Sunday, 25 January 2015

Swiss Franc going bonkers

1. I am employed by one of financial institutions involved in mortgage lending denominated in CHF, my financial well-being might be negatively affected by aftermaths of sudden appreciation of CHF.
2. I do not possess any substantial (in equivalent of more than 1,000 PLN) liabilities nor assets in or denominated to any foreign currency.

With hindsight it sinks in to me the decision of Swiss monetary authorities from 15 January 2015 deserve some more attention. The Swiss National Bank, apart from discontinuing its policy of warding off appreciation of the country’s currency, decided also to slash interest rates by 50 basis points, pushing policy rate further down into negative territory…

This move calls into questions one of economic paradigms I would take for granted during five years of studies and four years of banking career. Until recently in the economic theory the “floor” for interest rates was zero. Whenever the range of a central bank’s instruments in monetary loosening was described, one mentioned decreasing interest rates to zero and if this turned out to be insufficient, enlarging monetary base. Whenever I asked chaps from market risk department to estimate maximum negative valuation of an interest rate swap, it went without saying the scenario to analyse was an overnight drop in interest rate in a given currency to zero. Time and central bankers proved us wrong…

Interest rate is cost of money. Because as a matter of principle money cannot be bought or sold, the price is paid for temporary transfer of money, i.e. for borrowing or lending it. Theoretically, the cost of money can be negative, but in practice it seemed irrational. Recent goings-on have disproved economic theory. Thus we witness theory of economics is still in the making.

Negative interest rates have serious implications for stability of financial system. We already see the first apparently eerie effects of SNB’s move. Yields of Swiss governments bonds have entered negative territory, not only on secondary market, but also on debt auctions. In practice if yield on a10-year bond is –0.09%, you pay now 100.91 units of a currency to be paid back 100.00 units in ten years. At first glance it such investment makes little sense and the negative yield can be interpreted as safekeeping fee. Nonetheless, investors snap up on such bonds. Why? “The Economist” has beaten it to me in providing a comprehensive answer.

Government bond market naturally crops up as the first illustration of how central bank’s policy impinges on financial system. Let’s examine the outcomes for other economic actors.

Interest rates at which commercial banks lend or borrow money are strongly tied to rates set by a central bank shaping monetary policy of a currency in which those banks lend and borrow. On the lending side the situation is at first sight straight-forward. Components of cost of credit are a variable rate taken from inter-bank market (LIBOR) which is the cost of funding for a bank and the bank’s margin over LIBOR, standing for reward for credit risk borne by the bank. Whenever positive margin is higher than negative LIBOR, the cost of credit remains positive. If the margin, however, was low enough not to fully cover negative LIBOR, we would be faced with a situation when a borrower would have to repay less than they had borrowed. Consider a 1Y 10,000,000 CHF overdraft with cost of 1M LIBOR + 100 bps a Swiss company takes out. The principal is to be repaid at maturity, interest to be paid monthly. But if 1M LIBOR is –1.12%, then what? My first answer would be that no interest payments would occur, but how to handle loan principal? Should the net cost of –0.12% per annum be amortised over time and decrease outstanding loan by 1,000 CHF? If so, what if within a year 1M LIBOR rises above –1.00%? Loan administration staff and finance staff at some banks should begin to scratch their heads now!

From the borrowers’ (no matter if talk of individuals or enterprises) perspective the loan with negative cost is a veritable bargain. Probably the SNB intended to spur borrowing, thus increase monetary base and trigger inflation that would result in currency depreciation. The side effect of this action is that the break-even point for borrowers has been set too low, i.e. some entities that would not be eligible for a loan if LIBOR ran at 1% are now creditworthy. This pool of borrowers will likely default on their debts when interest rates increase, threatening economic growth in the future.

From the depositors’ perspective negative interest rates make horrible news. If commercial banks are to get funding on market conditions, they should pay depositors LIBOR. Businesses have no choice and will need to accept the negative rate. No one would imagine companies switching from bank transfer to handling payments in cash. Individuals, however, might choose to withdraw money from banks and decide to keep their savings in cash in a piggy bank / in a drawer / under the carpet. Of course if you keep cash at home, you are exposed to risk of physical damage or theft, but I presume some depositors would be willing to take those risks. A sudden outflow of cash from the banking system could pose a threat to banks’ liquidity. The effects could be comparable to a regular bank run.

In Poland, the Banks’ association and the Ministry of finance have worked out and agreed on measures to ease the pain of over half a million CHF mortgage borrowers. The proposals are modest and require banks to make some concessions that will somewhat decrease their profits, but in return should fend off provisions for past due debts. The measures will include:
1. lower or no FX spread on instalments – directly hits banks’ earnings, however gives a relief of up to 4% to borrowers,
2. using negative LIBOR as a base rate, however the total sum of base rate and margin might not fall below zero – at best a borrower would not pay any interest on the loan,
3. banks will refrain from calling for additional collateral – it has to be underlined in extreme cases LTV ratio, measure relation of outstanding debt to property market value, might be reaching even 200% (e.g. a borrower owns a flat which could be sold for 500,000 PLN but their debt in PLN is 1,000,000 PLN), the concession is a violation of one of Financial Supervision’s recommendations on mortgage lending, but given the current market situation, it is the best possible solution,
4. extension of lending periods, which would result in lower monthly instalments – given record-low credit cost in CHF and prospects of CHF/PLN returning to levels seen before 15 January 2015, it is a reasonable to wait out the period of ultra-strong CHF.
The compromise is very wise, since both banks and borrowers will share responsibility for the event which has taken both sides aback. That being said, one must not forget during the lending spree which reached in climax between 2006 and 2008 banks aggressively foisted upon their customers loans denominated in foreign currencies, particularly to those mortgage applicants who could not afford to service mortgage loans in PLN, but in CHF, in which interest rates were lower, were creditworthy.

For those with shorter memory, a short reminder, how in July 2006 the same politicians who today bleat how evil CHF lending was, expressed their disapproval of Financial Watchdog’s efforts to curb mortgage lending in foreign currencies.

The Polish Financial Supervision has also come out with another proposal that seems to hold water. The distressed borrowers could be given the option to convert their loans into PLN at the CHF/PLN rate from the day the loan was taken out, however they would need to return to banks difference between lower interest paid in CHF and PLN. The CHF appreciated rapidly in late 2008 and despite staying around or above 3.00 since then, a monthly instalment of a rate in CHF was lower than a monthly instalment in PLN until the first quarter of 2013. This was due to interest rate differential between CHF and PLN that offset CHF appreciation. This proposal should remind CHF borrowers for many years they benefited from their decision, however the reward was accompanied by FX risk… Impact for banks is very hard to estimate, in depends on so many technical assumption of the operation that any attempts to give a ballpark figure are doomed to fail.

The proposal, apart from questions of legal nature, gives rise to several technical / mathematical questions, e.g.:
1. how the current outstanding debt in PLN would be determined (not only FX rate but also loan amortisation needs to be taken into account),
2. how the difference is interest base and effects of loan amortization and changing time value of money would be accounted for,
3. would the borrowers have to return the difference in interest paid in cash, or would banks be willing to add it to the outstanding debt, if yes, would breach of currently binding Recommendation S in terms of max. LTV ratio be allowed,
and many other, proving this idea makes sense, but is on account a quick fix.

Many accuse banks of reaping profits from CHF appreciation. Had it worked like this, we would see enormous profits of institutions involved in CHF-denominated lending in their 1Q2015 financial reports. But we will not. CHF-denominated loans are banks’ assets, but they are effectively funded by liabilities. Because Polish banks do not take deposits in CHF, rarely issue bonds in CHF and generally do not take out loans in CHF (there are exceptions when funding is secured by parent companies), they have to replace funding in PLN by funding in CHF. This is done with use of FX swaps, derivatives which compose of FX spot and FX forward. For example, in order to replace a 3M deposit in PLN with a 3M deposit in CHF, a Polish bank sells PLN and buys CHF at a current date at spot CHF/PLN rate and agrees to conclude a reserve transaction in 3 months, at pre-agreed CHF/PLN rate which reflects interest rate differential between PLN and CHF. Thus effective cost of funding is LIBOR rather than WIBOR. Such operations are risky, because long-term assets are matched by short-term liabilities which needs to rolled over frequently. The roll-over risk materialised in late 2008 when access to FX swap virtually dried out and intermediation of Polish and Swiss central banks was requisite to match positions on Polish banks’ balance sheets.

Banks’ earnings on loans denominated in foreign currencies are made up of spreads. When such loan was disbursed, a bank earned profit on a spread between market FX rate and bid rate (i.e. if NBP CHF/PLN rate was 2.30 PLN, a bank would convert CHF into PLN at 2.20). Then banks earned on spread between market FX rate and ask rate each time an instalment was repaid. This practice was curbed in 2011 thanks to anti-spread law. I dare to claim as of today portfolios of FX-denominated loans, after costs of hedging and provisions for bad debts, generate negative income for the banks.

My own guess is that the period of negative interest rates and ultra-high CHF will not last long. Negative cost of money will lead to distortions in financial system, while strong CHF will send the Swiss economy into deep recession. Bright future is not ahead though. Just three days ago ECB announced it would launch out into quantitative easing. If without near-zero interest rate and expanding money supply economies of the Euro zone are unable to grow, it means they are still on their knees, almost seven years since the outbreak of full-blown crisis in early autumn of 2008. This time there will be more than seven lean years…

Sunday, 18 January 2015

Polish mining industry on the edge

If you believe a more appropriate subject for this week’s posting would be the decision of the Swiss National Bank to effectively float the CHF, I advise you revisit this post, especially in the light of some politicians’ proposals to help out over half a million mortgage borrowers (and also currency speculators who have shorted the CHF) thumped by skyrocketing Swiss currency.

If not, I suggest we go back in time by 30 years, to bring back backdrop of miners’ strike in the UK in 1984 – 1985 which led to closures of several unprofitable mines. The atmosphere in the UK those days was in some aspects similar to what is happening in the Polish mining industry. Some commentators have attempted to equate Polish prime minister, Mrs Kopacz, to Mrs Thatcher, a comparison for many out of place. Needless to say, just as British mining industry was in deep need of turnaround, the Polish one also calls for it, while the treatment it receives might be named overhaul at best.

The current situation has deep historical roots. Back in PRL the mining industry, one of focal points of heavily industrialised socialist economy, was pampered. Miners, the pride and joy of comrades were granted numerous privileges then. Mines were developed regardless of economic legitimacy, actually in the same manner as all companies in the socialist economy were managed. In the wake of the shift into free-market economy rules of the game have changed, but not for everyone. Most mines have remained a stronghold of the PRL. In late 1990s one programme of winding down unprofitable mines was launched. Later on no comprehensive strategy for the Polish mining has been pursued. In the meantime, miners excelled at defending their fulsome privileges (at the expense of Polish taxpayers), thus decreasing competitiveness of Polish mines. Fluctuating coal prices for some time allowed the government to sweep the problem under the carpet. Coal market slumped severely in 2009, but quickly bottomed up and mines had enough capital and cash reserves to ride out the short crisis. Coal prices rebounded in early 2010 and despite well-blown-out costs Polish mines remained profitable until late 2012. Since mid-2012 coal prices gradually declined and according to market forecasts, are unlikely to substantially recover in the foreseeable future…

To examine the distress of Polish mining industry, let’s have a glance at some facts:
1. Mining is a commodity business, thus above-average volatile and exposed to price fluctuations. Each mine, with quite rigid costs (little flexibility on technological and human resources sides) is a price-taker. It means when good times roll in, a mine swims in cash, but faced with a downturn, it can go under quickly. A prudent financial manager should run a company in such way that effects of price movements are smoothed out.
2. Environmental policies, including those imposed by the EU, hit the coal industry. Preferences for low-CO2 emission energy sources bring down global demand for coal.
3. Despite EU regulations, Polish energy sector is doomed to use coal and key fossil fuel, given scarcity and prices of other resources. Therefore, power and heating plants will remain the key off-takers of Polish coal mines.
4. Mining is one of most heavily unionised industries in Poland. Trade unions in some of the mines have sprawled into pathological size. Their power must not be under-appreciated, since they are capable of bringing most of the mines into standstill. Their bargaining power in negotiations is amazing, given track record of consecutive governments of giving in and subsequently maintaining status quo in the industry.

One could reasonably ask why some mines are profitable, some not and why mining companies are profitable and others incur sizeable losses. All companies in the industry are affected by falling coal prices, but for some market environment means much lower profits, for others barely breaking even and for the worst, threat of going bust. I have taken the trouble to unravel the puzzle of why some companies fare much better than others, found several factors, but no comprehensive answer. Just to name a few reasons for varying incomes between companies:
1. poor corporate governance in state-owned companies; this includes incompetent, too quickly turning over management, lack of clear-cut strategy, strategic decisions made on the basis of political influences rather than business analyses,
2. different technology-related cost of coal extraction (in some mines drilling and extracting is much more costly than in others) and different calorie-count of extracted coal which impinges on its price – for this reason the same number of people may produce fewer tonnes of coal of worse energetic quality,
3. low work efficiency and overmanning, both underground as well as in overground administration,
4. one-side linkage between profitability of mines and remuneration of miners. Personnel costs account for about 50% of mines’ operating expenses, therefore the item has crucial impact on break-even point for mining companies. While miners demanded to quickly privatise profits of companies when coal prices were running high (bonuses, profit-sharing schemes), when market went down, they reach out for the state aid and refuse to give up on their privileges,
5. miners’ privileges which appear excessive in comparison to what other workers enjoy. Most hard-working people in this country of course do not have to work underground in heavy conditions, but also do not enjoy guaranteed 13th and 14th pay and several allowances and fringe benefits.

The current slump on coal market has forced the government to take steps to bail out the ailing industry. The restructuring programme is much belated and therefore has to be implemented in haste. A long-sighted manager (a rarity in the public sector) would gently launch such programmes when coal prices were high and industry was capable of absorbing restructuring costs from cash surpluses. For obvious reasons, such move would have been inconvenient for everyone… It must be underlined, the originally proposed restructuring programme treated the distressed industry really mildly.

After several attempts to defer insolvency of 100% state-owned Kompania Weglowa, the biggest mining company in Poland, running 14 mines and employing almost 50,000 people, the government was driven up against the wall. Either they had throw a lifeboat to it, or let it go under, with all consequences. The determination of the government to avert the bankruptcy of KW served as water to the mill of protesting miners… The insolvency of Kompania Węglowa would actually benefit nobody. In the scenario of mine liquidation the Polish energy sector would lose the biggest supplier, more than 100,000 people would be affected by redundancies. Economic consequences would include lower proceeds for the government from personal income taxes and social security contributions and higher social security spending. It could actually benefit predator investors who would buy single mines after asset-stripping and turn them around (maybe not the worst scenario)…

In some media reports I read some 70% of Poles support miners fighting to save their jobs and blame the government for collapse of mining industry. In contrast, when I look at comments under articles on the issue in the Internet, I notice growing anger and discontent towards privileges miners enjoy, blackmailing methods they resort to and meekness of the government. No wonder ordinary people feel disgruntled. If their employer had to be downsized, they could not count on generous severance packages. Most of them would get what they must be paid (salary for their notice period plus severance pay in the equivalent of one or two monthly salaries) and could not dream of two-year salary. Most of them would not boast about above-average earnings and for most of them, bankruptcy of their employer would be their, not government’s problem… In the market economy if your employer goes bust or downsizes and you are laid off, you have to go it alone! It seems miners are totally detached from the market economy. For them it does not matter whether anyone wants to buy the coal they extract, regardless of what invisible hand of free market shows, their jobs must be saved… Who is going to pay for it is beyond their interest.

Here comes the question about the dissimilarity between Poland today and Great Britain in mid 1980s. Mrs Thatcher had social support for her crackdown on unprofitable mines. But does Mrs Kopacz have support of Poles for closure of loss-making mines?

Yesterday the government and representatives of trade unions nailed down an agreement on mining recovery. The government succumbed to trade unionists and amended some of the provisions of restructuring plan:
1. there would be significant reshuffles in the ownership structure: merges, purchases, buyout, all designed to inject the cash to mines from wherever cash surpluses can be found,
2. instead of 4,000 job cuts, no one will be made redundant, however some salary cuts will have to be accepted,
3. severance packages for those employees who will voluntarily come forward to quit have been raised.
If somebody’s impression is that the government has just buggered it up, well… some things sound better left unsaid.

During a long discussion on how to turn around the Polish mines one modest proposal stood out. It was mentioned by former prime minister, Mr Marcinkiewicz, who put forward to hand over the unprofitable mines to trade unions and let them take charge of the business. Representatives of the trade unions quickly agreed to accept such gift, provided on top of mines they receive 3.2 billion PLN the government intends to spend on restructuring of the taken over mines! Some things sound better left unsaid…

Time will tell whether government’s turnaround strategy for the Polish mining proves successful. For the time being even the weather seems to be against the industry. For more than a week temperatures have not dropped below zero and a few times nudged to +10C.

Sunday, 11 January 2015

Speechless, all of a sudden

Stand-up comedy is still a niche type of entertainment in Poland. Polish audience, used to low-brow cabaret programmes shot repeatedly on TV, would probably find it as a challenge to embrace as demanding performance as stand-up is. Despite this, stand-up turns out to thrive in Poland, although you should not expect to watch it on TV or hear about it in commercial radio. Fans of this comic style will nonetheless find it easy and inexpensive to buy tickets for live performances of stand-up comedians…

I have learnt it all since for some reason I did a research on stand-up in Poland. While doing this self-assigned task, I also decided to find out who the most prominent stand-up comedians in Poland are…

Uncle Google always helps in such instances and the search engine did the job without reproach. Only my jaw dropped open at the sight of outcomes. I kept opening each next search result and my mouth refused to shut…

Recall the Short story about the price of trust? I have totally put the hapless loan out of my mind and with hindsight had to read over all my postings labelled lent 1,000 to refresh my memories of how I had been duped by my middle-school classmate. Karol, as it turns out, is one of the up-and-coming stand-up comedians in Poland. Back when we were in our teens he exhibited inclination and talent for stage career. His first performances available on youtube are from 2011 when he would show off his skills during open mic sessions. At that time, according to blog records (keeping some stuff for posterity now pays off) he underwent gambling rehab therapy and did his sentence for unpaid debts. As the (alleged?) sentence was suspended and partly swapped for public works, one does not conflict with the other. Internet contains some evidence of his 2012 performances, but his stand-up career began to speed up in 2014. These days probably everyone familiar with stand-up in Poland knows his (real) name. He is not one of most famous comics, however critics and more experienced fellow stand-up comedians claim he is one the most promising young artists, has his unique, individual style and huge potential to grow into an outstanding stand-up comedian. Nothing more about, since I still do not want to reveal his identity.

The reading also reminded me Karol had borrowed money, much more money, from our fellow classmate, Marek. Without further ado I logged on to fejsbuk to find Marek is online and I started off a chat. Marek’s jaw probably also dropped open at the news of our ex-friend being a rising star of stand-up comedy. Sadly, Marek did not recover full 8,000 PLN he had lent. Having been paid off 6,000 PLN and having wrangled too much to get back the remainder (it would require taking the case to the court, as some of Karol’s creditors did), he had given it a rest. Interestingly, Marek knew a bit more about Karol’s tribulations than I did. Up to that moment, I had only been stunned, from that moment I was incensed. I could get over he had deceived me and many of his other former friends, but I cannot get over Karol turning his back on his family who got financially and emotionally ruined getting him out of troubles several times, despite this being none of my businesses, I feel damn sorry for Karol’s parents and brother.

I do not wish badly on anyone, including Karol. As Marek rightly said, maybe it is better he pursues his career as comedian than if he was to engage in massive scams as a lawyer (he had been expelled from the Faculty of Law for embezzlement of money from the student union’s account). But if once he rises to stardom and I happen to see him on TV, I will look at him with disdain and contempt. A man of honour might stumble and fall, but once a man of honour mends his ways, he makes up for the wrong he did. Karol, as the Internet shows, has got up of his knees, but does not think about apologising to his primary-school friends, middle-school friends, high-school friends and university friends (all of whom he still owes money). He will remain in their bad books so maybe his efforts to fix once broken friendships should be spared. Yet, first and foremost he should beg his family for forgiveness. Based on what I know, he has cut off, they renounced him and therefore even if for many he will be a celebrity, for me he will remain a liar and a thief.

Sunday, 4 January 2015

Jakie piękne samobójstwo - book review

Barely stepped into the new year and right away I cannot be ranked among majority of Poles who will have claimed not to have read a single book in 2015. Hope the reading statistics in Poland improve this year. A shame 60% of Poles declare not to read books at all…

Before setting up the blog I read two other books by Rafał Aleksander Ziemkiewicz (hereinafter: RAZ); Polactwo and Michnikowszczyzna, zapis choroby. A few years passed by since my reading, therefore my memory of those books is a bit blurred, yet I remember well I was not impressed by RAZ’s style and his bias was at times sickening. On Thursday I grabbed his latest book, literally “What a beautiful suicide”, in which he (again) examines and slates some shortcomings of Polishness that preclude our nation from rising into well-deserved potency.

The book draws on the hackneyed concept of Poland being a peculiar country (Polska to ciekawy kraj). Not a mould-breaking discovery to discern Poles are distinct from almost all other nations in terms of building their national identity on martyrdom, glorifying defeats and extolling heroic bloodshed, regardless of its outcomes. RAZ cites January Uprising and defence against German invasion in September 1939 as best examples of thoughtless, spontaneous spurts resulting in full-blown military debacle. The former, instigated by wet-behind-ears lads in their twenties ended up with nothing but repercussions against Poles imposed in the wake of the rising and not lifted for half of century. The latter found Poles insufficiently prepared for stand up against Germany and with totally otherworldly hopes that Poland would be capable of fending off the German assault for months and that France and Great Britain would rush to aid Poland. RAZ also dedicates a few paragraphs to the Warsaw Uprising which (kind of startlingly) he sees as another example of irresponsibility of army commanders and their absolute lack of foresight, however in this case his criticism seems muted. Nevertheless, as RAZ underlines, all those national tragedies are glorified (note ‘glorify’ is dissimilar to ‘commemorate’ which appears some appropriate bearing in mind aftermaths of those events) and their fatalities fighting for Poland’s independence are hailed as heroes… Quite unexpectedly, by dissenting the official policy line, RAZ undercuts historical policies pursued mostly by right-wing governments in Poland since 1989 and… broadly falls into line with what my parents were taught at schools in 1960s and speaks one voice with today’s down-to-earth leftist journalists.

RAZ contrasts Poland to other nations in two dimensions. Firstly, other nations much more adroitly run their historical policies. They intently erase shameful events (author cites the example of Belgian genocide in Congo), while highlight episodes from their history they should be proud of. After decades, in terms of perception by other nations, they are better off. Poland in turn not only glorifies failures, but also overly apologises (vide example of murder of Jews in Jedwabne) and fails to claim historical truth when it is due (see how the issue of genocide committed by Ukrainian Nationalists on Poles in 1943-1994 was swept under the carpet just not to shatter Poland’s relations with Ukraine). Secondly, other countries are more practical in their policies. France barely resisted the Nazi invasion during WW2 and the country and its elites survived the war almost intact. Czech Republic (Czech part of Czechoslovakia) was incorporated into the Nazi Germany without a single battle, a fine example of line-toeing submission. Then the Czechs once tried to rise up against communist regime in 1968, but once their mutiny was brutally put down, they obediently conformed to the role of being a part of Soviet bloc until 1989. In the meantime economically they fared better than Poland and generally have prospered better after 1989. As RAZ argues, when faced with threat of war, other countries performed a cost-benefit analysis to work out whether it would pay off to fight in the long term. Poles, in turn, would blindly fight for the very idea of fighting, without clear vision what then and without taking heed of all aspects of costs. Thus both defence war in September 1939 and the Warsaw Uprising resulting not only in material destruction (what is level with the ground might be rebuilt), but also in thousands of lives lost, in particular with Poland’s elite being effectively liquidated (an irreparable loss). Oddly enough the same mechanism was visible in 2014 when Poland spoke the loudest on the Russian-Ukrainian conflict, while other European countries were rather restraint and preferred not to stick their necks out, with a view to foster their own interest, i.e. not to spoil economic relations with Russia.

RAZ then asks whether it was worth to make all those sacrifices. He challenges the idea of fighting losing battles just to die in honour and go down in history as a valiant warrior. Was saving several human lives not a preferable alternative? Today this question is hard to answer, when course of history cannot be reversed. It easy to claim both that preventing the outbreak of Warsaw Uprising would save much part of the city and save lives of almost two hundred thousand civilians, as well as easy to claim the resistance put up by inhabitants of the capital stemmed the advance of Soviet army into the Western Europe. Maybe if so many representatives of the Polish elite had not died in WW2, many of them would have helped rebuild post-war Poland? But had it not been for our fortitude and rough ride given by Polish militants, Poland would have become the seventeenth Soviet republic, rather than a satellite, yet separate country?

This is the cynical question, whether it makes sense to fight under any circumstances and RAZ tentatively attempts to give the answer: it makes sense to fight when the fight makes sense…

RAZ’s books tend to arouse controversy. This one is no different. RAZ gripes about bias in Polish historical policy towards martyrdom, cult of sacrifices and heroism at all cost, the bias making it untrue, but a few pages later he calls on such shape of historical policy that also departs from the truth, yet in a different direction. Thus, he does not advocate history as a source of true and fair knowledge of a nation’s past, but urges on using it to shape a nation’s mindset and the only fault he notices is the choice of historical events, but not the very method of pursuing the historical policy.

RAZ several times points out it was not unreasonable to enter into an alliance with the Nazi Germany before WW2, before Poland’s relationships with the Western neighbours were tattered as in the summer of 1939. In his line of reasoning he stresses communism was superior in terms of cruelty to fascism (at least measured by number of fatalities of each totalitarianism, Stalin beats Hitler) and if Poles joined Hitler, Polish army could fight with the Germany military forces against the Soviets… A polite Englishman would call it “a quaint theory”. The other story is because the Soviet Union was a vital part of alliance against fascism, the United States and Great Britain instrumentally had to turn a blind eye on the atrocity of communism and had to make concessions in order to keep Stalin on their side. One of such concessions was pushing Poland into the Soviet sphere of influences.

I should have written it earlier, but three-fourth of the book does not deal with issues I discussed above. The book essentially is a bitterly critical assessment of Poland’s internal and foreign policies from 1918 until 1944. I must admit cursory (or just general) knowledge of Poland’s history in that period (even if better than average for the Polish society) is not enough to judiciously evaluate the book in terms of its content. I have taken the trouble to check some of the facts the book mentions and indeed, uncle Google knows about all of them, so credit to RAZ for citing reliable sources. The book, however has a drawback of failing to clearly distinguish facts from opinions. Because this is not an academic dissertation, but rather a loose essay, such form is acceptable, albeit I have not been fond of it.

The reading has left me with mixed feelings. I will not conceal I generally dislike RAZ, not for his (right-wing) views, far from mine, but for the bias he exhibits and lout-like writing style he tends to boast about (because it distinguishes him from self-styled elites). Despite my aversion towards RAZ, I appreciate the chap has guts to write or speak out what he thinks (sometimes no matter how stupid or controversial it is), is uncompromising and does not know such word as self-censorship. Even though his writing does not take my fancy, I hold dear its straightforward character.