I just reread a book of the time when Finland had freed capital movements and made the transition to so called open economy, in order to join the EU. This book has a promising name: Invisible Hand (Mauno Saari: Nȁkymȁtön kȁsi, Gummerus 2006). It describes the chaotic set of events that most Finns remember seeing in the television and these events seem just as chaotic in Saari’s book as they were in reality. Where did the Finnish people live over means? Why Iiro Viinanen had to take all these huge debts? People were not told anything at all of the real reasons. I was not in Finland at the time when the depression started, and when I returned, my own field, telecommunications, was doing just fine. At that time, I neither had time not interest to think of the reasons of this depression. Now I have read a number of economy books and realize that these events follow the general theory of what happens when the economy is opened in the way demanded by the IMF.
After the Second World War up to the releasing of capital movements Finland, like most other Western democracies, followed a Keynesian economic policy. That means that capital movements to and from abroad were controlled and small in scale. Capital that was over the years created by Finnish economy could not escape abroad. Neither could foreign capital come to Finland. That means that there was less capital than there was demand, but the capital that there was had to be invested in Finland. The government gave benefits for investing this capital to machines and other capital investments in selected sections of industry, notably such branches of export industry where Finland had relative advantage. As a result of this policy the economic growth in Finland was very good and the country had managed to catch up with other Western countries by the time capital movements were freed. Employment was low, public debts were low, inflation was in control, GDP growth was high, everything was fine. There was one thing: profitability of capital investments was low. This is a natural result of this type of growth: it increases the amount of capital per worker to a high level, thus the gain of still increasing capital is small. The second reason for the low profitability of capital is that worker unions were strong and could demand increases of wages when profitability of work increased. Thus, most of the increase of profitability caused by improved technology moved to wages of workers. There were not many who suffered from low profitability of capital. By definition those who suffered had to be people who had lots of money, and they still earned something with this money. Yet, Finland belonged to WTO and Bretton Woods institutes demanded that economies must be opened, including freeing of capital movements.
Many things happen when capital movements are freed in a Keynesian economy tuned to increase exports. In the Keynesian model there were no better investment possibilities for capital than Finnish export industry, but now there are more profitable investment possibilities abroad. Thus, Finnish capital escapes the country. It means that Finnish investors, who e.g. sell their shares in Finnish companies get Finnish marks and want to exchange them to foreign currency, like US dollars. As many people try to sell marks, the value of the mark sinks. In 1990-1991 Finland tried to keep the value of mark fixed because according to the Washington consensus inflation was the main evil. As markets had too many marks, the mark should have devaluated, but instead Finland revaluated mark. This move reduced export. Then we clearly have a country where the market thinks that the currency is too high, but the Bank of Finland tried to keep mark in this high value by buying marks. Buying marks spent the currency reserves the Bank of Finland had collected and Finland had to take large loans to get foreign currency by which to buy marks. This is how the huge loan was created.
Reflect a while. Who gets the money? The Finnish government (Finnish taxpayers) get a huge loan. Somebody must get the money. It is the Finnish investors who move their money away from Finland. The effect of the Bank of Finland keeping the value of mark high by buying marks is to enable these Finnish investors to move their money (which is in marks) abroad. Had they simply put a pile of Finnish marks to their pockets and traveled abroad and then exchanged marks to dollars in the destination country we would have this money leave Finland, but the government of Finland had not got any loan. What Finland did is exactly the way the IMF requires to be done: protect your too strong currency as long as is needed for investors to pull their money from the country before the currency collapses.
This was one clear effect. The other one is that as there was too little capital in the country during the Keynesian system, after capital movements are freed there is a demand for foreign capital. This capital was taken as foreign currency loans by Finnish banks, which then distributed the money as loans in Finnish marks to Finnish customers (people or companies). The banks had the risk of devaluation, as devaluation of the Finnish currency could make the foreign loans much higher. These foreign loans had to have guarantees, so Finnish banks gave as guarantees real estate that they owned. The values of these real estates increased because much of the loans to Finnish customers were used for buying real estate in Finland. That means, giving house loans much easier than before raised the prices of houses and as the bank used its buildings as guarantees of loans, it could take bigger loans from abroad. This is the most typical real estate bubble and it is bound to finally collapse. When the bubble collapses the guarantees are not sufficient for the loans, thus foreign investors cancel the loans. In order to pay the foreign loans, the bank must cancel loans it had given to Finnish customers. This resulted to some 30,000 or so bankruptcies in Finland in 1993-94. The government decided to save banks, which was done my creating a junk bank. This bank bailout was then paid by taxpayers. Who here got the money? In this case much of the money actually disappeared e.g. in an investment that was abandoned.
Iiro Viinanen, the Finnish minister of treasury at the time, was unwilling to devaluate mark even though mark had a too high value. We can understand this from the side of Finnish banks: they had taken loans in foreign currency and distributed them as loans in Finnish marks. Yet, the government in any case finally had to bail out these banks. The loans of the government had been taken in order to protect the Finnish mark. They were loans taken in foreign currency and to be paid in foreign currency. The government had to collect the Finnish money from taxpayers to pay these foreign loans. Thus, it were more difficult for Finland to collect the money if the Finnish mark had lower value, but it certainly was even more difficult to collect this money if export industry was in recession because of a too strong mark. It is difficult to understand why Viinanen did not devaluate, and indeed, why he originally revalued the mark. The reason probably is that he had been told to do so by people who wanted to move money away from Finland.
Iiro Viinanen actually was a Freemason and he had no education or experience with macroeconomy. I briefly read another book, Karl Steinhauser, EG Die Super-UdSSR von morgen, 1992 (EU huomispȁivȁn super-Neuvostoliitto, 1994). Originally when I read this book I discarded it as nonsense, but now rereading it, it is not so bad. Especially good is the preface in the Finnish edition, by Jakim Boor. This same alias Jakim Boor apparently wrote a preface to a book of the Russian revolution and there was a court case as the Finnish Jewish congregation was irritated by Boor’s text. This book is not available, so I do not know. In the preface to Steihauser’s book Boor does not mention Jews at all, but he does mention the megalomany of Henry Kissinger, that Kissinger thought he was Chyren Selin of Nostradamus, the future world ruler. I had to check this. It seems to be true that Henry Kissinger did think he is the world de-facto ruler, Ilkka Pastinen’s Uusi Maailmanjȁrjestys, (Otava, 2007) tells the same and Pastinen was a Finnish ambassador, a reliable source. This Chyren Selin is in Nostradamus Century VI 27 and 70. Chyren is an anagram of Henryc and he is indeed interpreted as the future rule, more like Anti-Christ. Quite possible that Kissinger knew about Chyren Selin and really was a megalomaniac.
Finally Finland did recover from the recession of 1993-94, or depression it was. Economic growth was good from 1995 to 2008 and after the 2009 crash it has not really recovered. This economic growth during 1995-2008 was mainly caused by the telecommunications sector, with Nokia in a major role, but also Telecom Finland and F-secure and so on. As most macroeconomic tools in the Keynesian theory could not any more be used in the EU, Finnish economists turned to neoclassical theories. (How the Keynesian theory fits to IMF’s requirements, see e.g. the model for Brazil in Robin Hahnel, The ABCs of political economy, 2002. It very well shows how IMF’s demands ruin the target country.)
In the neoclassical theory there is Solow’s growth model and the more modern endogenic growth theory that emphases education. And there is Parker’s diamond model and clusters and the four phases: resource based / investment based / innovation based / wealth based economies. I did read Michael Porter’s book The Cometitive Advantage of Nations (1989) again, but was not at all impressed. It was even more sad to read Finnish economy experts Ari Hyytinen and Petri Rouvinen What created economic growth (Mistȁ talouskasvu syntyy, 2005). I remember when all those things were tried in practice, increasing technical education, inventing and introducing ITC services. It was so useless, total nonsense. Just the type of things that naive Finnish researchers think make economic growth, while in the real world you should look for robber barons and things like that, if you want to explain what really happens in globalization. One day, not so far in the future, I hope to have time and energy to write a scientific article on this topic, but not right now. The economic theory as it is today is really poor. Exactly the type you would expect to find if the field is taken over.
Now I can answer what happened to the conspiracy after the Second World War. It was trapped by Keynesian economic politics that limited the role of international capital. This politics allowed trade unions to have a strong role in discussions how to divide profits that essentially came from technical improvements and better education. Normal people, who had some – even quite much – property were not happy with this politics: inflation ate their savings and trade unions squeezed the majority of productivity gains. No wonder that these normal people, some kind of small capitalists, supporter reganism and thatcherism, which meant stopping inflation and allowing capital investments to be made in more profitable way, that is, allowing investments to other countries and from other countries. I can understand these feelings, nobody wants his savings wasted, as was during the Keynesian policy. But the solution released the beast that had been tied, that is, releasing capital movements gave too much power to big international speculators. Currently they control the IMF and the World Bank, and as almost all countries belong to WTO, they have to follow the policy of IMF. This is the same conspiracy as the original bankers-Freemasons conspiracy. Masons are today in a minor role, but possibly Iiro Viinanen was selected to sack Finland because he was a Mason. Hard to say. Masons may still be needed in some special cases. It is the banks today, some special banks, and the USA, and for some reason or another, they have special interest in Israel.