News from around the web: 2009-12-10

  1. aitrader says

    Killer Debt: Dubai, Greece, Spain — Now the Baltics?

    We talked about the situation in the Baltics earlier this summer, but I would like to cover the topic again to highlight my belief that a devaluation of the Latvian currency is nearly certain. Although it hardly sounds as if that event could affect the global economy, history tells us otherwise; the tiny country of Latvia may signal the return of risk-avoidance in the region and beyond.

    When we first covered the Baltics back in June, we focused on the similarities between present day Latvia and 1997 Thailand. Both countries had a pegged currency, and their respective governments’ coffers were being drained by a defense of the peg. In Thailand, the abandonment of the peg led to the Asian contagion that swept across the globe rapidly and affected all emerging and developed markets. Latvia is coming perilously close to devaluation because its tax receipts, and thus its ability to defend the currency peg, are plummeting along with its economy.

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