Tuesday, February 01, 2011

A spectre is haunting Europe . . .

Jeffrey Sommers and Michael Hudson are in fine form in this co-authored piece:

"Bankers and the financial press are asking governments from Greece to Ireland and now Spain as well: “Why can’t you be like Latvia and sacrifice your economy to pay the debts that you ran up during the financial bubble?” The answer is, they can’t – without an economic, demographic and political collapse that will only make matters worse. "

Read on here.

1 Comments:

Blogger Physiocrat said...

Little of Latvia's experiences can be used to demonstrate anything of general applicability.

First, they seem to have a knack of being inefficient, which cannot help.

Second, things are not as bad as they might have been, due to a land distribution which took place presumably in Soviet times, with a break-up into smallholdings. Thus food production and distribution is "inefficient", which means high quality and varied fresh produce, and distribution by small traders in the main city, Riga. In that situation, supermarkets have not exerted their evil grip and cannot get a foothold.

The economy of the country, including its transport system, is still tied into that of Russia. Coal transhipment from the Ukraine is important. Vacant sites and buildings are much in evidence in Riga, as the aftermath of the property bubble.

Due to the small-scale nature of much of the economy, much trade is in cash, making it difficult for the government to collect tax through levies and wages and production. Latvia needs to go the LVT route.

1:17 am  

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