Monday, November 26, 2007

Russia: Death of a Nation

I just finished watching a fascinating and frightening documentary on Russia's demographic crisis (thanks for the tip Jaanus).

It's a look into the rapid decline of Russia's population which is compounded by poverty, drug use and disease. It also examines the growing nationalism in the country, the maker often compares what he sees to 1930's Germany.

It's made by Channel4 in the UK and is available on Google Video on also on some torrent sites.

It's a good watch if you're into Russia and makes you wonder how they'll turn things around internally.

Is Russia trying to devalue the Estonian Kroon?

There are reports in the papers today that Russian websites are saying that the Eesti Kroon is being devalued and people should cash in their EEK's for Euros. Officials have come out and said that this is not true but that hasn't stopped a number of people from rushing to currency exchange places to convert their kroons. Apparently most of the people converting have been ethnic Russians in places like Idu-Virumaa and it hasn't spread much further.

So the question is whether the Russian government (directly or through its various proxies) is trying to cause the kroon to collapse and whether they could succeed? Eesti Pank has said that they have more than enough foreign currency reserves to hold the peg and since the Kroon is a fairly illiquid currency on the global market I doubt that Russia or any Russian organization has enough kroons to sell to make any impact. Also, since the biggest losers of a devalued Kroon would likely be the Swedish banks that control Estonian finances they'd probably do everything they can to purchase the excess money that is coming onto the market. So the only real option would be to try to cause an internal "run on the bank" and get locals to sell their Kroons, which it seems like they are trying to do at the moment but I doubt it will work.

Now I wonder what would happen if Russia tried to push the value of the kroon up instead of down? Could this ruin the economy by making exports unrealistically expensive? Hypothetically if Russia took some of the vast amounts of money they make every day off of oil and started buying kroons they could push up the value of the kroon to effect an already vulnerable economy. I haven't thought this through very much so I'm sure there's a reason why this wouldn't work but it's an interesting thought nonetheless. Most likely Eesti Pank could flood the market with more kroons bringing the value back down to normal and negating any impact.

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Tuesday, November 13, 2007

Economic Crisis a good thing?

Sten caused a bit of a stir this past weekend when some of his comments at a innovation forum made the newspaper. Sten was quoted as saying that Eesti could use a good old economic crash at this point in order to secure the economic future of the country. He argues that Eestlased have gotten a bit lazy, that life is going so well and the money is rolling in so there's no need for radical change. This is good in the short term but long term will hurt Eesti which still relies greatly on Old Town tourism, (no longer) cheap labour, a real estate boom and transit corridors as sources of income.

I think Sten hits the nail on the head and a little shake up is necessary in order to re-order the school system and focus the country on a sustainable economy of innovation and services. Looking at the recent economic stats (GDP growth hits a 4 year low) we may be in process of that correction, whether or not it will be severe enough to shake things up is yet to be seen.

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Wednesday, November 07, 2007


Estonian inflation hit 8.5% in October, nice. I don't see much about it in the papers or any comment from the government. I haven't seen a single step by the government to curb inflation (not that they have many options) and I'm starting to wonder if anyone in Eesti understands the economic consequences of high inflation? Ansip proudly stated that they hadn't adopted the Euro yet not because of any internal problem but because of the strict Euro entry requirements, wonder if he still uses that (weak) argument?

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Tuesday, November 06, 2007


I spent the last week in Spain catching a bit of sun and spending some time with Liisa. I'd been to Spain before about 6 years ago and enjoyed it then and still enjoyed it today.

A couple of things I noticed while in Spain:

1) Madrid's subway system is amazing, it's cheap and goes pretty much everywhere and is exactly what public transit should be. A single ride costs 2EUR but you can purchase 10 rides for about 6EUR. You can take the metro out to the airport eventhough it's 15+ kms from the centre and there's even a line with only 2 stops (I think it's mostly to get up a big hill). They continue to expand the system each year which is something unheard of in Toronto. Purchasing tickets is simple, quick and mostly automated although there is still usually 1 worker who you can ask questions of or buy tickets. The system appears to be used very widely and was always full. I wonder how they get the money to continue to expand the system? Do they get EU money for it? Toronto (and Tallinn) could seriously learn a lesson or two from Madrid's public transit.

2) Spanish lifestyle is fun but doesn't suit me. In Spain time seems shifted, shops don't open until 10 or 11am. They close for a long time in the afternoon and reopen again after 5pm. You can't get dinner until 8:30pm (kitchens are often closed) and no one goes home until 4am. While this might work well during the hot summer days and is fun once and awhile I couldn't live like this. I like to go to bed relatively early and get up early, I'm most productive in the morning, maybe the long Estonian winter nights have permanently shifted my patterns.

3) Tapas is great. I love being able to have a number of different little dishes rather than one big dish. It's also great to be in a country where they don't tack on a 500% markup on a bottle of wine in a restaurant.

All in all a great vacation, coming back to Toronto weather wasn't much fun but it's better than the weather Liisa has in Tartu. :)

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