K-towers tapes – questions left unanswered

Much uproar in the public discourse after the unveiling of recordings on which nadczłowiek* Kaczyński was talking about eventually aborted office development plans. Interpretations of what can be heard on the tapes (takes a while if you want to listen to the entire bundle of recordings, since the basic file shared by Gazeta Wyborcza has a duration of one hours and eight minutes) vary drastically. My thoughts to share are on the sidelines of the debate, since I am trying to look at the entire scheme from a banker’s perspective and discern intricacies an ordinary commentator would overlook.

1. No one has bothered to comment on how an office rental could fetch a return of 30%. I infer Kaczynski and his relatives meant ROE (return on equity = own funds invested) generated by a leveraged (financed with a third-party loan) investment. In reality rental of office space in Warsaw generates yield around 7% yearly.

2. The mythical one billion three hundred million. I have not worked out so far whether this was the amount of loan to be disbursed by Pekao S.A. or the entire construction budget. The question is valid since the Polish Finance Services watchdog a few years ago has brought into force Recommendation S, a set of strict guidelines pertaining to commercial property lending (observance of which has been strictly controlled by the regulator since then), in line with which a bank can finance up to 75% of (net-of-VAT) investment costs. Here I see only two possible outcomes:

A/ Srebrna venture has 25% equity, i.e. at least 300 million PLN, which according to my best knowledge goes well above the market value of plot of land. This gives rise to another question, namely how Srebrna had come into possession of so much money.

B/ State-controlled bank Pekao S.A. would finance 100% of the project budget and be in breach of Recommendation S, however the regulator (with Marek Chrzanowski in charge of it) would connive at it.

3. The terms of conditions of the deal were described by the press as very loose. I have not read the source article in Wyborcza (or skimped to pay for subscription), only its summary in Onet, which sadly was compiled by a journalist not up to the task. I can tell you if I recommended a loan for a start-up, for preparatory works with bullet repayment and interest capitalised rather than paid in regular intervals, I would be handed a cardboard box and fired. Since the inception of my adventure with banking industry, I have always avowed, unless pressed by unemployment, I would never, ever consider taking up a job with a state-controlled bank. And I proudly hold with it!

In recent weeks one scandal afflicting ruling party prominent politicians chases another. Seemingly PiS is teflon-coated and support in polls has not dwindled markedly. The situation resembles the course of events which kicked in the previous government out of power in 2014-2015. It all had begun with tapes whose importance had been shrugged off and then president Komorowski who had been told to have to run over a nun while inebriated behind the wheel to lose the election, actually lost it. The history may repeat, while the European parliament election in May will serve as a gauge.

* nadczłowiek = literally more than a human, the word I have coined to describe the stance of himself Jarosław Kaczyński had demonstrated over recent months.

Recordings for the record

SLD government in the first half of 2000s was sent under by the Rywin scandal. First PiS government was sent under by the arable-land corruption scandal leakage. The PO-PSL government began to fall apart after conversations of prominent politicians of the party, eavesdropped in a restaurant were published.

The joy of anti-PiSites that the unfolding KNF scandal with help overthrow the current PiS government is premature. Firstly, we still know too little about the story. Secondly, the government acts firmly and calmly (with some ludicrous exceptions) tackling the scandal (i.e. those who have no chance to be defended stand down, others where nothing can be proven at this stage, refute accusations). Thirdly, the circumstances of revealing  the scandal (why have they waited for more than half a year) and persons behind it (Leszek Czarnecki, not being crystal-clear businessman, nor his businesses and Roman Giertych, formerly a prime minister in first PiS government, since some five years, the chief barrister of the prominent no-PiS politicians) have all makings of a straightforward political game (this is it).

To assess political impact, find out what an average citizen who knows little about finance understands of it. An average Pole his little grasp of how banks are supervised, what the mechanism of bank bail-out is, why banks go to the wall, etc. They understand two basis threads: “fix up my crony with a job and pay 40 million and we’ll get off your back”. Voters have allergy with bribery and nepotism, the former being combatted by PiS, the latter being nurtured.

Commentators get outraged or excited by the notion of a bank being taken over for a single zloty. The world of finances has seen such transactions, such as Barings bank being taken over by ING for one pound, or Banco Popular being taken over by Banco Santander for one euro. Such deals were co-ordinated by central banks and regulators for the sake of financial stability. The difference is must be underlined is that all aforementioned banks bought for a single currency unit had gone insolvent on their own. In KNF scandal, PiS wanted to use financial supervision authorities to drive Czarnecki’s banks (not actually heathly, but not yet under water) to bankruptcy and nationalise them (in other instances private capital had to aid).

The very outbreak of the scandal has already taken its toll at Getin Bank and Idea Bank. Both institutions raised the pricing of deposits offered to clients, to around 200 basis points above interbank market rates. This indicates the banks struggle to stem the outflows of deposits (and remind on their webpages with capital letters that deposits are insured under Bank Guarantee Fund) and I would to be surprised to see a run on Getin and Idea. If this happens, deposit withdrawals can be suspended and Czarnecki might be forced to file for insolvency of his banking businesses. If he goes under water, the question is who else he drags down.

PiS in power, episode 1 in 2017

Not a dreamt-up start into the new year for the current government. Nevertheless, the five image-tainting slip-ups have not sent support in polls sliding. I believe this will happen slowly, gradually, as more voters reach their pain threshold (i.e. as wrongdoings accumulate).

Moving about safely is not the biggest virtue of PiS. Over twelve months limousines carrying prominent politicians had three serious accidents. In March 2016 president Duda’s BMW fell off the motorway after a tyre popped. On 25 January 2017 minister Macierewicz’s motorcade moving at excessive speed on an icy road smashed into cars waiting ahead of traffic lights. On 10 February 2017 reinforced Audi driving prime minister Szydlo home collided into a tree after hitting an overtaken Seciento. Circumstances of the latter accident remain most blurred, however most recent findings reveal internal safety procedures have been breached and the vehicle was not moving at the allowed speed between 50 and 60 kmph as police and ministry officials claimed. Truth be told disrespect for safety rules and fondness of speed have been a domain of all predecessors of PiS, however nobody has learnt the lesson so far, especially as Internet users publish films from dashboard cameras, shot after 10 February 2017, showing dangerous motorcades of government limousines.

Defence ministry spokesman, Bartłomiej Misiewicz, the embodiment of personnel reshuffle conducted by PiS in government-controlled enterprises has been locked up around a month ago (having days off to compensate him for working overtime). After several incidences of high-rank army officials saluting to the (civilian) spokesman and after his foray to a night-club in Białystok, Mr Misiewicz is no longer in the limelight. His future remains uncertain, however minister Macierewicz will rather not leave him out in the cold, despite Mr Kaczynski’s clear statement that Mr Misiewicz is a predicament for PiS. Conspiracy theorists wonder what Mr Misiewicz knows about Mr Macierewicz and what Mr Macierewicz knows about Mr Kaczynski that guarantees Mr Misiewicz irremovability.

The proposal to enlarge Warsaw by adjoining over 30 surrounding towns has struck out of the blue. The draft law, not consulted with anyone, including around two million residents of Warsaw and nearby towns affected by the law, brought in a strong backlash. Experts pointed at several shortcomings of the document, including violating constitutional rules (who cares?). Besides, local governors in unison underlined the deputy Sasin’s draft had not been discussed with interested parties. PiS had to give in and back down from the plan of extending Warsaw’s borders before local government elections. I suppose as too many potential voters have stamped down PiS intentions and thwarted boosting chances of their candidate in winning mayor of Warsaw stool, politicians of the party will have a hard nut to crack.

Lex Szyszko, or the amended environment protection law is probably the most visible outcome of PiS in power. You just walk outside and see chopped down trees, on private and public lands. And as a matter of principle, the wood is hardly ever cleared away, so sights like this are commonplace (in the background, uncanny freight train on Siekierki coal line). I am in two minds about this law, remembering that cutting down wizened trees that do not come into leafs and pose threat during gusty winds is necessary for the sake of safety of humans and their property. It will take decades to make up for the harm inflicted over a few weeks of the law in force. PiS has taken note of its mistake and announced next changes to the law, time will tell whether they block unfettered tree-chopping spree, but whatever steps they take, they will not reverse the time and those who have benefited from the amendments over the recent weeks will not be deprived of their benefits.

The debacle of Poland’s candidate, Jacek Saryusz-Wolski is Thursday’s (not deferred) vote on the position of European Commission candidate is the biggest defeat of PiS government in international politics and in my humble opinion, the most prestigious calamity of PiS since they took over power. All remaining 27 EU representatives, including our closest allies, i.e. prime minister Theresa May and prime minister Victor Orban, without hesitation backed the incumbent president Donald Tusk. Competencies of Mr Tusk and common sense of 27 EU leaders have been superior to domestic conflicts. The United Europe showed thumbs down to Poland whose voice has become finally audible in Europe. Indeed, our voice is heard, but no one wants to listed to it. Poland’s foreign policy is finally not pursued on its knees. Poland’s diplomats and leaders have gotten up of their knees to fall flat on their faces, straight into a cold, dirty, muddy puddle.

I feel no joy writing the above. The events in Brussels demonstrate Poland is becoming a quirky outsider in the EU, whose officials will sooner or later lose their patience and take revenge, namely cut Poland off generous flow of money from the EU. Sadly, the defeat will change nothing in perception of PiS government inside the country. Those who oppose it will not change their mind, while approximately 20% of the electorate who are hard-line believers of Mr Kaczynski will genuinely put faith in all of his words and accept as true Mrs Szydlo’s trip to Brussels was a huge victory and that evil EU is to blame. I hope Poland does not take umbrage with the EU, as if this happened and EU retaliated, Poland, not the EU would be worse off.

Schadenfreude - the response

As pledged on Tuesday, a longer reply to Michael’s commentary on the recent travel expense scandal (whose echoes faded quickly)

Oh what bliss it was to watch TV news on Friday evening! Earlier that day, the story broke that three PiS deputies - Adam Hofman, the party's spokesman, Mariusz Kamiński (not to be confused with the former head of the anti-corruption agency, the CBA) and Adam Rogacki - were caught flying to Madrid on Ryanair when they had all claimed expenses for driving there and back on parliamentary business.

They would have gotten away with it, had it not been for the fact that their wives, travelling with them, were drinking alcohol that they'd brought onto the plane (something forbidden by the airline), and were remonstrating aggressively with cabin staff. The in-flight fracas was brought to the attention of the tabloid press, which led to some investigative digging. This in turn resulted in some interesting facts coming to light.

The introduction deserves a referral to a brilliant editorial by Jacek Zakowski, published in the recent issue of “Polityka”. As the author points out, the scope of the problem is much deeper than one-off incident of wheedling out public money. After all, just like Mr Zakowski, I also kind of regret those guys; no matter how nefarious they were, they could not have been denied wits. Mr Hofman, remarkable for his mordant retorts, was one the cleverest representatives of youngsters (by relevant standards politicians in their 30s) in Polish politics.

Firstly, that Hofman had done this fiddle before many times over the years - claiming mileage for driving to foreign destinations on parliamentary business, yet buying tickets on low-cost airlines. The sum of 64,000 zlotys (about £12,000) has been mentioned in media reports. The other two were also discovered to have been doing this. They'd been buying the airline tickets weeks in advance of claiming for travel expenses.

I recall testimony of 53 thousand zlotys claimed during this term of parliament, but the exact amount misappropriated is of secondary importance. What comes to the forefront is that as criminal lawyers adjudicated, such contrived scheme has all features of a punishable crime. Therefore, the up-and-coming politicians will not only end up at best on the sidelines of politics, but may also face a prospect of a few years spent behind bars.

Secondly, that once at his destination, Hofman only voted six times out of the 25 parliamentary deliberations that he had ostensibly gone to attend. He'd sign his name in the register and then slip away. So rather than sticking up for Polish taxpayers' best interests, he'd be off sightseeing, at their expense.

More than surely, scale of depravity runs well beyond one-off offence and well beyond three deputies caught red-handed. The more insightful analysis of misdemeanour of the trio indicates they had engaged in the murky scheme of claiming excessive reimbursement and not attending voting sessions without inhibitions and not even trying to conceal the deceit. As Mr Zakowski argues, Mr Hofman and the likes have been spoilt by the politics to such extent that they have grown blind not to distinguish between right and wrong. Same was the case with Mr Nowak rubbing shoulders in expensive clubs and swanking outfits worth more than an average Pole’s annual salary, or with Mr Wipler who makes a martyr of himself after picking up a night-time brawl.

All the glee and schadenfreude at the political end of this slippery trio has come at a particular inauspicious time for PiS - a week before the local and provincial elections.

To his credit, Prezes Kaczyński has terminated the trio with extreme prejudice - they've been expelled from the party earlier today. Oh what bliss it was to watch the TV news this evening! Mr Kaczyński has lost his able spokesman, who always knew how to make his boss look good, just as Poland is about to vote for its mayors and provincial parliaments.

Firstly, Prezes acted firmly, but… Back last weekend, at the trio were ousted from the party, I brought back autumn of 2006, when Prezes threw Mr Lepper out of coalition and pledged not to consort with people of sullied reputation and three weeks later let Mr Lepper in through back door, only to shield parliamentary majority. So back then I thought ‘I will believe if in half a year they’re still away from the party’ any my doubts were fuelled by the track record of Mr Hofman getting away with other acts of misconduct. In my today’s perception, the odds of the three young henchmen of Mr Kaczynski winning back his favour have diminished.

Secondly, I cannot believe Mr Kaczynski had not known what sort of arrogant, cynical, coarse lout Mr Hofman was. He had put up with all of his partisan’s smaller and bigger sins just because he had needed him. The Madrid trip scandal tipped the scales and to protect credibility and integrity of his party, Prezes had to choice but to kick out Mr Hofman and cut off his wrongdoings.

Thirdly, Mr Hofman has been swapped for Mr Mastalerek, who will now serve as spokesman of the party. In comparison to his predecessor, Mr Mastalerek is more arrogant, more cynical, more aggressive, more hatred flows from his mouth, however is far less witty than Mr Hofman. The glee at disappearance of Mr Hofman from the position of media foreman of PiS seems thus premature. One day we might be missing polite Mr Hofman who, while giving an interview, could at least summon up a feigned smile.

Fun though it may have been watching PiS squirming in extreme discomfort, it is worth putting this Polish MPs expenses scandal into perspective. Do take a minute or two to see the size and scale of the 2009 UK Parliamentary Expenses Scandal. How the mighty have fallen, eh?

I'm sure that PiS deputies were not alone in this form of misbehaviour. It is evident that there were no checks in place to make sure that the money given as an advance (zaliczka) was ever accounted for later. Having worked all my life in the private sector, this is unthinkable. When I return from a business trip, I account for all my bus tickets, taxi receipts, hotel invoices etc - or I don't see my money back. That's fair. I cannot get to grips with an expenses system that's so lax that money is just handed over on trust - and that's the end of the matter.

I’m sure they trip to Madrid is just the tip of the iceberg that has come above murky waters of politics thanks to lack of foresight of politicians’ wives. Had they not felt over-confident on board of cheap airline’s plane, the scheme would carry on, at the taxpayers’ expense. In the private sector each corporation (I assume) has a business trip policy, a document which sets out a system of checks and balances that ensures travel expenses are thriftily managed. In a sound private company no one would give approval for a business trip to Madrid for three employees, each travelling by their private car (Mr Kaminski, as his wealth declaration says, does not even possess a car), because the journey takes 27 hours of continuous driving, which means the journey would take at least four days there and back and require accommodations along the way – this is a waste of time and would mean employees would be weary performing their duties in Madrid. Alternatively, one of three guys could be damn afraid of flying, then they could all go by one car and change behind the wheel, but not by three cars! Not to mention the matter of safety of air travel… The story of driving to distant Spanish capital does not hang together at first glance so in a properly functioning company such request would be declined right away. In a sound company a manager who approves business trip expenses (in advance and upon return) can be held accountable for mismanagement, if approvals are out of line with internal policies and costs are not sought to be minimised. The New Factory in its policies has the overriding goal of ensuring the lowest total cost of travel per person, including hotel expenses, which means faster means of transport might be selected if they allow to save on accommodation. The laxity of Polish parliaments procedures is inexcusable – I bet no private company’s policies would give so much room for abuse.

And the idea of flying to a conference and not taking part is equally scandalous. If the taxpayer is paying these parliamentarians to represent them internationally - that is what they should be doing.

The arrogance and complacency shown by these three deputies should, I hope, result in none of them ever holding public office again. And a thorough investigation needs to be carried out into our parliamentarians' foreign trips - how much they cost and what they accomplished.

If a really comprehensive review of politicians’ trips was to be carried out, spanning not only legitimacy of those journeys, but also expenses reimbursed, several more interesting facts could come to the light.

It is worth copying the idea of TheyWorkForYou.com. This website gives UK voters all the details about the person who represents them in Parliament. Take a look, for example, at Stephen Pound MP, who represents my parents' constituency, Ealing North. To quote something that three different visitors from the UK have said to me over the past week, 'this is what "good" looks like'. Poland needs to replicate this. OniPracujaDlaCiebie.pl, anyone?

For the very – a plea on election day. I walked to the polling station, collected the ballot papers, looked at names, did not even touch the pen and threw the papers to the ballot box. Such is my displeasure with the local politicians that I deliberately cast a null vote. According to exit polls, PiS gets the edge of four percentage points over PO and will mark its first victory after seven elections in the row won by PO.

The German break

As promised, some succinct impressions from the recent holiday trip to Poland’s western neighbour… Then giving way to has been going on in domestic politics.

The Lufthansa

Was my first encounter to the German airline and the impression is very positive. The class of its own, as my friend accurately summarised the operations of the company. I reserved the flights more than three months in advance and, tipped off by another friend that flights between Warsaw and Frankfurt am Main are served interchangeably by PLL LOT and Lufthansa and each flight has a pool of tickets offered by each of the airlines, settle for the German airline. Oddly enough, PLL LOT tickets are sold-out much earlier, Lufthansa tickets are much cheaper (I flew there and back for mere 512 PLN!), on top of that PLL LOT is loss-making, while Lufthansa fetches some, indeed meagre, yet still, profits. And chances of passengers clapping their hands after successful touchdown are marginal. On my way there some folks sitting in a row behind, in economy class as well, were weighing in clapping, but eventually gave up on their plan. Whoever has come up with such custom, has left me bemused. Even if the touchdown is impressively gentle, applause after an ordinary part of a pilot’s job implies lack of trust in pilot’s skills…

The airport

My colleagues who fly frequently tried to frighten me by telling the airport is dreadfully huge and it is easy to get lost. Utter rubbish. The airport is indeed dauntingly spacious, but signage is excellent and losing one’s way is virtually impossible, especially in arrival or transfer zones. The airport follows the trend of letting the passengers serve themselves to the extent which it is possible. Large number of self check-in kiosks and luggage drop-off counters combined with few open check-in desks and huge queues to them encourage passengers to do the check-in themselves. Before my return flight the whole procedure (check-in, shipping luggage and going through security) lasted mere four and a half minutes. Then I could enjoy the sight of bars of chocolates for dirt cheap EUR 8.90 – a snip, in the duty-free. The only drawback of the airport, serving vast number of flights are long times of waiting for the take-off or touch-down… Its other huge advantages are the proximity to the centre of Frankfurt am Main and admirable links to the local and country-wide railway networks.

The country

Once ‘The Economist’ described the German stance in EU politics as “stolid”. This epithet resounded in my mind throughout my journeys. It superbly fits the mark Germany leaves on a foreigner, no matter which visit to the country it is (mine was fourth). This very time I have grown weary of predictability and repeatability of the landscape, architecture, etc. Each town and city having a similar central train station, church, old town, sometimes castle, similar houses and block of flats. 

Little could impress me (such is my general mindset that fewer and fewer things can impress me – a disturbing sign?) and little would take my breath away, as the view from castle hill in Heidelberg (to the right) did. If any more is to be visited in this country, it is definitely Berlin (have ventured there so far, enough for a 3-day weekend and reachable by car or train), Munich and Bavaria land (a trip for a more extended weekend and it is more advisable to get there by plane).

Meanwhile in Poland…

On account of roaming around abroad I have missed out on the eavesdropping scandal unfolding. I have quickly caught up with both recordings of conversations between politicians (and businesspeople) and subsequent commentaries.

Michael in his post pleads he is outraged at the content and mostly form of dialogues between politicians and the nation is shocked by the released materials. I cannot renounce the feeling of indignation upon listening to the recordings, but I have not been taken aback by them. I could actually safely bet similar conversations have been held by politicians of PiS and SLD in times they were in charge of the country. What has been revealed is just the backstage of making politics, the murky underbelly no one would like to see. I would hazard a comparison to the most down-to-earth stuff – each and every one of us has to defecate, but no one would like to see a fellow man defecating. Politics consists of official part which can be witnessed by the public and of several unofficial talks that facilitate pursuing it. The other story is how the private and public spheres mix up, since if meetings and conversations are ‘private’ and the dinner during which they are held is paid from ‘public’ purse, something is amiss.

Michael is also disgusted by the foul language used by statesmen he considered gentlemen. Maybe this is a matter of upbringing, but I, born and bred in Poland, have long taken it for granted folks from all walks of life swear in Poland. Swear words flow from mouths of politicians, businessmen, scholars, doctors, rank-and-files and coarse drunkards. The old and the young, women and men, in the sticks and at the heart of capital, almost everyone swears. The matter of culture is only refraining from being foul-mouth when necessary. I pledge to avoid foul language when women are around, when I talk to a person I know does not swear, in official situations, but my more-or-less official or strictly private conservations with some of my workmates or friends sound similarly abhorrently as those eavesdropped in Warsaw’s posh restaurants. If my conscience is not crystal clear, I may not feel entitled to condemn anyone for using foul language. The prime minister Tusk who has once also pledged to swear like a trooper is not going to hold anyone accountable for the form of language used.

Now dear readers, I will stoop as low, as eavesdropped members of the government did and enjoy the off-the-record part of the posting. Needless to say, minister Sikorski is an ordinary lout (zwyczajny cham) who, no one can deny it to him, just mastered to perfection the art of feigned politeness. Overwhelming majority of my interlocutors with who I have discussed the issue, share my view that impeccable manners of Mr Sikorski are grossly overrated. What matters is how you behave and what you say casually, while what you pretend to do in public just reflects upon how good your acting skills are. Mr Sikorski definitely can skilfully play out a well-brought-up gentleman. Nevertheless, the recorded conversation between him and Mr Rostowski casts favourable light on his shrewdness and political wisdom and actually he scored a point with me for realpolitik-grounded view on Poland’s relations with the United States. The words of “worthless alliance between Poland and the United States” and us doing a blow-job to Americans are home truth. The very situation bears out, again, diplomacy is the art of lying and reaction of the US diplomats who reaffirmed strength of the strategic alliance with Poland also confirms this old adage. I seriously doubt Mr Sikorski’s revealed conservation will noticeably spoil relations between the US and Poland, I would not be even stunned to learn Mr Sikorski would have gained some esteem with his US counterparts for not being a starry-eyed sucker.

If it was not greed but lack of fear which caused the financial crisis, it was not lust for power but lack of humility which was a nail to the coffin of Mr Nowak’s political career which has now come to a bitter and irretrievable end. May his example serve as a forewarning for all young, up-and-coming guys lured to shiny world of politics, tempted by visions of expensive dinners, slick suits and official taxpayer-funded trips to distant places. The temptations to use political connections to pursue one’s own interests and to feather one’s nest are strong, yet we must not forget a politician is a public servant. Growing complacent and losing self-preservation instinct is the first step towards dragging oneself down, no matter if you are a top-rank politician or a rank-and-file worker in a corporation…

The one whose reputation came out probably the most burnt and bruised from the scandal is the governor of the central bank, Marek Belka. In the light of prevalence of the foul language in Poland, I can only draw a veil over frequency of using swear words by him. Deplorably, the substance of some parts of the conversation resembles a chat between tanked-up fifteen-year-old lads. I would never suspect Mr Belka of discussing lengths of several men’s penises…

Whose penis is shorter and whose longer is a matter of minor importance, although some claim those who have small penises tend to drive bigger cars ;-) The pivot of the conversation between the head of central bank and minister of internal affairs, highlighted in the scripts that first leaked to the media, had been the discussion how the central bank could help the government finance the budget deficit before the parliamentary election in 2015 and prevent victory of PiS. Cross my heart, from what I have read I cannot make out what the men meant and how the central bank could help out the government. The discussion, unclear, casual and full of understatements, has turned water to the mill of several journalists and politicians, many of who, as I noticed, not necessarily comprehend the heart of the problem. From my perspective, if we are to assess whether potential violation of law occurred, we have to take into considerations three situations when a central bank can have government bonds on its balance sheet. Here we go with a crash course!

Firstly, budget deficit financing may take place if the central bank buys government bonds on primary market, i.e. the central bank comes in when government bonds are auctioned off and purchases them while they are issued. Such reprehensible moves in all civilised economies are prohibited by law and known as debt monetisation. The central bank, as the only issuer of money, increases supply of money which is not accompanied by rise in output, hence expanded monetary base results in increased inflation and decreases real value of government debt. Upshot: the government is better off, everyone else is worse off and double-crossed by the central bank and the government.

Secondly, the central bank can purchase bonds on secondary market from commercial banks. From the government the operation means a change of creditor and does not directly aid the government. Such actions are kind of controversial, but have been widely undertaken by the Fed, the ECB (to the right, the building, where those bastards who slashed deposit rate below zero have their headquarters, fenced off to prevent bad people from trespassing the decision-making space), the Bank of England. The purpose of such moves is to remove from banks balance sheets securities and convert them into cash in order to enhance liquidity or encourage banks to lend money. The side effect of such operations is that increased demand for treasury securities from the central bank decreases yields and hence brings down borrowing costs for the government. Securities bought up usually have long maturities (more than 10 years) in order to avoid the roll-over (refinancing) risk, as if it materialised, the situation would easily evolve into variant one.

Incidentally, the ECB will soon move to a new, posher skyscraper, top-centre on the photo to the right, seen from the viewing platform at the top of Main Tower… If anyone is to ask where they had the money from to build such huge edifice, the answer is simple – as an exclusive money issuer they have printed it. Printing money is a very serious task, hence it requires appropriate premises…

Thirdly, the central bank may engage in Repo transactions with commercial banks. This manoeuvre is from a borrower’s (commercial bank’s) perspective a purely collateralised loan – i.e. a central bank lends money against government bonds, although technically it buys securities from commercial banks (spot leg) and agrees to sell them back at a later date (forward leg). Repo transactions are aimed at regulating liquidity in the banking sector and have nothing to do with financing government debt.

I gather the first variant is out of question, the second is a contentious measure, while the third does not require any further attention.

The excuse for mentioning the plausible aid of the central bank was the threat of PiS winning the election and subsequent economic disaster… I am far from supporting PiS and also not think their victory would be best for Poland but this is a step too far. We live in democracy and make-up of the parliament lies in the hands of voters. If they decide PiS is to glean the highest number of seats in the parliament, their choice deserves due respect! The very victory of PiS will not be a disaster. It is not the case which party is in power (although perception among investors does matter), what really matters are decisions it takes.

For the very end, let’s dissect the line of defence the prime minister Tusk has taken. He will not dismiss any of the eavesdropped officials nor will hold anyone accountable for use of foul language. All the recorded government members in unison claim the Polish state has been attacked by an “organised criminal group” and it will not succumb to it. The public is thus to be focused on culprits who recorded the dismal talks in restaurants, not on the substance of allegedly private conversations (which by the way show Mr Belka, Mr Sienkiewicz, Mr Sikorski and other ‘victims’ are just regular guys, behaving like ordinary Poles when they get drunk). The timing of releasing the recordings is puzzling. Euro-election is over, local elections are due in half a year, holiday season sets in. Are the recent government’s plan to prop up ailing coal mines in Poland by curbing imports of cheap coal from Russia the real reason? I firmly believe the waiters who admitted to have installed bugs have just grabbed the opportunity to cash in on knowledge they could come into possession thanks to microphones in VIP rooms. They are just cogs in a larger machine and the plan is masterminded by someone much more cunning that people who make the headlines these days. The only problem is that the purpose for which the machine is running, remains unknown…

Random tidings – SGH, stocks, blogs

Fellow students who, if Google Analytics tools don’t fail me, hardly ever visit PES may find here my outrage over what authorities of our school have done to us yesterday. Why did we file the course declarations in December, if one decision has nullified them? Why does somebody (put stock in the laconic announcement, and the guilty is prof. Joanna Plebaniak, who has showed lack of respect to students many times before) change the rules during the game? Why does nobody inform students about it? No wonder they get lost.

The worst thing about this is not the mess. I’ve learnt to live with the chaos built into my university, month by month it’s getting worse and whenever I think the sloth, incompetence and insolence have reached its climax, the next attempt to improve something proves me wrong. Every time the outcome of their activity is an outright failure, they try to tell us they had “temporary problems”, or they didn’t know, it wasn’t their fault etc. We, as students feel treated like downright idiots, because only a downright idiot would believe in their rubbish explainings.

The worst and hard to reconcile to is that people who screwed it up (don’t blame computing centre, they just fulfil orders from “dean’s office” and it’s not their fault that infrastructure is crappy) will never be held to account for this scandal. They will laugh in our faces and tell us “nothing has happened”. A man of honour would follow out a ‘PiS strategy’. PiS stands here for “Przeproście i Spieprzajcie!”. Unfortunately, they will never say sorry and, what is worse, they won’t bugger off! It is a human thing to make mistakes, but a decent man should be able to concede them, apologise and resign from a position they are not capable of holding it.

I feared the worst, I was prepared for the worst and nothing has taken me aback, so I sat in front of computer and after two and a half hours I straightened everything out. This time properly configured Firefox and usually crappy Play Online didn’t let me down. Thank God my adventure with Warsaw School of Economics will have been finished in a year, circumstances permitting. The last condition implies my hopes will be dashed.

Dear foreign readers, every time I visit any office of Polish administration I am truly grateful I’m not in my school. Any institution is more citizen-friendly than my school. I recently studied the economic collapse of Zimbabwe. If the whole Polish state administration worked like my school we would end up like the South-African country.

This has been a wonderful week on stock exchanges across the world. Indices plummeted by three to five per cent yesterday and today, wiping out the whole bull market from the last few months. On 4 February 2010 WIG 20 (Warsaw stock exchange blue chip index) slid by 4,11%, today it declined by only 3,95%. Since the last gasp of bull market it fell by 12%

Long live the free market, markets are sound, only the forecast found on “Profesjonalny Inwestor blog” is a bit scary – what I called a bull market might have been in Mr Bartłomiejczyk’s opinion just a correction in a long term downward trend. So are we going to see new troughs? Given the current fiscal problems and drags of public debts the pessimistic scenario is unfortunately conceivable. The first wave of crisis hit the financial sector, will the second one hit the governments which ran up debts to stimulate economies? Will the contagion of fiscal woes overcome stock markets? Poland’s situation seems very good, when compared to the countries which may face insolvency. Time will tell, at the present my forecast from 30 January proves right.

The most famous English-language blog about Poland is probably Polandian, but watch out now, I’ll give you a link to “Oto Polska”, the most infamous Polish-language blog about Poland. Don’t think it has anything in common in style or content with Polandian.

If you decide to click there, be prepared that the authors won’t pull any punches. Their picture of Poland is simple: a land of dog’s excrements lying on pavements and lawns, idiots brainwashed by Catholic Church, morons who try to outfox one another, cheat on every step, botch up everything they get round to. Their griping isn’t laced with any analysis, they don’t try to trace back the source of our national shortcomings, postings generally (not all) lack constructive criticism. Good blogging may include pouncing at bad solutions, but a writer should elaborate why a certain solution is flawed, how to improve it and justify it.

Authors of “Oto Polska” instead of delineating Poland’s inferiority and taking delight in calling Poles mongrels could rather use the Net to set up a movement to change this country. We are far from ideal place to live mostly for one reason – low level of social capital.

The most disturbing thing in the whole matter is that sadly many of their posts are totally true. Hadn’t they just been eaten up with hatred and crammed with foul language, they would have just described a dark side of Polish reality, like the post about Polish higher education system. Why does it strike a chord with me?

Penultimate optimistic part is a weather report. Last days were comfortably warm, yesterday daytime high was +2C, today temperature barely crept above zero. Snow was slowly melting. The coming days are expected to bring a bit frosty weather with light snowfalls. By and large, a normal February will follow a frosty January.

Final part is a photo from today’s hearing of Jarosław Kaczyński before parliamentary gambling scandal commission. Next time I go to a barber’s I’ll ask: Na Kaczyńskiego mnie proszę ostrzyć poproszę!