-Alfred

I feel your pain, my friend, I feel your pain.

But since when has Latvia been on the Euro? Or, are you referring to getting out of the EU? And if so, then what? Rejoin the Russian Federation? Latvia’s only hope remains the EU, NATO, and the West — very much Romania’s situation.

Anyway, from what you’ve described, it sounds like slick financial engineering hasn’t worked out very well for Latvia.

I also don’t understand why would real estate prices skyrocket in a Nordic nation. No offense meant, but weather in Latvia kind of sucks, and those second-home owners would have been wiser to get a condo in Spain of Greece instead. Sorry, but unless you’re a polar bear, 6 months of winter just isn’t that appealing.

As far as Latvians migrating to Western European nations is concerned, don’t you think it’s a bit late for that? Time for that was 20 years ago. The Romanians, the Polacks, the Bulgarians, and others have started doing that 20 years ago. Now these people have transferred tons of cash to their homelands, and can weather the recession while drinking domestic beer and eating homemade sausages by the pool. Sorry, but there are no jobs in Western Europe for newly arriving easterners anymore.

BTW, I was born in Romania, but spent most of my adult life in the greatest nation on Earth. Can our French or British readers guess which might that be? Anyone? Anyone? Buler? Buler? There! We have a correct guess: the United States of America. And the winner is… a disgruntled Frenchman…LOL

Vinny GOLD

Partial issues for the country were insufficient vital industries, exports and production in the post-soviet era. We had dairy and timber as the main industries. To keep up with our more urbane cousins to the west, we became a conduit for western-style banking, and (my opinion) a pipeline for russian oligarch and drug money heading into the eurozone, making for a bustling banking center. We also made money charging the Russians transit fees for gas pipelines. Slick finance and watching pipes does not exactly make for a truly productive culture, but crazy amounts of money were flowing in, driving real estate prices to truly insane levels, compared to avg local resident incomes. It was a bubble and a half.

I want to interject on the violence portrayed in the media. The demonstrations were actually pretty peaceful until the cops got antsy at the end and started getting heavy with some drunk guys. Then the violence erupted. We're actually pretty mellow folks. But once you've lost your job, food prices increased and you're up for moving back into your parents' one bedroom flat, tensions can, understandably, escalate.

The unfathomable part was the government's nodding acceptance to borrow from the IMF to pay for bad private loans given out by mostly swedish banks (for vastly overpriced real estate). Some of the loans were to locals, some other nationalities that wanted 2nd homes in Latvia. My understanding is that most of the mortgages were full recourse, but certainly not guaranteed by the govt. The real options for the govt would be to:
1. Allow the banks to repossess and auction the properties regardless of local or external ownership
2. Only allow repo on foreign owned properties
3. Allow no repossessions and nationalize the properties.

Now the avg Latvian is getting wages cut (if they aren't being fired outright) and many social and govt institutions are cutting back dramatically or closing entirely. Why? Because swedish banks needed to be bailed out of criminal loans with IMF money and the latvians will suffer for this for at least a decade.

Of course, if I were in charge of "financial diplomacy" I would also include doing radical things like joining the SCO, getting off the euro and onto gold or renminbi, but only after I froze assets of the swedish banks and told them to go f*ck themselves for being so stupid in the first place. I would also outlaw mortgages being denominated in foreign currencies and/or payments tied to forex fluctuations, since agreeing to such terms is similar to prostitution, except it costs you, lasts for 15-30 years and does not come with lubricant.

1. As of today, most investors from Western Europe have already left Romania, this with little impact on the nation.

2. Romania’s economy is not dependent on credit. It is largely a cash-based economy.

3. Romania has a sizeable trade deficit with the West (Romanians love BMWs and Mercedeses). Therefore, Romania’s import of Western products is likely to decrease, thus it will hurt the West a lot more than Romania. Romania’s car manufacturer (Dacia) is likely to benefit.

4. Over 2 million Romanians have gone to work in Western Europe, mainly Spain and Italy. However, given the severity of the crisis in those nations, more and more Romanians are returning to Romania. And, when they do, they bring their sizeable saving with them as well. They are now investing in construction projects or purchasing goods in Romania. Therefore, this reverse migration is likely to help Romania and hurt the West.

I am not concerned about Romania. The doomsayers would do well to redo their research. I am more concerned about the lazy, work-allergic French and Spaniards, or the alcoholic and sexually depraved nations like the United Kingdom, and Netherlands who have gotten used to have their work done for them by Eastern Europeans, while they discriminate and denigrate these easterners with every chance they have. I hereby foresee a complete collapse of Western Europe (a.k.a. “Old Europe”), and a return to the “Let them eat cake” era.

Yours truly,
Vinny GOLD