"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Monday, December 01, 2008

Dmitrijs Smirnovs, Latvian economist - Latvian Secret Police arrest him for bad-mouthing the stability of Latvia's banks, national currency, the lat

"To be controlled in our economic pursuits means to be controlled in everything." Friedrich August von Hayek

The UK's EU cousin , Latvia saw their national economy take a very steep nose dive this year. After joining the EU in 2004 they rejoiced that had the highest growth rate in the European Union. Latvia is now in deep recession. Their economy shrank 4.2% in the third quarter.

In late September, Sweden's Swedbank, the biggest bank in Latvia in terms of assets aw deposits slide - not hugely but by 3% .

Parex, a big locally owned rival, also lost customers - 5% of its deposits in October. In the bars and coffee shops Latvians pondered about the solvency of the country and thre strength of thei currency the lat.
Dmitrijs Smirnovs, a 32-year-old Ventspils University College (Ventspils Augstskola) lecturer and economist , took part in a discussion organized by a small local newspaper, Ventas Balss. He reflected a common view that hard times were on the horizon: "All I can advise is this: First, don't keep money in banks. Second, don't keep money in lats."

Shortly afterwards, on Oct. 6, the Security Police opened a criminal investigation into people who "spread rumor and untruthful information". They mobilized to combat destabilizing chatter about banks and exchange rates. Agents directed their attention to Internet chat rooms, newspaper articles, cellphone text messages and even rock concerts. A popular musician was taken in for questioning after he cracked a joke about unstable Latvian banks at a performance.

Swedbank, supported by guarantees from the Swedish government, saw customers return. Latvian owned Parex, sank deeper into trouble as depositors continued to flee.

Fearing the worst, Latvia's government took a 51% stake in Parex and then approached both the European Union and the IMF for help.

A few days later, Mr. Smirnovs was picked up outside his home by two plainclothes officers from the Security Police and taken to Riga for questioning.

Latvia's Security Police are usually busy hunting spies, terrorists and other threats (mainly Russian) to the 2.4 million people who keep 26 local banks busy.

Now free after having been held without charge for 2 days Mr. Smirnovs is still under investigation for bad-mouthing the stability of Latvia's banks and the national currency, the lat. Investigators suspect him of spreading "untruthful information." They've ordered him not to leave the country and seized his computer.

Finance Ministry officials acknowledge that secret police won't save the country from economic crises. But they do believe Security Police vigilance makes the public think twice before spreading uninformed gossip about banks.

"It is a form of deterrence," says Martins Bicevskis, Finance Ministry state secretary.

Gene Zolotarev, an American financial manager who has lived in Latvia for years, says that he's "not generally a fan of totalitarianism," but doesn't mind the probes. "Extraordinary times call for extraordinary measures."

Dzintars Jaund┼żeikars, chairman of the National Security Commission of the Latvian Parliament, the Saeima, has come out in favor of punishing rumor-mongers and making people "think before they speak" about matters of the national currency and economy. (Free Speech Latvia blog)

For those who think of Latvia of a small countruy, far away of which we know little.. this picture may help your understanding.

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