Nicholas Vardy

I've just returned from a fascinating -- and sobering -- weekend in Estonia.

If you're like most Americans, you may not know that Estonia is one of the three Baltic States that until 1991 were part of the Soviet Union.

Today, the Baltic capitals of Tallinn (Estonia), Riga (Latvia) and Vilnius (Lithuania) are better known in Europe for the beauty of their women -- and as “stag” (“bachelor”) party destinations for British men looking for a good time.

Sure enough, the English guy sitting next to me on the plane to Tallinn was wearing a penguin suit.

I first visited Estonia in 1989 in the bad old days, when it was still part of the Soviet Union. As I remember it, even the departure times at the train station were bizarrely set an hour later than local time, just so they would match Moscow's time.

Fast forward 25 years, and Estonia today is a full-fledged member of the European Union (EU), and it even adopted the euro as its currency in 2010. It is also a full-fledged member of the North Atlantic Treaty Organization (NATO).

Culturally, Estonians view themselves as eminently practical and hard working. With only a population of 1.3 million, scrappy Estonia punches far above its weight. Tallinn was Europe's cultural capital in 2011. It is home to the hyper-modern Kumu art museum, Europe's “museum of the year” in 2008. And as the original home of Skype, Estonia now boasts its own high-tech scene trying to mimic Silicon Valley's secret sauce of high-tech success.

Since it declared its independence from the Soviet Union in 1991, Estonia has become an icon of free-market capitalism. The Heritage Foundation's 2014 Index of Economic Freedom ranks it as the 11th freest economy in the world -- one place ahead of the United States. As such, Estonia gets plenty of approving nods from the likes of Steve Forbes, who regularly praises Estonia for its flat-tax regime and free-market reforms.

Conversely, Estonia also has attracted the wrath of economist andNew York Timescolumnist Paul Krugman, who chided the country for its post-2008 crisis policy of austerity, leading to a “Twitter” war between Krugman and Estonia's U.S.-educated President Toomas Hendrik Ilves. The clash inspired Latvian-born composer Eugene Birman and Estonia-based American writer Scott Diel to compose a “financial opera” --Nostra Culpa (“Our Fault”) -- which premiered last spring in Tallinn.

The Russian Bear Growls

Nicholas Vardy

Nicholas Vardy is currently editor of the monthly investment newsletter, The Alpha Investor Letter, which provides longer-term global investments. He also writes two weekly trading services, Triple Digit Trader and Bull Market Alert, which focus on making short-term profits in the hottest markets in the world.