. Kas savukart bremzes ekonomiku, ja gribam te izmeginat kaut kadu "monetaras iluzijas" variantu.

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Armands Strazds -> info 15.02.2011 22:39
LVL *is* a "normal" currency. And BoL is a Central Bank. What Latvia needs is somebody qualified enough to professionally discuss financial matters with the ECB. Anybody?

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liberāls 15.02.2011 22:29
"In another one, you’re part of a bunch of misfits who are sick of being ignored by that same world but lucky to have the opportunity offered by this crisis to gain some publicity and influence."
Lieliski ! Another, another ! RTFL is part of...

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info 15.02.2011 21:35
That is exactly my point.

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lo 15.02.2011 21:30
If we can produce such a commitment with our keyboards – they would be more than happy to accept it.

--

but since we are not the ECB/FED/CBJ/BOE we cannot produce such a commitment, so your point is null and void.

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info 15.02.2011 21:23
Come on guys. Learn some accounting first! Balance sheet always has two sides. And IMF do not ask from Latvia bags with cash but to give back the same thing that they gave to Latvia: SDRs. And SDRs are not a currency but a commitment by the ECB, Fed, CBJ, BoE that it will be possible to exchange the SDRs for what is called normal currencies. If we can produce such a commitment with our keyboards – they would be more than happy to accept it.

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lo 15.02.2011 21:16
but how do you account for the biggest lender in this program, the European Commission, which sold Eurobonds to fund the Latvian loan to private investors. Surely defaulting on this loan will mean real losses to either the EC, whose budget is guaranteed by member states (including Latvia), or the investors that bought them.

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Armands Strazds 15.02.2011 21:04
Here additional RTFL comment re: Latvian denial that money is created on a computer keyboard.

The IMF’s Special Drawing Rights (SDRs) is Money created out of "thin air" and, in that respect, is just like all other types of Money.

When deposited into an IMF member’s SDR account, the SDR become internationally recognized Purchasing Power.

When used to make international payments, the SDR’s Purchasing Power attributed remains intact just like that of all other types of Money.

The not-out-of-thin-air aspect of out-of-thin-air SDRs/all Money arises from such transfers of Purchasing Power between economic agents.

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G.D. 15.02.2011 19:08
One more thing. Usually when countries negotiate haircuts creditors look at “ability to repay” (experience with Germany in the 20s helped to understand the argument), i.e. the burden of the debt. That helped Iceland and will probably help Ireland.. For Latvia’s below-the-EU-average 50 percent debt it would be very difficult to get any reasonable haircut. But of course, one may try to get us into more debt: “stimulate” economy for 5 years and then default on Russians or whoever had given us the money with 120 percent debt. Also a strategy. Good luck!

"getting better terms" is simply a myth. IMF and EU has rules, which are the same for every country which comes to them (it would be strange if it was different). I.e. one cannot re-negotiate the interest rate. Other "terms" are purely up to us. They actually don't care. They simply want their money back starting from 2012.

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Gudrais Jānis for Prezident 15.02.2011 18:56
As a prezidential candidate in democratic Latvia (my motto: From vision comes inheritance),

I offer as my first vision--
Riga as the capital city of the European Union. Brussels should be relegated to second place.

My second vision--
to use the possibility of Latvia's default (an unknown known?) as a bargaining chip to get better terms from the ECB and IMF. From what I see of the present government, it is slouching toward Brussels with its tail between its legs.

My apologies to W.B. Yeats. Other visions soon coming up!

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G.D. 15.02.2011 18:46
BTW. I think that some people live in illusions that you can just-like-that not to repay money you have borrowed. First, it does not work like that. After defaulting you usually have long and difficult negotiations about restructuring. And the more haircut you want the longer the negotiations. And accordingly longer is the period of uncertainty, default-level credit ratings (which has impact on every company in a country), and low growth. The discussion is always only about the haircut, nothing else… So, are our companies ready for default-level ratings in order to get some haircut on the 50% debt, let us say 20% haircut, then we would have 40% percent debt? Is it worth it? Second, the IMF always gets their money back because they have preferential status. Besides, it is usually the precondition for even starting negotiations about the haircut. As far as I remember, even Argentina did not default on IMF loans but repaid those orderl

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G.D. 15.02.2011 18:29
That is all cool about economists. But it does not change the fact that if you want to talk it helps if you know at least something about the subject. Well, let's start from history. Economocs would also help. Otherwise... An argument like "the global financial press is full of accounts" is somewhat thin because the same press also did not foresee the depth of the crisis (the same as Armands Strazds).

E.g. I found one good overview to start with
"Recovery Before Redemption: A Theory of Delays in Sovereign Debt Renegotiations" by Benjamin and Wright. Can be found on internet.

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V Dombrovsky -> Armands Strazds 15.02.2011 18:26
Armand,

I liked your response. Not least because I like being called “serious and smart”, of course. You faced the criticism and responded under your own name, unlike some of your colleagues. But that doesn’t change the facts. What you said in an interview to NRA was full of crap.

Comparing yourself (or Mr. Hudson) to Copernicus is a nice trick but it won’t work here. As I see it, there are two possible states of the world. In the first one, you’re right and the world (of mainstream economists) is wrong. In another one, you’re part of a bunch of misfits who are sick of being ignored by that same world but lucky to have the opportunity offered by this crisis to gain some publicity and influence. I don’t know in which world we actually are, but I can understand why you’d want to believe it’s #1.

Also, please don’t associate me with the ideologues such as Mr. Aslund, who, in my eyes, has gone a long way to professionally discredit himself. I have little regard for what he has to say on what is happening in Latvia.

I didn’t understand what you wanted to say with your ‘experiment’ example. So lets approach the issue very broadly. Money is all about trust. At least since the gold standard is gone. That’s why it’s called fiat money, after all. Same with what you refer as money created by banks, etc. I prefer this terminology, but if you really get a kick out of this, you may call trust “thin-air”. After all, it’s hard to see ‘trust’. It’s a bit of a miracle of how so much value is created out of this ‘thin-air’ of yours, isn’t it? Somehow people believe a paper note that says 100 lvl is actually worth something. This belief makes them do things, often (but not always) productive things. But where does this belief in ‘thin-air’ come from? Certainly because they trust the government (or BoL, whatever) will not trick them by switching on the money printing machine, or devaluing, or what have you. So what you call ‘thin-air’, I call a set of mutual interlocking sets of beliefs about each others strategies. In one word, trust.

So what is it, that you’re offering? You want to hit the default button, i.e. renege on promises made to the other parties, e.g. IMF, EU, banks, etc. You think defaults are largely consequence-free, and that’s why you like to think of money as of ‘thin-air’. As I see it, a world where everyone defaults a bit too often (although what this ‘too often’ is a good question) is the world where there is no trust. One side won’t trust another to honor its part of the bargain. Citizens won’t trust the money issued by the state, etc. Basically, you propose to strike into the very fabric of this trust. And I am sorry Armand, you might be a good musician, but, as far as economics goes, you are an amateur who doesn’t have a very good idea what he is doing (feel free to call me an amateur, too, but note I suggest no such experiments). I could produce you lots of references to all kind of peer-reviewed work showing how important 'trust' probably is. You just don’t have a very good clue of what kind of gynnie you want to unleash from the bottle. But there you are thinking yourself no less than Copernicus, or Luke Skywalker or something, pitted in a ruthless battle against “thoroughly rotted and ideologized” economics profession.

Or think about it from this angle. In a comment to this blog one of your colleagues (probably Jeff) asked what have local economists done to create “capital”. We talk about physical capital, human capital and no-one doubts these factors of production are important for economic growth. Don’t you think ‘trust’ (or, as some authors like to call it, ‘social capital’) might be important too? You can’t observe it, but that unfortunate defect of our eyes can’t possibly mean it’s causally not important, can it? So maybe your recommendations amount to destroying that very ‘capital’ that you’re so keen to create.

Finally, what my ‘dark purpose’ is, using the words of you commander-in-chief, is a belief in the virtues of facing the consequences of one’s actions. The Greens and Farmers (and Unity, and your Harmony as well) signed a contract that had fairly predictable consequences. In my time, I pointed out these consequences to some people in the party you are now affiliated with. Even the IMF warned them about the consequences. However, these people didn’t want to look or think that far into the future. And now the consequences are here. How do people learn to think long-term? They must face the consequences of short-sighted thinking and learn a lesson. The ZZS, the Harmony, the Unity, the voters.

Bottom line, Armand. Latvia’s public debt will probably stabilize around 50% of GDP. Nothing extraordinary. Nothing I see as serious enough to justify the nuclear option, i.e. pushing the default button. Yes, paying this debt will be painful. Walking away from this debt might make things seem easier in the short run, but (I believe) be disastrous in the long run, possibly also in the medium term.

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G.D. 15.02.2011 18:22
Defaulting is always an option. However, as far as I know from history it usually costs more for a nation than not defaulting, even in the short term. From what I have read, defaulting usually does not reduce indebtedness because defaulting has a negative effect on growth. Besides, the long-term costs in terms of reputation may last for centuries and are rather difficult to estimate. One thing is clear: if you have two countries, one called LV, the other EE. And the first first makes a huge bubble, then collapses, then defaults etc.. An at the same time, EE remains pretty much stable... Which country would you choose to invest?

So if the goal is to make situation as bad as possible and then, probably, to privatize something cheaply defaulting may be a good option.

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Armands Strazds 15.02.2011 16:11
Dr. Vyacheslav Dombrovksis seems a bit exercised. Then, I can understand why. Few take most economists seriously these days. Like when Copernicus declared that in reality the earth circled the sun rather than the reverse, the church reacted very badly to the news. Rather than confront fact, it attacked those who revealed reality.

Most economist missed predicting the biggest economic crisis of the past eighty years. Indeed, even the poor little old Queen of England wanted to know why they did not see it. Well, almost none that is, for there is the small matter of the Financial Times having declared the Michael Hudson was one of six economists in the world who did. George Soros has described the whole discipline to be so thoroughly rotted and ideologized that it requires a whole new institution to produce reality economics, which he has done by capitalizing his “Institute for New Economic Thinking” with $50 million as a start. Meanwhile, Latvia keeps listening to the pre-Copernicans like Anders Aslund, who made this usual papal like entrance into Riga in May 2009 to authoritatively declare that Latvia’s economy would only shrink by 9% that year. The sage heads at the BoL all nodded in agreement. It shrank by 18% that year.

Regarding a few factual matters, money, is created out of thin air. Mr. Dombrovksis himself admits as much with US quantitative easing program. Yet, he fails to recognize that the problem is older and much bigger with banks doing the same on their computer keyboards. They must be reigned in.

Lastly, regarding debt write downs and defaults, the global financial press are full of accounts of the successes enjoyed by Argentina and Iceland with these policies, while Ireland continues to slog through an effort to pay off its debts. The policy’s efficacy is debatable, what is not is that there are successes.

I have no doubt Mr. Dombrovskis is both serious and smart. However, I would encourage him to expose his own assumptions to further interrogation, and of course, feel free to continue doing so with mine.

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Armands Strazds 15.02.2011 16:08
We should be very thankful to Mr. Dombrovskis for his experiment of how to test if the IMF/EU money is real or not. I would suggest to call it a Dombrovskis-Test (ambivalence intentional!). I tried it today, and it worked! I looked in to my wallet sure to discover the IMF/EU money. But - no miracle! What I found was our national currency LVL. No more, no less. I wonder if anybody can demonstrate a different outcome. What went wrong, Mr. Dombrovskis? Or did IMF/EU loaned to us currency (EUR/USD) that nobody actually uses here (is forbidden by national legislation!): no pensioners, no teachers, no nurses, no firemen, no policemen? (more coming soon...)

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Ezis 15.02.2011 14:23
That's interesting how everybody here is dismissing "swedish" case for Parex failure. But actually that failure is combination of "swedish" attack and lack of reason of former Parex owners. Of course this didn't happen as official act of Swedish government but was done by invisible hand of market allowed to unrestrained operation by Swedish and Latvian regulators!

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Nav svarīgi 15.02.2011 12:38
``E.g. PM Dombrovskis and many experts are saying that creating harsh conditions for unemployed should increase the competitiveness of country. There is peer-reviewed research that proves the opposite – it leads to poor employee-employer mathcing and it decreases GDP generally.''

Piekrītu - var izmantot to stick approach, bet ne jau mērdēt cilvēkus badā, pacelt minimālo algu un baurot, ka šie, redz, nestrādā (kai gan to darba vietu vienkāršajiem strādniekiem nemaz vairs nav), bet dzīvo no pabalstiem, tādēļ arī tie jānoņem, citādi vēl viņu bērniem arī radīsies pieradums dzīvot no pabalstiem (bet tikmēr, lai padzīvo no miskastē atrodamā, jā - Latvijā ir diezgan auksts, bet tam jau arī var atrast savas priekšrocības) :)

LV laikam pirmā valsts, kur ne tikai FM pēc rekomendācijām jāpieņem darbā cilvēki, kas saprot, kas ir ekonomika, bet SVF arī tik lielos apmēros runā par sociālo drošību bezdarbniekiem, bet var saprast - citādi vēl viņiem sāks likt virsū vainu par to bezcerības ieleju, sāksies griešanas ietekme vecajās ES valstīs, atkal brauks un filmēs, kā tad veiksmīgais Latvijas piemērs beidzies.

Veikt iekšējo deflāciju , ne devalvāciju pie atvērtām robežām un mobila darbaspēka īpaši gudri tāpat nav, bet to jau, liekas, saprot arī pats SVF.

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leberāls 15.02.2011 12:17
Labs raksts ! Pēc Strazda intervijas jebkurš bandīts var atņemt godātajam "self-styled economist"-am īpašumu, kliedzot apmēram tā- "hei-hei, valsts augstskola, SVF, ASV, fiat money, QE, čau-čau."

@m.
Mr. Krugmans ir saņēmis Nobela prēmiju par pētījumiem par brīvas tirdzniecības priekšrocībām, bet Strazda k-gam un RTFL par šo tēmu ir absolūti citi uzskati (gana eksotiski, atgādina Lui XIV Franciju).
Un jau ilgu laiku Mr. Krugmans nav zinātnieks, bet tikai un vienīgi - kreisais publicists.

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zxzxs 15.02.2011 09:56
Economists have their place in the scheme of things, but I am always surprised that their proposals are in the interests of the banks, well, almost always.

There has not been one suggestion by a Latvian economist or statesman/woman of how to accumulate capital, except perhaps by deforesting Latvia and letting lose all dogs of avarice āka "uzņēmēji", no restrictions on them whatsoever.

I am for making Riga a competitor to Brussels and become the future capital city of EU.

If that does not work, we can bid Riga out to the highest bidder (China would be especially welcome) for 100 years. The intent here is to turn Riga into an engine of wealth making, instead of spender of the last pennies (Ls 84 mil) to build a concert hall.

I would love to see the next president of Latvia cancel the 2014 "Riga cultural center of Europe" project as totally irrelevant to the problems facing Latvia. The shock of such a cancellation would ring alarms bells all over Europe and Latvia, and could lead Riga Latvians into taking the poverty of the countryside seriously. Else, the 2014 project is simply to impoverish the Latvian countryside further.

Mr. Rubiks has just come forward with a program of how to save Latgale, a region that the governments of the last 20 years have destroyed rather energetically. EU deputy Rubiks' plan seems reasonablek, though further discussions are necessary.

I could go on with any other number of points, but let me end by suggesting that the government of Latvia takes on Mr. Hudson and Dombrovskis on its payroll as official advisors for a year and let them slug it out in view of us all.

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bomzis 15.02.2011 09:24
M wrote:
``E.g. PM Dombrovskis and many experts are saying that creating harsh conditions for unemployed should increase the competitiveness of country. There is peer-reviewed research that proves the opposite – it leads to poor employee-employer mathcing and it decreases GDP generally.''

what research are you referring to? if you dont cite anyone than why should we care what you have to say? Its not enough to say such research exists, sources must be provided, otherwise its a waste of time.

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Lasītājs 15.02.2011 00:23
Tādu sviestu no it kā cienījama ekonomista negaidīju. Identificēt SC ekonomista Strazda viedokli ar Lemberga uzskatiem vai vēl trakāk ar ZZS uzskatiem tikai tāpēc, ka šī intervija publicēta NRA ir vienkārši aprobežotības kalngals. Vai tad katra intervija kas tiek publicēta šajā izdevumā nozīmē Lemberga vai ZZS atbalstu? Varbūt arī tad, kad Kristovskis vai Ēlerte tiek intervēta, tas ir Lemberga viedoklis? Vļe varētu saprast ka ar tādu paranoju plātās Streipveidīgie, bet it kā cienījams ekonomists pauž sādus uzskatus. Nu esmu pamatīgi vīlies Dombrovskī.

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John W 14.02.2011 21:52
As an interested lay observer (no research papers to my name - just a desire to better understand what is happening - let's get that out of the way), the issue of seignorage seems pretty interesting (I will admit I had to look the word up.). I would have thought that it is a pretty key point that the issuers of currency receive interest payments for effectively - well it seems to me - creating money out of thin air (if it is a fiat currency that is). Wasn't that the declaration of Patterson, the first governor of the Bank of England, when he said "the bank hath the benefit of interest on all monies it creates out of nothing". - (I think that's right.)

If the central bank is privately owned, as the Federal Reserve is, isn't this a point of real interest with regards to the political economy?

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runc 14.02.2011 21:11
On the two arguments:

1) It is well known that Parex would have collapsed without state support, and saving Parex, although the process was imperfect, prevented larger losses. Part about Swedes getting rid of a competitor makes no sense.

2) Lenders gave up some purchasing power by lending money "created out of thin air". If Strazds seeks moral reason for not repaying, he might base this on the premises that a) stealing from thieves is OK morally b) lenders are thieves because printing money is equivalent to stealing purchasing power from common public. While the first one is a matter of judgement, the second one is unlikely, seigniorage has many publicly supported purposes and can hardly be called pure "stealing" nowadays.

From this it seems that Strazd's opinion is at least partly misinformed and based on shakey grounds. The economic effect of default is a diferent matter, neither defaulting nor repaying has conclusively proven to be better for the borrower (but repaying is probably better for the world as a whole)... so, although probably of little significance for economists, at least "honoring the deal" with the lenders seems a pretty good rule to go by under the circumstances.

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VS 14.02.2011 20:14
Gentlemen of wisdom, can you please comment is common language as the knowledge of Economics of common man is limited (and a few are interested learners).
Latvian house debt to common man: why it must be honoured after the bank takes repossesion. Banks reaped rewards, shared wealth during boom years. The bust must be shared. Apparently, the coomon man continues to carrys the burden. Why?

National debt: why not default. afterall, the same banks who made profit would be first to suffer from default. Why should general population and common man pay the price with years of higher taxes and deficit cuts.
Or will there be anyone left since the debt burden does stress competetiveness in international market through higher taxes..

Very common thoughts. Please advise where these are flawed. And there is no flaw, why not default?

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V Dombrovsky -> m. 14.02.2011 18:51
A master decided to defend his disciple? Let me return your last question to you. Who are you, Mr. M? My research and achievement record is known, whatever it is. But it’s a bit hard to check your publication record, Mr. M. Care to help me there?

As to your points, lets start with the ones that are misguided. I never argued harsher conditions for the unemployed would contribute to competitiveness of this country, nor was I ever “quite satisfied with the BoL policy”. If you mention the word “research” so often, you should put a bit more work to get your sources right.

Now the ridiculous. Are you seriously trying to say here that the NRA (and Strazds) rhetoric is the same one as use by e.g. NYT? That, for example, Paul Krugman would see the bust of Parex as the work of the Swedish minister of finance who wanted to remove a competitor to help his buddies at Swedbank? Or, this pathetic lets-make-the-banks-lend-all-the-money-they’ve-got (reserves are for the wimps!) argument? Not the level I have ever seen in e.g. NYT. Again, you should seriously work on your facts there.

The ‘thin-air’ one. So the U.S. is doing QE to devalue its currency in a politically correct way. So, since U.S. is a major funder of IMF, it seems to you that, therefore, some of the money that IMF is lending is coming ‘out-of-thin-air’. We could argue about details, like that demand for US dollars probably depends on inflationary expectations, i.e. the extent of QE, but fine. Does this get you anywhere near saying that what IMF lends comes out of thin air? Come to think of this, you don’t even need QE to happen here. Wouldn’t plain seignorage do - something that’s happening all the time in every country. Is this grounds for saying, at any given time, that governments take money ‘out-of-thin-air’? Are you trying to portray yourself as a serious economist here? Well, excuse my lack of peer-reviewed publications here, but I am just not buying into this.

And the final one - on defaults. OK, the studies do fail to find substantial after-effects of sovereign defaults and, on average, countries do seem to regain access to capital markets after about four years. And you think a few papers published in Journal of Development Econ (and even one in JeL) is sufficient grounds to default whenever one thinks life is too tough? I mean, you’d bet it’s a well-researched area? Or, have you noticed maybe that, say, Reinhart and Rogoff data say defaulting once makes you more likely default again? Would you take, say, Greece, that serial defaulter as a success case? Mind you, it’s not like I am against defaults no matter what. Say, Greece should probably have its debt restructured, and Ireland hardly did the right thing when it guaranteed all its banks. Closer to home, creditors of Parex should have received a substantial haircut (in spite of best efforts of Harmony to the contrary). But I don’t see default as something you should do once life gets a bit too tough.

And we come to the main problem with Michael Hudson & Co. This default idea - whether explicitly, or implicitly, via inflation, is just about the only idea that you have, don’t you? That’s what it really is, down below, - you advocate start fooling people. Start with defaults on loans, then create inflation by printing money (why not, if money come out of ‘thin-air’?), and so on. Hope you can fool all the people, all the time, in other words. And you call me “short-sighted”?

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m. 14.02.2011 17:51
Well - and wording "That Greens and Farmers made a step to embracing the rhetoric of Mr Strazds and the likes suggests there is hardly a limit on how low they’re prepared to go." leaves room for some debate about the meaning of words "low".

Rethoric (or arguments) used by Strazds and also NRA (in this case) is usual set of ideas and arguments of almost every Wester progressive or centre-left party. This rethoric is repeated again and again in the pages the most renowned or one of the world's most renowned newspaper The New York Times (by number of Pulitzers, by citation count in US Senate processings - senators are eager to make references to this newspaper, by the record level of readers of its online edition). And this rethoric is more or less repeated by Nobelists and top citated economists as well - like Krugman.

I would like to ask - who is Mr. Dombrovskis and what is his research record or aschievemnts if he is saying that this line of thought and ideas is someting low? I guess - there is some rather dark cause why Mr. Dombroskis is using such rethoric as he is using.

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m. 14.02.2011 17:37
The experts of this country are notable for their short-sightedness, maybe they master economics at introductory level (e.g. Econ 101), but largely they have incredibly poor record of peer-reviewed research and they lack knwoledge about the recent developments in the economic science.

E.g. PM Dombrovskis and many experts are saying that creating harsh conditions for unemployed should increase the competitiveness of country. There is peer-reviewed research that proves the opposite – it leads to poor employee-employer mathcing and it decreases GDP generally.

Many experts picture sovereign default as the end of the country. But again – recent peer-reviewed research in Journal of Development Economics empirically proves that countries experience significant hardships shortly before the decision about default is made public, but long term consequences of sovereign default are much, much smaller that it is assumed in society at large.

Many experts are quite satisfied with the policy of BoL, but again – peer-reviewed research shows that many small countries can use inflation targeting regime with quite good results – something that BoL says is not possible at all.

And about creating money out of thin air – well – maybe some IMF contributors are giving real money to IMF but one can be sure that IMF is receiving money that is created using QE as well – so – it is indeed correct to say that some of IMF money comes out of thin air.

I would like to suggest Mr. Dombrovskis (both of them) read more or something advanced about economics, otherwise there is threat to be enslaved by right-wing propaganda. And besides – doing some high-quality research may also help to get some knowledge.

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