Sunday, 24 February 2013

Lean times...

How come during the first wave of the crisis (I still assume economic misery lasting since 2008 would only ease, not cease) Poland was a “green island” on the map of Europe, while these days, although Polish economy does not, and predictably will not, contract, there are several CEE countries that outpace Poland in terms of GDP growth. How come? In my view there are two factors that contribute to relative frailty of the Polish economy. First is the strength of the Polish currency, the other is dwindling consumer confidence.

The former can be easily quantified and its impact on growth can be explicated with referring to currency regimes. Currencies of countries severely hit by the economic woes in late 2008 and 2009 were pegged to EUR (Baltic States), or these countries had just adopted the single currency (Slovakia). Polish zloty was then allowed to float and speculators betting against our currency sold it off  to levels which considerably boosted competitiveness of Polish exports and decreased demand on foreign products. Today PLN is fairly valued against other currencies and so Poland cannot fully benefit from advantages of cheap domestic currency.

The latter is less measurable (although you can always work out several indices or ratios to quantify optimism among consumers or entrepreneurs), it is more about collective state of mind and expectations. In 2009 Poles would rush to the shops as if economic slowdown was just a newspaper headline. Retail sales were rising, not soaring, but most Poles stayed optimistic about the future.

These days confidence is shrinking. Consumer feel much more insecure about the future and their salaries in real terms have dropped, while basic costs of living keep going up. Whenever we spend more to meet our basic needs (dwelling maintenance, food) and our income does not rise, we are forced to save on something else. And so we cut back expenses on culture, entertainment, going out, holidays, cars, etc. Plus when we feel insecure about the future, especially about the terms of our employment, we tend to put aside money for a rainy day. This is all visible around…

Just over the recent week Gazeta Wyborcza published two pieces on this trend. The first says fear of being fired is worse than joblessness. From the economic point of view it is better to have the job, than to be out on the limb, but from psychological point of view, the former state, combined with insecurity about tomorrow appears more crippling. Once you are jobless, your situation seems controllable. When, just like me, you have a job, but at the back of your head you have the thought that each day you go to work might be your last day there (I’m still better off because I have a generous severance pay guaranteed!), it is much more crippling emotionally. How can you plan anything? How can you decide to take out a loan if your repayment capacity might be jeopardised? How can you spend more, if a natural reaction in such situation is building a cash buffer? A human needs some stability, while today’s economy cannot offer it.

The second article dwells on general trend on the labour market – employment is falling, salary hikes are frozen, employees hold down the job, and, fearing of losing the job, expend less. This has severe implications for the total economy and becomes a self-fulfilling prophecy: consumers spend less, aggregate demand falls, producers put out less, needs fewer staff, lay off, those laid-off buy less and so the vicious circle keeps turning. Private consumption is the propeller of GDP and drop in it, compounded by limitations in offsetting it by other components of GDP (private investment, government spending, net exports), is quickly reflected in economic growth statistics. Also the current disinflation, despite its unsustainable character (1.7% y/y inflation in January was caused by temporarily cheaper fuels and drop in natural gas rates for households – do not cut interest rates so rashly!), is also the aftermath of lower consumer spending.

Skimping on every step is not just a figment of panicking journalists’ imagination. I can see it around, but not everyone is cutting down on splurging money. Fewer people buy coffee in the morning in our canteen (5 PLN per mug each day, giving it up leaves 100 PLN in your pocket each month), more prepare instant coffee, paid by the employer. I find it harder to find company for a lunch, as more people bring food from home. If they decide to eat out, they prefer our subsidised canteen to more expensive eateries in the vicinity of our office. Prices above 15 PLN for main course (without a soup) are prohibitive for Poles all ranking among 5% best-earning ones. Many decide to eat only a soup… They see merits of shoes bought in Deichmann or CCC, when choosing their holiday destinations, they seek cheaper places. Polish countryside is again an option, with agro-tourism being far less costly than mountain or seaside posh resorts. If abroad, Bulgaria, Hungary and Albania are all the rage, offering much cheaper accommodation that Mediterranean countries. Colleagues who have returned from winter holidays say lodgings and borrowing skis are much cheaper and despite this there are fewer tourists. Zakopane was all desolated as prices of rooms and in restaurants were far too steep (50 PLN for a lunch for one person is a daylight robbery indeed!). Going to a cinema – not more often than once a month, to a theatre – once in a quarter – restraints on spending on culture are quite typical. Car or public transport – the latter quite often wins. Traffic density and number of cars covered by snow for an extended period are respectively: lower and higher this winter. Traffic jams are not as bad as they use to be... No wonder if many people have given up on their cars.

Maybe what are just observing is just the farewell to credit-fuelled growth and onset of era of frugality. Number of new mortgages granted by banks in 2013 might be record-low, this will surely have implications for the property market, i.e. accelerate process of adjusting prices to purchasing power of buyers. There is one more time bomb ticking and I have not heard anyone’s concern about it in Poland – there is a property bubble swelling in Switzerland and the country’s central bank might be likely to raise interest rates. This might in turn hit mortgage debtors in Poland with their liabilities denominated in CHF, as amount of monthly instalment is much more sensitive to interest rate than to exchange rate. I am not envisaging spectacular bankruptcies of distressed borrowers, bad debts will not soar. Instead “home-owners” will be bending over backwards to make ends meet and avoid foreclosures even harder and this will also decrease private consumption.

The upbeat part of the post is, again, that property prices should be heading down…

Sunday, 17 February 2013

Four years on!

Few bloggers can boast about such quite long track record. Despite being short of time and other adverse circumstances I’m soldiering and don’t plan to give it up. To mark the anniversary, a short list of several out of over 300 posts that deserve to be remembered. I’m not judging they are my best, nor claim they are outstanding, but think are the ones worth reverting to.

The very first serious post – in the middle of option crisis in Poland

The timeline of Polish history after 1989, but before its defining moment which ensued 10 months later.

At the end of this trifling post – an appeal for support to Paula Pruska, young Polish blogger, who documented her fight against the cancer, lost on 31 August 2011…

A look at pathologies of Polish banking from before the times when I immersed to it – as a 3rd year student with no job, no income and little assets I was offered a huge loan…

The shift from socialism to free-market economy – who was better-off,who worse-off.

Taxation and justice – part 1 and part 2

My take on martial law in Poland – hasn’t changed since then

Why I don’t commend pursuing loose monetary policy – a recommended read less than two weeks after fourth consecutive interest rate cut in Poland

What’s to blame for the crisis – Lack of fear or other factors?

Black swan theory – posted two days before Smolensk crash – what a coincidence…

A hilarious attempt to write a letter of application in English – one of many lost battles betweens Poles and the most often used foreign language in Poland.

How end justifies the means – after three years I look at how PiS and its followers have no scruples to harness any method to attain their political goals – this will never change…

The whole series of posts on the story of 1,000 PLN I lent to my classmate who turned out to be a compulsive gambler – I haven’t recovered the money, but it’s nothing compared to him, up-and-coming lawyer expelled from university, doing a sentence for unpaid debts and after a few suicide attempts…

Probably the most controversial post on Smolensk crash – number of comments proves this best!

Winter timelines – 2010/11 and 2011/12, another one pending

A comprehensive description of workings of Polish pension system, written in time when it was one of the most topical issues – part 1 and part 2

Memories of 9 April 2010 and 10 April 2010 – for posterity…

The last post on studying at my university – foreign language teaching evaluation

On taking risks – indispensable in our lives

A gloomy picture of farewell to the ruthless corporate world – this year my company is going to lay off 600 employees, or over 10% of its staff. Here we go again!

My last year’s examination of conscience – helped me understand a lot and realise how many mistakes I had made…

A conversation between my guardian angel and me – over four months have gone by, I have broken away, but still there are days when I have to chase away ghosts of the past… And here is when it began. Over a year wasted?

Corpo-life in a nutshell – a wry look at absurdities of corporate capitalism and similarities between it and the communism.

On top of this, I’d add all reviews of films and books – it never hurts to have a dose of culture here…

Anything you’d add to the list, enjoyed most, etc.? My foregone conclusion is that since the inception of full-time job quality of my blogging has gone down - less time for writing, less time for reflections, less inspiration...

Sunday, 10 February 2013

Me – the odd one…

I haven’t planned to mark the second anniversary of submerging into corporate world, neither here, nor at work, but it somehow coincided with the first… kind of crisis. It’s not a pure burnout, nor anything akin. I’m still highly motivated, my work gives me a lot of pleasure and satisfaction and still offers a lot of challenges. It’s about people I’m surrounded by.

Overwhelming majority of my colleagues are staid, several years older people who’ve set up families – are married and most have offspring. For many months I hadn’t minded it. I would get along with them and still do so, unlike many of my friends from university who couldn’t imagine working with people not of their age. I hadn’t mind it, but with time it sank in to me I’m a different breed. It’s not just boiling down to the fact I’m 25 and most of them are in their 30’s, but this age difference is a why and wherefore I don’t fit in.

I was aware of some sort of generation gap long before, but I first realised the depth of gulf between us early last month when one of my colleagues returned from maternity leave. Our team went down to our canteen for a coffee and to have a chat. The conversation, predictably, revolved around early stages of parenthood, I sat with all the young and slightly older parents and silently gobbled an ice-cream (eating cold Big Milk once a week superbly fends off germs from throat in the winter, recommended second breakfast) and for the first time I felt actually alienated. I felt like standing up and walking away, but for sake of civility I listened to them with feigned interest in things which won’t be familiar to me for a while.

From that very moment I inadvertently looked for ways to escape their company in moments when we were not focused strictly on work-related stuff. I have workmates below 30s at different departments, so I decided to spend most of my lunch / coffee breaks with them, much to my fellow colleagues chagrin (I don’t understand why they find it so aberrant I seek company of my peers).

Since then some of their habits I used to perceive as minor shortcomings, began to wind me up. The ‘dirty mug pride’ is at the top of their list. Whenever I see them coming to our desk where we have a kettle, coffee jar and milk with mugs or cups not washed after coffee sipped on the previous day it makes me want to puke and I have to hold back not to snatch it and shatter it on their held-up-high heads. At the end of the day before I leave, no matter how much I hurry and no matter how exhausted I am, I have to go to the kitchen and wash my mug. My parents taught me at home that whenever I use any dish, after I finish I should wash and keep it clean, for sake of hygiene. I don’t feel comfortable with dirt, they do.

This somehow contradicts with how toffee-nosed they are. When talking about holiday voyages, they claim they don’t accept accommodation below four-star standard. Everything below this substandard and they deserve something more. The same goes about business trips. I don’t mind staying in an economy-class two-star hotel. I only need a clean bed linen, a clean bathroom, a closet spacious enough for my suits and shirts and a decent breakfast. Why the hell my colleagues think they deserve a better standard? Are they made of higher-quality clay?

This is all a matter of klasa – you have it or not, you won’t learn it, nor acquire it. Good taste and good manners can be easily recognised – whenever they are rehearsed, they are unnatural. You might finish a good university, get a prestigious job, grow into wealth, learn foreign languages, but if you lack klasa, your image will always lack that missing piece. It all comes out in a way you treat people, how you mark your social status, how you use foreign languages, your reliability and attitude to work, etc. A well-mannered person will never treat anyone with superiority, will not raise their voice, keep cool head, be self-confident (this reflect their lack of inferiority complex), never show off their wealth, will learn foreign languages continuously and improve their command, instead of confining to just getting by in communication. Klasa is about modesty and proper balance between self-confidence and self-effacement.

When I observe them, dwell on their mindset, a picture of a typical lemming emerges in my mind. And the word ‘lemming’ does not just refer to voting for Platforma.

By the way, once I can say I am proud of this government. It has fought over 300 billion zlotys for Poland from the EU budget for years 2014-2020. This money will have a great contribution to helping Poland catching up with western economies. I call it an immense success, much greater than the same amount negotiated by Kazimierz Marcinkiewicz government in late 2005, as conditions are much tougher than then. When everyone was focusing on cutbacks, getting that much money is a success. The other story is that the budget might be voted down by the European parliament, many members of which are reluctant to such ‘profligacy’, so the joy might be premature, but the very fact such amount of EU funds is at stake is a reason give credit to our government. Of course the main opposition party, whose leader quite recently declared keeping fingers crossed for Polish negotiating team, but on Friday silver-mouthed PiS deputy Mariusz Błaszczak announced 300 billion are a bare minimum… How much would his principal attain for Poland during late-night informal negotiations without an interpreter?

Coming back to the main thread of the post – I’ve just realised my colleagues are a by-product of culture of consumerism, or triumph of ‘having’ over ‘being’. Living beyond means to show off their status is typical for Poland’s fledging middle class. The focal point of their wealth is usually a mortgage, symbol of dream of state-of-the-art dwelling fulfilled. Not planning to take a mortgage is it least dubious. In my parents’ generation having so much money implied right away you must have come into the possession of it illicitly. For much younger people it rather invokes a question “what’s wrong with you?” What’s wrong with you that you don’t want to have your own flat right away? And I simply don’t feel like taking such burden on my back if I don’t have to (if I was renting a flat, I’d surely have a different view), for many reasons.
Firstly, property prices, despite recent considerable drop, are still steep and given their relation to disposable income, the imbalance of supply and demand, curbed mortgage lending, macroeconomic situation, dwindling consumer confidence and demographic trends, are very unlikely to go up in two or three years; the worst scenario is that they level off.
Secondly, being free of debts gives you a huge comfort – future is not full of insecurity over job stability, health, source of income.
Thirdly, it’s about pure maths. Assuming I take out a 25-years, 250,000 PLN mortgage at interest rate of 6% (=0.5% monthly) and pay it off in monthly annuities, the monthly instalment is 1,610.75 PLN, out of which around 1,250 PLN goes for interest payment, so in the first month my debt is reduced by 360.75 PLN. It means after a year of repayment my outstanding debt is less than 4,500 lower than at repayment phase inception! I could also set aside some money and from most of them prepay the loan (some rainy-day liquidity cushion must stand by). I could safely assume after a year my outstanding debt would go down by 15,000 PLN. In a year of saving and living with parents (and putting up with them) I can set aside a whole lot more and my savings earn interest on top of that.
Fourthly, there are bargains on property market and in case of urgent sale a vendor decreases asking price and can accept an even higher discount in return for cash received immediately. If you want to hunt a bargain, there will be no time to arrange a mortgage. Oh, I would’ve forgotten, the very procedure of fixing a mortgage is also expensive – upfront and other fees usually consume an equivalent of a square metre of a flat at best.

Being thrifty is not a virtue in consumerist world. None of my colleagues does what my parents were doing from the day of my birth until I was finished high school – they were setting aside small sums of money for a separate bank book, then on time deposits. For what they’d put aside and interest earned I could buy a brand-new city car, but a single zloty from that money has not been spent until now and it still works. Then I’d put aside money as a student and inherited some more money. Savings began to rise quickly as I got a full-time job. Should I be ashamed I have accumulated something instead of throwing it about? Should I, as some suggest, paint the town red each weekend and thus decrease balance of my bank account by at least a few hundred zlotys each month?

Some people say after the stint of two years at one employer, there is a need for a change. But in the respects above, transfer to another bank would mean doing the same thing with the same sort of people, so there’s no point in changing… Unless for pay-related reasons… But this is not the case now…

Got it off my chest! What a relief!

Sunday, 3 February 2013

President’s death / Thaw in Warsaw

I remember my promise to review the film which appeared last Sunday in NGC. I remember and deliberately go back on it, by keeping my impressions brief and concise rather than going on about the documentary.

The film, not unsurprisingly, was a letdown for me. I expected a rather one-sided picture of the disaster, based merely on the official reports, but the outcome was more distorted than I had expected. To make it clear, I am not in favour of conspiracy theories, I accept findings of the Polish parliamentary commission which had investigated causes of the crash and realise film-makers, as in every case, based their coverage only on official reports (there were two in the case), but the bad taste remains.

The depiction of Smolensk crash should not be described as ‘biased’, the better word is ‘selective’ and, at some points, ‘distorted’. In fact, as nobody survived the impact, there is no chance to accurately present what was going on aboard before the crash, black boxes reveal only what was said in the cockpit and tell nothing about other circumstances, including mindset of the crew.

The message from the film is quite clear – Polish pilots’ errors in conjunction with bad weather and indirect pressure on them were the major cause of the crash. I believe these indeed were most likely reasons why the plane shattered before runway, but in fact circumstances were much more complex and going beyond what happened on the hapless day and analysis of other factors should not be confined to mentioning incident from August 2008 when the lead pilot was the second pilot on the plane whose lead pilot refused to touch down in Tbilisi and was expelled from the regiment for disobedience. I can only repeat questions asked by the media – why filmmakers did not bother to see photos of the airport in Smolensk, tragically run-down, lacking equipment? Why nobody mentioned flight controllers were calling somebody to take instructions what to do? Why nobody mentioned the Russian plane which nearly crashed the runway in thick fog shortly before the crash? Why co-operation between Polish and Russian investigators was depicted as exemplary? Why Russians were presented as careful and attentive if every child knows this is a departure from the truth?

Predictably, the film, watched by over 2 million people, triggered public outcry. Most commentators think the remembrance of the Smolensk crash will be based on this film only. I doubt its influence is so huge and I doubt it can convince anyone who showed at least little interest in the accident to change their mind about the backdrop of the disaster. I have seen it and could describe it as ‘factual, yet inexcusably selective’. Now I am looking forward to seeing another film, shot by a Polish PiS-backing journalist, Anita Gargas. I will not make me change my mind, but it never hurts to see what the other side claims and, if possible, pick nits in their reasoning.

Having written all this, I discern how I have evolved over the last four years. In the first two years of blogging wallowing in such mire gave me a lot of pleasure. Two years ago I could argue with commentators on Toyah’s blog and stir up atmosphere there just for intellectual pleasure. Today I would not raise a finger to be get into discussion with them which often ended up with me being offended. For some time now, my interest in politics has been dwindling. Currently the headline-hitting issue are civil partnerships and rights of gays, lesbians and transsexual people. I must say as this does not affect me, I care little about this. I used to dream of ideal political, economic and social order. With time I turned into a typical lemming, focused on his own well-being. I care more about my work and personal life, while other issues recede in the background. My attention is centred on small stuff I have influence on and probably if no breakthrough which could have a serious impact on my daily life takes place, this is not going to change.

Turning to small things… Proper winter has given way to thaw and I decided to make use of warmer weather and picked up a habit of everyday walks from the underground to my office (distance of over three kilometres). Most people detest weather like this – not frosty, but chilly, gloomy, grey, miserable, while it lifts my spirit when it ensues after a frosty and snowy spell. 

To the right – Wednesday, dim morning. I walk westwards ul. Pańska. The building in the background is one of many on Osiedle Za Żelazną Bramą (literally: Behind the Iron Gate Estate), a cult and prestigious dwelling 30 years ago. Today – a home to ordinary people, immigrants from Far East and thousands of cockroaches, and an excellent example of economical housing concept put into practice – a 4-room flat here has an area of less than 50 square metres. Asking prices per sqm usually are between 8,000 and 9,000 and they reflect excellent location and numerous drawbacks of these flats. I would not move there.

To the right – snows have not melted yet, or water has frozen up overnight. Pedestrians have trampled a narrow path, there are lots of puddles and still it is very slippery so watch out! Despite some nuisances the stroll is still enjoyable.

To the right – an essence of Wola. Once a typically industrial district, for the past years it has been morphing into a modern, post-industrial area, with ramshackle factory buildings being torn down and giving way to new office and residential buildings springing up. My company’s office was one the first such developments, completed in 1998. These days the pace of construction around is impressive, seeing how quickly new office buildings are erected you would not dare to claim existence of economic crisis. And here, on ul. Łucka, some time will have to pass before these derelict buildings are demolished. Squalor, dirt and misery is what fills me when I saunter there. The inscription in the foreground without subtleties informs you Poland’s leading political party has reached the bottom. Will it bottom out?

On the other side of ul. Towarowa, just next to IPN head office, you can find this building, the closest to my office stronghold of the bygone times. I have never visited ‘Bargain Consignment’, but my ex-boss recently encouraged to venture for a lunch to the bar. Once I got in there, I immediately caught the climate of cheap bar from PRL times. When it gets warmer, I will have to go there with a camera and immortalise the interior. In the menu you can find typical Polish home-likemeals at inexpensive prices. The key drawback is the length of a wait for being served – not a recommendable venue for hurrying office workers then…