Latvia Protects its Banking System by Arresting Economist For Speaking the TruthPolitics / Emerging Markets Dec 07, 2008 - 11:39 PM GMT
The Latvian secret police arrested a university professor for delivering gloomy forecasts on the prospects for the Latvian economy and the state of the Latvian banking system, which as with the western banks have been riddled with over leveraged loans made during the easy credit boom times, but now have to contend with the impact of deleveraging and increasing rates of default that is plunging many eastern european countries into crisis.
The latvian police arrested the 32 year economist, Dmitrijs Smirnovs for his public analysis of the state of the country's 26 banks and implications for the Latvian currency LAT which he expected to be devalued. The fallout of end of the credit boom has resulted in economic meltdown for Latvia which saw GDP contract by 4.2% in the third quarter and appears destined to follow a similar fate to Iceland which went bankrupt in October following the crash of its banking system, Latvia also seeks help from the IMF in the form of an estimated $4 billion loan. The Latvian government is attempting to hold to its currency peg against the Euro, however given the economic meltdown a devaluation appears to be inevitable where the longer the country delays the more foreign currency reserves will be spent in the LAT's defence.
The response of Latvia's state police is reminiscent of the dark days of the USSR when the truth was only uttered in the confines of ones homes and any public announcements that did not tow the state line were met by arrest and a summary one way trips to the goolag.
By Nadeem Walayat
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