Sunday, 26 October 2014

Watching one's tongue

If there is an area in which I could mend my ways, I would surely point at being less impulsive. I tend to quickly say or write some thoughts that come to my mind, without second thoughts. The outcomes of acting too spontaneously at times happened to be slightly embarrassing (I was too sincere and straightforward like an innocent child), but never offensive for anyone. Additionally and fortunately it has never occurred to me that I acted hastily in official situations, when weighing carefully one’s words is of paramount importance. But slip-ups with which a young corpo-rat can get away with, do not befit public officials. In Poland one such scandal follows another and the spate of such anything, but well-thought-out public statements is probably bound to never come to an end.

Last week agriculture minister, Mr Sawicki, during a press conference called farmers“suckers”. The government, to tackle the problem over-supply of domestic apples in the wake of ban on imports of Polish fruits to Russia, has put into operation an EU-co-funded apple buy-up scheme, paying growers PLN 0.27 per kilogram of apples (up to a certain quantity). Some growers instead of letting their apples being dumped, sold their fruits off for processing for less than half of the buy-up price… Their economic decisions (analysed up to that point only, since there might be other factors which have not been assessed in this short analysis) did not appear economically rational…

Not seldom does it happen that economic actors behave irrationally. Yesterday the price of one litre of 95 unleaded petrol at Orlen station in Piaseczno was PLN 4.95. At the same time, identical fuel at Orlen station in Konstancin Jeziorna was PLN 5.32. This means the same petrol was 7.5% more expensive on a station of the same distributor (for simplification I do not try to find out whether franchise could be in place) If you buy a full tank of petrol, i.e. 50 litres, you need to fork out PLN 18.50 more and even the cost of driving to Piaseczno and back to fill up a car, which is no more than PLN 8.50, leaves a tenner in your pocket. In simple words such price discrepancy is a simple rip-off. But because free market rules are in place, decision whether to fill up cars at Orlen station in Konstancin rests with drivers. Rational drivers would boycott the station, but yesterday (and on any other day_ the station in Konstancin was chock full of cars. In private, I deem the drivers who came there to buy fuel, suckers. If I were to explain to a wider audience (I do not consider this blog as a way of reaching wider audience) why the station has not gone bankrupt nor has had to decrease prices to stay competitive, as it should if the market was efficient, I would not dare to call those hapless drivers suckers. Mr Sawicki dared…

The next day former foreign minister and current speaker of parliament, Mr Sikorski, in a hurriedly given press interview, mentioned in 2008 Mr Putin in a conversation with Mr Tusk had put forward to divide up Ukraine between Russia and Poland. Several hours later he took back his words, citing lapse of memory as an excuse. Mr Sikorski’s misdemeanour is much serious than the blunder of Mr Sawicki. The latter only offended a group of his party’s potential voters, while the former (according to the version everyone officially sticks to) misrepresented the course of official meeting of prime ministers, compromised his own credibility and held himself up to ridicule. To boot, this clanger was dropped by a seasoned journalist who spent over a decade in the Anglo-Saxon world. I have never thought highly of Mr Sikorski, but the most recent confabulation puts him in even worse light…

Then things went as usual. Contrite Mr Sikorski staged a press conference and apologised, citing ample reasons for why he had made up a story of Putin’s proposal and had given a false testimony. Politicians from the opposition held out for dismissal of Mr Sikorski, politicians of the coalition, with the customary exception of deputy Kłopotek, in unison moderately defended him and tried to sweep the scandal under the carpet.

Poland has really peculiar standards in terms of dealing with reputational scandals. I do not posit one misstep should drag a person down for the rest of their career and do not view the other extreme as appropriate. Standards vary from country to country. In April 2014 South Korean prime minister resigned from his office after a ferry sunk near Korean shore. Five months earlier the Latvian prime minister also submitted a resignation after a roof collapse. I have to admit until today I do not construe motives for both personal moves. The reasoning implies a prime minister can be indirectly responsible for every tragedy in a country they run, regardless of total lack of their involvement in the disaster. This brings us towards a foregone concept of wina Tuska, which is ludicrously absurd. How can you hold a prime minister responsible for a disaster caused by a few construction workers failing to obey safety rules. If there is any explanation, I must be a matter of honour, a concept with which Polish politicians are totally unfamiliar with.

Whatever shameful deed they make, whatever subsequent scandal breaks out, for a few days they are under fire and then the dust falls and they carry on as if nothing has happened. Sometimes there are profound reasons to pretend everything is alright. Such was the case when members of Monetary Policy Council, offended by Mr Belka in wiretapped and then publicised conversation with minister Sienkiewicz, officially claimed nothing happened. Had they taken umbrage in public, they would have jeopardised the stability of the Polish currency, so the price of keeping up appearances was high enough.

I personally view a long-term track record and competencies as crucial in assessing one’s capacity to hold a specific office. For such reason I was not distasted by over-sincere “apologies” of Mrs Bienkowska “sorry, taki mamy klimat”. But if slip-ups tend to recur, it would be better to reconsider whether it would not benefit society if a person prone to get involved in repeatable embarrassing situations stepped down. Being unforgiving rarely pays off, but being too forgetting does not teach to think twice before going one step too far.

Sunday, 19 October 2014


Never ever before, during almost six years of blogging, hasn’t my temptation to commit my thoughts to the blog had to be suppressed by auto-censorship. No matter how preposterously it sounds, self-imposed constraints are the price to pay to stay in the charmed circle. The heading of his post could have contained idioms such as “to throw in the towel”, “put oneself out of misery”. Some of you are able to read between the lines, however haphazard visitors are quite likely to be kept guessing and may it stay so.

It is Scatts who excels at writing rants over crappy customer service, breaking down brand new cars or defective electronic devices. He has a gift of depicting his tribulations in amusing and quaint way. I do not wish to take away the primacy in grumbling he undoubtedly deserves. I need to get off my chest how irritating Szajsung Galaksi Srent might be.

From the word go… I actually don’t need a company mobile phone. Back at the Employer’s I didn’t have one and held dear being deprived of such perk. Many times I had to use my private phone to handle work-related stuff and my private number was spread around the company, but I always had the right (hardly ever exercised) not to pick up the phone when I was off work. At the New Factory everyone can theoretically expect to reach me at any time and it’s a nuisance.

I actually should be contented. The limit for private calls and text messages and 2GB data transfer package could easily allow me to give up on the private phone (something I won’t do since private stuff and work need to be separated) and actually the opportunity to check something online, such as timetable or tram route, is immensely useful. I also appreciate built-in GPS which consumes little data transfer. It all comes in handy and is convenient, but…

1/ GPS can locate you well, but before the phone finds your location, it needs to spend between two and five minutes searching, not very practical when you’re short of time.

2/ Despite running on 4G/LTE Internet connection, pages in the web browser load more slowly than with my shitty 3G Cyfrowy Polsat modem plugged to my laptop.

3/ The cell phone switches between “silent”, “vibration” and “sound” modes at its own discretion. Consequently either I do not know the phone is ringing or the ringtone, resembling flushing a toilet (called ‘waterfall’), resounds at least appropriate moments.

4/ Whenever I shake the phone (and screen is unlocked), it asks me to set up the starting display. It is quite bothersome and if I put the handset to the pocket or lay it somewhere, I need to do it gently, otherwise the request pops up.

5/ I have absolutely no idea why it randomly chooses what to display after unlocking or after entering the menu.

6/ The prediction mode does more harm than good in assisting writing. I eventually turned it off, since after the phone guessed a word, making the handset change its mind required too much effort.

7/ Due to restrictions, I haven’t downloaded any applications, so memory and operating system of the phone are nearly empty and despite this the phone tends to think very slowly and sometimes simply crashes and I need to wait a few minutes before the device comes back to life.

Besides, it’s a quite fancy device. Everyone in the office has the same model of Szajsung and almost everyone whines about its ample shortcomings. There is a rule that you should not look gift horse in a mouth, therefore maybe the rant is out of place. I don’t wish to blame the corporation which has equipped its staff in such devices, as they’ve done it in good faith and it was probably the best model they’ve negotiated with the telecom operator at reasonable price. It’s rather about the producer, opinions on whose products vary considerably, but the term “Szajsung” repeats disturbingly often.

The other story is that myself I can do nothing about faults of the phone, because it is not my property. I can of course report defects to the sourcing department, setting a huge bureaucratic machine in motion and embarking on more trouble than it’s worth. One workmate’s Szajsung totally broke down and he went through veritable hell to have it repaired… Shit happens, but the future seems bright anyway ;-)

For the record – today temperature topped over +19C, one could bask in the rays of autumnal sun in the afternoon. Although the weather is to break soon, October 2014 stands a chance of going down as one of the warmest in history of measurements. Until yesterday, average temperature was +12.7C. It eventually will be lower, but so far it beats October 2000 when temperature over the whole month averaged out +11.6C, but falls short of October 1907, the warmest since records began, when average temperature stood at +12.9C. May the warmth stay with us long!

Sunday, 12 October 2014

Rates down

Most economists expected the Monetary Policy Council to gently set off monetary loosening by decreasing the interest rates in Poland by 25 basis points, while the outcome of its recent session, effective from Thursday 9 October 2014, might be staggering for many. Except for slashing the policy rate (at which the central bank conducts open market operations) from 2.50% to 2.00% (which is another consecutive ever-time low), it also decreased spreads between two other central bank rates that had been stable for many years. Spreads between deposit rate (at which commercial banks may deposit their cash surpluses at central bank) and the policy rate, as well as between lending rate (at which central bank extends to loan to commercial banks to help them meet compulsory reserve requirements) and the policy rate have been narrowed from 1.50 percentage points to 1.00 percentage point, with the former now at 1.00% and the latter at 3.00%. Implications of the latter move are quite fascinating (actually depending on what turns you on)…

The decision to bring down the interest rates was justified by accommodation to extremely low inflation (at times deflation) driven chiefly by depressed prices of foods and beverages and fuels and a response to slower pace of economic growth, suppressed by decline in exports to Russia. By the same token, the disparity between Polish central bank’s policy rate and policy rates set by other European banks (I leave out special-care examples, such as Hungary) has been bridged. The real interest rate in Poland is now near 2.00%, which is perceived by many economist as sound and sustainable level. What raises my concerns is whether the Polish central bank gets its act together to respond swiftly to first signs of rising inflation or unsustainable economic expansion which will sooner or later make themselves felt in the wake of pursuit of easy monetary policy.

In theory, lower interest rates should spur economic growth (hey, parliamentary election is coming) via several macroeconomic channels (increasing consumption and discouraging from saving, lower cost of credit for enterprises and the government, downward pressure on currency benefiting exports, etc.), in practice I believe interest rates primarily provide guidance for economic actors rather than substantially impact their choices. There are plenty of other factors influencing how capital circulates around the economy, other than interest rates, although I do not point out monetary policy should be totally disregarded. The most crucial factor is popularly called ‘sentiment’ and with respect to individuals refers to how secure they feel about the future, while for businesses it has to do with confidence regarding future environment. Whenever future prospects are upbeat, individuals are more likely to consume and to take out loans, while enterprises are less reluctant to launch new investment projects; while when future looms insecure all private-sector economic actors tend to save more, their propensity to incur debts goes down and many plans are put off or given up. Level of interest rates only impacts the costs and profitability of their decisions.

Much more interesting is the impact of low interest rates (in particular the lending rate of tiny 3.00%) for banks. Those institutions, as long as they fit the definition of ‘commercial banks’, raise deposits (liabilities) in order to grant loans (assets) and costs and incomes generated by both sides of their balance sheets are interest-rate-dependent.

Deposits can be broadly divided into: (1) sight deposits or float, i.e. money kept on individuals’ and entrepreneurs’ current accounts to meet immediate liquidity needs and (2) term deposits. Majority of current accounts pay no interest. For banks it means free-of-interest-expense funding, but note when interest rates are lower, spread between the rate at which banks borrow money (0% in this case) and at which they lend it, shrinks, putting pressure on banks’ profitability. Term deposits will also pay less, however their impact on banks’ profits will be less substantial.

Banks’ assets are composed mostly of loans, which in turn can be categorised either as: (1) business / corporate loans, based on variable rate and margin (there is no such thing as fixed rate loans in Poland, in order to get a synthetic fixed loan, a bank and its customer must conclude a hedging transaction), (2) mortgage loans, also based on variable interest rate and margin (without dwelling on FX- and PLN-denominated portfolios), (3) consumer loans, i.e. cash loans, credit cards, auto loans and other products of similar nature (financing current consumption).

Corporate loans and mortgage loans, due to their variable-rate nature, will not largely hit banks’ profits. Banks’ earnings on those products (or maybe services, since bank loan is anything but tangible) are, to put it simply, a function of margin over the variable rate they charge. Corporate clients in Poland can obtain dirt-cheap (in terms of margin over WIBOR) financing, while newly extended mortgages are getting more and more expensive in that respect.

For consumer loans the situation is the most interesting. The anti-usury law in Poland caps the interest rates of granted loans at four times central bank’s lending rate, so currently at 12%. Perplexed? Try finding a consumer loan which will bear an actual cost of 12%. It is impossible, because interest expense is just a component of total borrowing cost, which is also made up of up-front fees, obligatory insurances, pre-payment fees, servicing fees and God knows what else contrived to rip off borrowers. The cap, however will not be circumvented by the banks so they will be attempting to find ways to pass on the cost of missed opportunities to their clients, not necessarily to borrowers but also to depositors. Drop in net interest income will be more than surely to some extent offset by incline in net fees & commissions income. Those who will bear the brunt of slashed interest rates will be ordinary customers of banks. Banks are definitely more powerful than their customers and will try to shield their profitability. Since 2012 many external and regulatory factors have exerted downward pressures on banks’ profits, while the whole banking sector’s net income does not decrease. There are reasons for which banks hold strong, however they are beyond the scope of what can be discussed on this blog ;-) takie życie

If you want to know what I make of loose monetary policy, I recommend you revisit my post on the topic dated December 2009. Five years have passed and again I have not changed my mind. I wonder what would it take to persuade me to change my economic views. Poland’s current leading ultra-liberal, Leszek Balcerowicz forty years ago used to be an avid Keynesian. What would need to happen to make my approach to monetary policy dovish, convince me to embrace pension funds in shape they used to function in Poland since 2009, or forego my belief in free market being the best possible economic environment?

Sunday, 5 October 2014

Straten boven de tweede metrolijn geopend

On Tuesday morning, as I sauntered from the Świętokrzyska underground station to the office along ul. Świętokrzyska, watching construction crews bustling about to tidy up the unfinished street to meet the opening deadline of the turn of October, I said to myself “If they’re going to the works and open the street tonight, I’m a Dutchman”. The upshot of my unbefitting doubts is reflected in the title of the post… (credit to Google Translate)

On Tuesday late afternoon works were in overdrive, it seemed the general contractor was determined to bend over backwards and finish off by the end of September… On Wednesday morning I learnt online the streets above the central section of the second underground line had been opened. To the right – what I beheld as I emerged from underground. Doesn’t look spick and span, but it has been opened – the intersection ul. Marszałkowska and ul. Świętokrzyska.

As I march west, the sight of flowerpots, benches, cycling path and the very road, narrowed down to two lanes, gives ample evidence the development has been finished in haste. Looks nice, but lacks freshness it should exude… The opening could have been delayed by a few days to polish all the stuff up.

I approach ul. Emilii Plater and decide to snap (this time the regular camera is employed) part of Warsaw’s skyline; looking from the left: Żagiel (one of symbols of construction boom in Warsaw, under construction since 2007, after many tribulations, including suspension of works for over a year and finally termination of loan for the investor by Bank Pekao S.A. in late winter 2014; following the default the building was sold to another investor, however future dwellers, some of who paid tens of zlotys for each square metre of their apartments, still cannot move in as the occupancy permit has not been issued), Intercontinental Warsaw (I once went to a café there), Warsaw Financial Centre and beyond it, Rondo 1.

At Rondo ONZ it turns out traffic light are switched off, causing chaos on the roundabout. In the foreground – cycling paths. While looking at arrangement of cycling paths and how they cross pedestrians areas, it occurred to me at some places layout could have been more wisely designed. As the letter to weekend edition of Gazeta Stołeczna shows, I’m not the only one to have reached such conclusion.

And for the record, almost the same place in July 2011, construction site fenced off, long way before life returns to that place and changes its face.

West beyond Rondo ONZ, ul. Prosta has been broadened to three lanes in each direction. Prior to underground construction, this section of ul. Prosta has been a bottleneck. Now, after rearranging the historical Norblin factory, the street deserves a status of regular thoroughfare, as it goes further behind Rondo Daszyńskiego.

Again for the record – the very bottleneck in November 2011. A gloomy, dejecting picture, with hindsight filling one with hopes for a brighter future; the future that has become the present.

And another snap from November 2011, taken at the very end of the central section, where construction works began in September 2010. Now Żagiel (in the background, surrounded by cranes, under construction) is almost finished, where building machines stood, now is a wide dual carriageway.

For me the just opened streets bring little benefit in terms of improving my ways of moving around Warsaw, but for many residents of Warsaw it may signal the intense public infrastructure development programme, inconvenient for many of them, is drawing to a close. No doubt, the worst is over and effects are visible. I sense HGW will be elected for the third term as Warsaw’s mayor. Far from being a perfect host of the city, her pursuit of ‘lukewarm water in the tap’ policy is quite successful…