Not a good July for holidaymakers...

At least for those who decided to spend it in Poland. July 2011 has been one of the wettest Julies in my lifetime, so those who ventured to Mazury or to the seaside did not get a chance to enjoy much sunshine and warmth. If my memory serves me right, there were very few sunny days over the passing month. And a good indicator for my memory is a frequency of watering plants in the garden. I haven’t done it for weeks and this means last weeks must have been extraordinarily wet, as the soil in my garden is rather sandy and it dries up after rainfalls immediately. At least it used to, as for some five weeks it hasn’t had any chance to return to its typical dryness again.

Excellent weather reporting site, run by a Spanish organisation Ogimet, proves my memory does serve me right. Statistics for Warsaw that exclude the last day of July give clear evidence: the minimum temperature of +8.8C was recorded on 24 July, the highest of +28.1C on 14 July, average temperature reached +18.1C, so almost one degree fewer than long-term average, but this year’s July was in turn much colder than those from last years. Last time it was similarly cold in July 2004, when temperature averaged out +17.9C. In 2007 July also wasn’t particularly hot with average temperature of +18.8C, but then we had a hot spell with temperatures hitting +35C interspersed throughout cold (as for July) snaps. This year weather hasn’t been actually changeable. Daily temperature amplitudes have stayed low, weather for most of the month has been the same, even rainfalls have been distributed evenly, and despite high precipitation there has been no big flood, but many minor inundations…

Warsaw saw two days when weather gave its inhabitants particularly rough rides. On Wednesday, 20 July, in the afternoon, a huge downpour paralysed the whole city, but those were the southern districts that got the biggest drenching. I left the office at 17:30, accompanied by two colleagues. One of them looked at the sky, seized up the clouds are predicted some little rain would set in. When I left the tram in the centre I turned back to see the colour of the sky over Mokotów and slightly aghast made my way to the underground. I had had a similar situation on 3 August 2010 and had a precise inkling of an impending downpour. I was right, the rain was so heavy that it was impossible to get out of the underground station. To the right, a road out of Metro Wilanowska bus terminus and P&R at 18:40. I waited a while for the rain to ease off, observed vehicles moving through the puddle to see where it was most shallow and finally drove home. As I was fording my way through the small pond I hit a number plate that had come off another car and a guy in fiat punto who drove in front of me broke off the front bumper of his car. The rest of the road home was all downhill… On many roads in Warsaw water was knee-deep and many cars got stuck in the puddles. I have a recipe for driving through such huge muddles – slowly, but not very – first gear, speed of some 10kmph, 1,500 revolutions per minute – the engine runs smoothly and steadily. Even though, I’m always anxious when I drive and the car encounters too much water – in 1998 during a huge downpour our car then (a one-year-old Rover 214) packed up on the middle, south-bound lane of Al. Witosa in Warsaw. Visibility was low and other drivers speeded despite pouring rain. Fortunately, none rear-ended our car. The cause of that breakdown were defective ignition coils. Last year the ignition coils packed up after two days of driving in heavy rain and through numerous puddles. Mechanics from Renault garage said they had been long overdue for replacement…

The other downpour, wreaking havoc to Warsaw on Wednesday, 27 July again laid bare how badly drained some places in Warsaw are. Heavens opened before dawn and it rained dogs and cats for a few hours. The way to work was undisrupted by any traffic impediments, except for a waterlogged street in Mysiadło. Problems began when I got off the Centrum underground station. To the right – a pavement between the entrance to underground station and W-wa Śródmieście railway station. People tried to waddle through ankle-deep water, yet few risked treading through the area where puddle was the deepest. I tried to pass it by heading towards Pałac Kultury – also to no avail – here only the higher parts of paved area weren’t flooded, but rainwater was running beneath pedestrians’ shoes.

To the right – on the same day – the lasts section of the obstacle course called ‘way to work’ – this is a pedestrian passage between the fence of second underground line construction site and Rondo Daszyńskiego. Even a small precipitation leaves one big puddle between the fence and concrete crash barrier. Pedestrian have to beware – firstly they must watch out for inconsiderate drivers who can splash water from puddles on the road on them and soak them up completely, secondly, as it was many times impossible to walk there, city authorities have put up some plastic steps to let workers from nearby office buildings to tread from one step to another and get into the other side of the puddle without having shoes and socks drenched. Unfortunately, the steps are slippery, I usually don’t risk going there and take a longer route around the whole roundabout, which is not problem-free, as the terrain is anything but flat and water flows into small basins…

I could grumble about the inclement weather, but I have to say I like it. There are some nuisances, such as huge puddles and accompanying air humidity which makes me break sweat even if the temperature is only +20C. (insertion: I wish to lodge a complaint about quality of air inside Warsaw’s public vehicles. In underground carriages and in trams it’s much hotter than outside and, to boot, close. There were years when it was always cool in the summer in the underground and riding it was a pure pleasure, why did it cease?) Actually I got used to such weather and I get on with this. It’s much, much better than unbearable heat of +30C, clear sky and drought, but on the other hand I feel sorry for the holidaymakers. I remember July 2000 when rains fell even more often, average temperature was 1.5 degrees lower and spending holidays when the weather’s so bad is not an enviable experience.


On Friday I went to town by public transport only. Commuting half way by car is convenient, but exudes a feeling of some isolation. My route was not the quickest, but I decided to take a train from Jeziorki (see classic pics of converging tracks) and this involves getting to the station by two buses (no suburban-zone ticket again), to see the progress of construction of Warsaw southern bypass. Much hasn’t changed since mid-June and a fellow SGH student Jakub Warszauer is totally right to claim he hasn’t seen a road with such unequal progress of works. On some sections the road is not ready, but actually passable, on some sections nothing has been done. May the works on junctions speed up and there will be a chance that it is opened in the second half of 2012.

Leaving the office I somehow anticipated traffic will be stationary and my guess was right – see the snap of ul. Towarowa – vehicles moving in snail’s pace in both directions. The same on all streets around, in. Al. Jerozolimskie, Al. Krakowska, ul. Puławska. This is what I call „holiday Friday afternoon jam” – traffic jams on Fridays during holidays are worse than on normal working days when schools are opened. And this makes me ponder upon the factors determining traffic density. Just look – in non-holiday period ul. Puławska in the morning between 7:00 and 7:30 a.m. is totally jammed. In the summer the traffic is not sparse, yet I make it from home to P&R Wilanowska in 20 minutes and drive no faster than 80 kmph. How many car users have to give up on taking this road to make it passable? Given that in my office I observe around 30% of staff are on holiday, some car users don’t have to drop their children to school and some people who normally commute by public transport use their cars, I estimate that the traffic volume is some 35% lower than over the school year. So let’s say if number of cars is reduced by one-third, commuting by car becomes worth considering…

Oddly enough, around an hour ago the sun chased away the clouds, but it didn’t take long, as a big storm cloud is rolled in from the west and the rain lashed down a few minutes ago.

Forecasters say August should bring more sunny days and temperatures typical for summer. Personally I’d prefer the current weather to stay on, but my sympathy for hapless holidaymakers tells me to quell these thoughts and long for some summer heat. It won’t be that bothersome as August nights are shorter and even with day-time highs of over +30C, mornings should salvage us with a cooling breeze…

Safety?

Never, ever have I had such problems finding an apposite title to a post. I've sat for some ten minutes trying to come up with a sentence that would best render the purport of the posting. 'Safety' is not an ideal title, but seems to be the closest common denominator for what I want to write about.

The initial idea for this weekend's blogging dose was to lay out my take on commuting, but after reading two other posts on it, and having left comment to one of them, there' s little to add, and another topic emerged in the meantime.

Recent weeks brought a spate of tragic events. Unwarranted tragic events...

18 June 2011 - Amy Winehouse is to kick off with her concert tour in Belgrad, but is too intoxicated to perform. After an hour of wait, she comes up to the stage, gibbers something, audience hook her down. Her other concerts are cancelled. Did anyone think over a month ago that on 23 July 2011 she would be found dead in her house in London?

29 June 2011 - two home-made bombs go off in Kraków, the people are injured,
14 July 2011 - another home-made bomb explodes in Kraków, one man is injured,
17 June 2011 - fourth home-made bomb explosion in Kraków within a month, another man injured.

Anything in common? All causualties were mullitated by home-made bombs, planted in shopping bags. All casualties run businesses. Motives of the perpetrator remain in the realm of conjectures, but as the man who quite probably is behind the explosions, was detained two days ago, residents of Kraków can finally have a sigh of relief. Can they feel safe now?

10 July 2011 Sunday - a cruise boat sinks without warning in Russia. Current findings point at human errors and bad technical condition of the ship as causes of the disaster. Death toll: 119. Could it be predicted?

Norway is an atypical country. Its residents are ranked among the happiest people in the world, the country has tremendous deposits of oil and gas, revenues from extraction of natural resources are not wasted but put aside into special ageing fund that should shield the country's finances against demographic problems. Outside European Union, yet prosperous, with society famous for its tolerance and low criminality rates. Seemed to look like a heaven on earth...

22 July 2011, aftenoon - the picture of paradise breaks apart. Firstly bombs go off in government buildings in the capital of Norway. Death toll there is considerbaly low, only 7 people died and several were injured. Later this attack turned out to be just a prelude to a bigger disaster. Some two hours later, a murderer killed almost 100 participants of a youth camp organised by the ruling party. The culprit did admit his responsible and described his deeds as "gruesome but necessary". Could it be foreseen? Did this carnage express some people's hatred towards multiculturalism, permissive societies, other religions, openess, tolerance? How will it affect the trustful and tolerant people of Norway?

Still we have more questions than answers. The post is kind of messy, as each and every note written out of duty rather than inspiration. May the next week bring some revelations on me... Before this happens, come along with some musings on the topic broached...

To the one who debunked the myth

I am dedicating this post to Michael Wolf, who served as Deputy Head of International Corporates at BRE Bank until late 2009.

If this posting is to prove something, it surely bears evidence that I’m a master of procrastination. Actually in everyday life I don’t tend to hang back on doing things I’m supposed to do, but this time broaching the topic of teaching foreign languages at SGH was put back and back. I hatched the idea of writing this post on 30 April 2009, so almost two years and three months ago. The only drawback of such delay is that I can’t remember as good as I would like to the event of that day. The overall picture of the issue remains unchanged, or, if it did change, things could have gone only worse.

And 30 April 2009 was the day when a conference on impact of economic crisis on German economy was held. The organiser of the event was one of student organisations focusing on economies of German-speaking countries (Studenckie Koło Naukowe Gospodarek Krajów Niemieckojęzycznych, not to grapple with the translation), so the debate was held in German. In the first part of the discussion participants had a 50-minutes long conversation on the main issue of the debate. Later students, till then being only audience to the discussion, were encouraged by moderators to ask questions. A few students pluck up courage and somehow strung together some questions in German. After one student particularly struggled to put his question into words, Mr Wolf decided to put us out of misery and offered in impeccable Polish that if we wished, we could ask questions in Polish, the he’d interpret them into German, reply in German, and once again in Polish. Thus he dealt a blow to everyone (students, teacher, organisers). The debate was meant to show students of Warsaw School of Economics can speak German and students… buggered up. In the meantime a German chap who just spent a few years in Poland brought a shame on them by showing off his fluency in Polish. But this is not the case, the case is that SGH for years has been famous for high level of teaching foreign languages. But has it deserved it.

In times of socialism, Warsaw School of Planning and Statistics (former name of SGH) was one of sparse places and the only one other than linguistics faculties, where students could learn foreign languages on a decent level. I don’t know how to define what a “decent level” is, but in a country where very few people knew foreign languages, good communication skills could be hailed as “proficiency”. Probably the bar wasn’t raised really high, and up till now no one bothered to improve the level of teaching.

The biggest myth about SGH was that it was a place where you could learn German. It was not just the opportunity to learn for free, but the whole thing was about being systemically forced to pull all-nighters to learn that language. After finishing a three-year course in German there I came to two conclusions:
1) much depends on a level of German newly admitted students stand for – many of them have a poor command of the language, so they have to work hard to catch up with the level of teaching,
2) with time, as linguistic skills of admitted students were declining, the school compromised and brought down the level of teaching. Lower entrance level meant later students would leave on a lower level.

According to curriculum, graduates of Bachelor’s studies should have a command of their first language (usually English, in my case as well) on C1 level and of their second language (usually German, in my case as well) also on C1 level. Entrance levels were set at B2 for 1st language and B1 for 2nd language. In fact my English was indeed somewhere around there, but thanks to my own work, not what I learnt at school, my German was at B2 level. The year I finished BA studies only some two or three groups were marked ‘C1’, the rest left with ‘B2’, ‘B1’, or only ‘A2’. Some students recruited in 2006 could not speak German at all. This was a consequence of flawed admission policy which allowed students who hadn’t taken Matura in German to get in.

While German is said to get the sleep off students’ eyes, English is said to be a piece of cake. For me, after the first year, the level was not ‘challenging’. During first two years I had classes with a woman who at first wanted to keep a high level, but then she loosened up. Second year was particularly not the time I could learn English intensively at school. In fifth semester I had a great teacher and I can sincerely declare I owe her a lot. I learnt a lot and in January 2009 I took my Bachelor’s exam in English. I passed it with the highest grade without lifting my little linger, which means the level was far too low! Then I had one term break in learning, when I took a CPE course in a private school. The base-case level of teaching met my expectations, but actual level was adjusted to the group, what eventually let me down… Then I decided I would never sign up for English classes at a language school. On Master’s studies I was assigned to a group run by a freaky and surely unhappy feminist. The level of her English was horrible and she gloated over other people’s command of English, which was really decent, yet far cry from proficiency. I could stand it for only one semester and put in an application for transfer to another group, run the teacher I had had classes with during the fifth semester and thank God had it approved. In the meantime I (claim to have) made a stride in English and classes with her were satisfying, but not challenging. Master’s exam was again a piece of cake, even with its allegedly worst, ‘Polish to English ad hoc translation’ part.

Learning German didn’t run that smoothly. During the first semester students were assigned to the groups according to their surnames. This means in each group there were people who barely spoke German and people fluent in it. After a fortnight authorities of SGH’s language teaching centre changed their mind and divided groups on the basis of level of students’ advancement in the language. Randomly, I came to a group taught by one of most lenient teachers at the whole school. Over six semesters, out of which during one my group was run by a stand-in (our teacher went for a sickie), I learnt some German, but mostly because I wanted to, not because systemic factors compelled me to.

In the case of German how much you learn depends on your teacher. This is a general principle, because I know people whose teachers were much more demanding and their German wasn’t better than mine. In the case of English students generally rest on laurels…

If I can advise anything (I’m talking to a brick wall, with no hopes for being heard), SGH’s authorities should:
1) not compromise even if students’ command of languages at entrance tests proves lower and lower – if students are poor they need to work harder to catch up or not go to SGH at all,
2) not cut down on number of course hours – I know teaching does cost money, but reducing learning hours by 40% over the whole course of studies will not impinge positively on grauduates’ profiles,
3) increase level of teaching English – a high school leaver should be on at least ‘upper-intermediate’ level and should be capable of reaching the provable fluency in general and business English.

English is an essential tool for almost every graduate of my school who wants to make a real career. And gone are the times when communicative English was fairly enough. At least once a week I have to read drivel written by the Poles who claim their English is at least ‘advanced’. Sometimes I make out that an author of such drivel had in mind, because I’m a Pole, sometimes I can’t because it’s too convoluted. The matter is now not about just getting by, but primarily on quality, so getting ahead.

I use English virtually every day at work, but lost touch with German at all. There were some odd situations when I had to exchange a few sentences in that language or read something, but these happened seldom. I’ve never felt a real incentive to learn German, as even in German corporations an official language is English and well-educated Germans speak English far, far better than well-educated Poles, so why bother? But recently my boss examined by German skills. I don’t know to what end, but it could be worth to think over the idea of brushing up on German…

It's weekend, time to move your a**e

And in the summertime there’s no excuse for not doing so.

Back to work from holiday on Wednesday, after a short shake-down, I got back into the swings of things in the corporate world. Working in front of a computer and sitting in the same position a few hours a day is hardly ever conducive to keeping fit. Sitting in the same position on the first day turned out to be tiresome for me, and on my way back home I somehow remembered I have a card (also paid by my employer) that enables me to enter thousands of sport centres all across Poland, so why not use it… After sorting out things with the card (first one came with a spelling error in my surname, therefore invalid, had to be replaced) it was a sin to keep it unused for two months in a wallet. Financial incentive proved to be the best incentive…

I decided it would be nice to return to swimming. I used to swim a lot back in times of middle school, but at the age of 15 I was forced to give it up due to circumstances beyond my control, what in simple words means I had a severe allergy to chlorine (added to water in swimming pools for… yes, maybe you know for what reasons?) – my whole back and face were covered with rash and seared. I tried to return to swimming in pools two times and allergy relapsed. So from the beginning of my studies I would only swim in lakes during holidays, last time in July 2009. But after all, why not give it one more try? In the worst case the skin would sear for three of four days and then the pain would be gone.

I decided the best facility to visit would be the town sports centre in Piaseczno (a partner of an issuer of my card) where I can use the swimming pool totally for free. I chose to go there early on Saturday in the morning, to avoid droves of people that turn up there as soon as small hours are over. I arrived there at 6:50 a.m. and at that, for many, ungodly hour six tracks of the pool were occupied by some eight people, so I had one track for myself. The facilities haven’t changed much since the times when I used it often (and lived 50 metres from there). I swam for forty five minutes. Upon covering the distance of 150 metres I felt my heart and lungs were telling me I wasn’t fit enough. Unabashed, I carried on and, to my surprise, after swimming over one kilometre I felt much better than after 150 metres. As I was leaving, there were even fewer people around than the time I was coming in.

Until now the allergy has not made itself felt (may farewell to it be ultimate), I didn’t forget how ‘one does it’, just like in the case of cycling, swimming is a skill one doesn’t forget, just at the beginning I had some minor problems synchronising all body movement and breathing in air above water and breathing it out under water.

As I walked back home the dearth of people in the swimming pool reminded me of game theory. I wondered how many people would have to think ‘I’ll come earlier because there’ll be fewer people’ to throng the place. Apparently the temptation to sleep early on Saturday morning is much stronger than the desire to enjoy swimming without shouting children and teenagers and having to share a track with a few other people… Most people go for sleeping.

Swimming a sport has some advantages that have to be underlined:

1. you can’t get sweat,

2. most muscles work when you do it,

3. you can easily keep fit, or bring youself back fit, without running risk of overstretching yourself,

4. doesn’t require high financial outlays – of course not everyone can go to a swimming pool for free, but charges aren’t that high (ask me how much an hour costs and I’ll plead my ignorance), but compare it to skiing,

5. you can do it all year round, although in the winter when you wear a lot and have to dry your hair carefully it is a bit of a nuisance,

6. is an alternative to gym (but slower) method of body building .

Later yesterday I tidied up the garden after recent rainfalls and washed the car, so I had a very reasonable dose of physical exercise. Today in the morning I felt a bit sore thighs, arms and nape, but now the ache is gone. I planned cycling around 15 kilometres today in the morning, but the weather has put me off. Around 8:30 a.m. it was damn hot (some +25C) and air was terribly humid. I was soaking with sweat before putting my backside on the saddle, so the trip was assigned the “put back” status. As it turned out later, morning was the time when the chance to cycle could be taken. After 10:00 a.m. stormclouds set in from the west and around 11:00 a.m. rain lashed down. Clement weather doesn’t wish to come back today, but may it come the next weekend – I’d be glad to see sunshine and warmth (around +20C, no more than +25C in the warmest moment of the day).

The Inside Job - film review

It starts with shots of intact Icelandic landscapes. In early 2000s the country finalised reform of its financial sector, which consisted mainly in deregulation. Until mid-2008 Iceland received glowing praises for the reform, which, as said by economists, strengthened the country’s financial stability and accelerated its economic growth. In fact deregulation of financial institution in Iceland gave rise above all to excessive credit expansion and, eventually, to an ultimate collapse of the country’s banking system.

This is just the prelude to another story told about the recent economic crisis. Clever, bright, yet not leftist and not politically involved. Some claim it does espouse leftists views on economy, but I did not discern it. If the film calls for something, it is surely not a revolution that would overturn the current unbridled capitalism, but for reverting to traditional capitalism, based on freedom, responsibility, playing by the rules and straightforward decency.

The main thesis the film sets out is that the financial industry in most developed countries has been allowed, by politicians and economists, to spiral out of control, then, by means of privatising gains and socialising losses, led to the recent crisis and went unpunished. The work, divided into five parts, explicates mechanics of events and decisions in the run-up to the crisis. I do not know if the way facts are presented is clear enough for a layman, but for me it seems the job has been done well.

Part 1: How we got there.

Filmmakers have come up with a theory that since the end of the Great Depression, until early 1980s when Ronald Reagan was sworn in as US president, the United States did not see any major economic crisis. This success, in fact untrue, since early 1970s saw oil crises, bringing about periods of stagflation, that put the era of Keynesianism to the end, is put down to the strict regulation of banking industry that prevented financial institutions from growing big. It was after Ronald Reagan took over and pressed ahead with his doctrine of Reaganomics when deregulated financial industry began to distend.

Two last decades of the 20^th century saw two financial crises triggered by deregulation – S&L crisis and the dot-com bubble. The former is thought to have been caused by excessive law liberalisation, the latter by simple lack of integrity. The film brings back commonly known, exposed by the press, examples of stock market analysts saying privately the dot-com stocks they had valuated at sky-high prices were just junk.

The end of the previous century brought also much more tie-ups between business and politics. Transfers from positions of CEOs of big investment banks to positions in state administration and the other way round became the order of the day. Number of lobbyists hired by financial industry to protect its interests soared. Belief in self-regulation of the financial industry became an officially recognised doctrine.

Part 2: The Bubble

Around 2000, deregulation was full-blown and any attempts to bring some markets under supervision met stiff resistance from financial industry, backed by officials from FED, at that time chaired by Alan Greenspan, an remorseless advocate of deregulation. One of the proposals eventually rejected around 10 years ago was the one to oversee derivatives market. Personally I’m in two minds about this. Derivatives are like axe, itself good, good when you use to it to chop wood, but evil when you use it to kill your mother-in-law. Derivatives can be used for transfer of risk, hedging and speculation. Two first purposes seem safe, but usually derivatives were used for speculation and this sparked the whole turmoil in the recent crisis.

Those who have never dwelled on the mechanism of mortgage lending in the US in early 2000s are recommended to see the part clarifying how this all happened. The same part brings up the ever-lasting issue of risk vs. return trade-off. So either you grant loans to creditworthy borrower and make safely small profits, or give risky loans and cash in more, as long as they perform. You just cannot circumvent this!

The film reminds that one of the causes of the crisis were flawed remuneration schemes that put emphasis only on performance, regardless of risks taken. Risk-adjusted salaries and loss-sharing together with profit-sharing before the crisis could have mitigated the aftermaths of the financial meltdown.

Very remarkable is the last episode of this part in which a psychologist tries to examine the specific features of a typical banker’s personality. As you would have thought this an alpha male, compulsive risk-taker, inconsiderate, acting on the spur of the moment. Such types were much desired by banks and still are, since only thanks to their bravado profits of banks in good times could be that high and banks did not spare money to finance entertainment for them…

Part 3: The Crisis

Begins with the face of Ben Bernanke and his utterance from mid-2005 in which, when interviewed by a journalist of one of US TV stations, he claimed there was very tiny risk that there was a tremendous housing bubble and found it improbable that bursting of it would plunge the whole country into a recession. Several economist claim to have warned Bernanke of the impending disaster but he would always shrug off those warnings. Deliberately?

His pronouncement coincided with the peak of the housing bubble. The film indicates a direct cause why it burst and it is strikingly simple – the housing market run out of suckers who wanted to buy houses at exorbitant prices and financial markets run out of suckers who wanted to buy securities backed by lousy mortgages.

Then comes another commendably clear explanation of how financial crisis spilled over into real economy. Finally, the makers conclude that, as always, those who suffer the most are not those guilty, but the poorest. The bailout programmes rescued big financial institutions (as an economist I realise it was cheaper to help them out than to let them go bust and the whole plan was purely pragmatic) and left millions of ordinary people unaided. This is again symbolised by empty houses, may this bleak sight serve as a symbol of human folly and may it caution others not to repeat the same mistakes.

Part 4: Accountability

What accountability? Current “crony capitalism” is based on lack of responsibility. Either I win or you lose. What a game! Fortunes of banks CEOs who brought institutions the had run on a brink of collapse are intact. Bankers got away with punishment. If someone went to jail, it was only for fraudulent activities. In 2008 and 2009 correlation between remunerations and performance and financial standing of managed institution was totally disrupted.

The film also lays bare the hypocritical take of financial industry on deregulation. Prior to the crisis they were against, in autumn of 2008 when financial tsunami was about to wipe out the whole industry they called for tighter regulation, and when in 2009 the worst was over again they returned to their previous stances.

The crisis has changed nothing. Financial institutions are bigger and more powerful than ever before.

At the end, the film outlines several tie-ups between renowned academics from best business schools in the US and the financial industry. The study of economics, as carried out by people financed by the industry and who get well-paid jobs there, is described as “corrupt” and indeed conflicts of interests are visible… Should we believe scholars then?

Part 5: Where we are now

I am thankful, again, I do not live in the United States. Level of inequality in the US society is continually increasing, while social mobility is decreasing. In Poland, by sheer hard work, it is still possible to rise from rags to riches. Many poor people in Poland still can afford to get in to university and break away from poverty. In the US it is out of reach. The US economy has made a huge shift towards innovativeness and high-tech. Jobs in new industries require good education which, due to its costs, is out of reach for more and more Americans. In Poland financial institutions are not powerful, their power is as big as it should be, maybe except for Pension Fund Managing Companies, which showed how to defend their interests during the debate on pension system earlier this year.

Filmmakers also blame the “culture of going into debts” for the crisis. Media and financial institutions, as they claim, have incited people on consumption spree, brought them into troubles and profited from their misery. Also limited access to higher education is said to be one of the reasons why people run up huge debts.

Barack Obama’s presidency turned out to be a big letdown for all those who had hoped for the CHANGE. He went back on the promises to curb excesses of the financial industry. European government somehow managed to tackle the issue, Mr Obama failed.

The film ends with a lovely conclusion: Real engineers build bridges, financial engineers build dreams. Many people dreamt of their own houses. Their dreams have turned into nightmares.

Personally I have two main reflections after watching the film.

Firstly, if so many people “declined to be interviewed for this film”, are their consciences not clear?

Secondly, I could not resist the impression that many people who agreed to be interviewed mastered lying through their teeth to perfection. This is an immensely useful ability in the contemporary world. Sadly…

Absolwent SGH

I think my second academic degree obtained in the time of running this blog is not a reason to rename the address of the blog, nor to change the nickname which is quite widely recognised in the Polish-English blogosphere.

The Master's exam I somehow passed today didn't go as smoothly as the Bachelor's exam. Many think such exam is just a formality that marks the end of one studies, at Warsaw School of Economics it's not a piece of cake, but on other hand something doable and not worth the whole stress that plagues would-be graduates. The Polish word obrona, literally "defence", fits quite well the character of the exam, sometimes you have you to prove you deserve the title of MA.

This time, unlike in 2009 I didn't buy and flowers, chocolates, nor any other gifts for the examiners. After all they do the job they are paid for and don't do me any favour that they come. The supervisor of my MA thesis turned up at proverbial "eleventh hour" (three minutes before the exam) and dashed off just after the result was announced, as he hurried to go back to work, the reviewer of the thesis didn't show up at all, but sent a stand-in who didn't even bother to stir up any problems. And the examiner in economics, despite being hailed as "the nitpicker" was surprisingly lenient.

So... If you happen to drop in on the McDonald's restaurant at the corner of Marszałkowska and Świętokrzyska for a portion of french fries, please place your order cordially:

Szanowny panie magistrze, poproszę frytki

No mercy for risk-takers

Sometimes you can hear a widespread opinion that financial markets resemble a casino, sometimes you are told prices of financial instruments do not reflect their fundamental values, but follow a random walk. Even if these assertions are half-truths, they must not be disregarded by anyone who wishes to be a market participant. If you enter a financial market, no matter if you buy, sell, borrow or lend, you take risks. Come to terms with it, put up, or ship out!

Over two years ago Poland witnessed sad stories of companies which speculated on currency options. In 2008 zloty strengthened, its appreciation was potentially detrimental to exporters, for who export sales would no longer be cost-effective. Banks found a solution to their problems – stricken exporters were offered an opportunity to buy currency options on sale of EUR at fixed rate, usually higher than market one. Unfortunately, such a hedge had to cost, so banks came up with a strategy called risk reversal. The rest was once described, there’s no need to repeat it.

Broadly at the same time, in 2008, Polish zloty (hereinafter PLN) hit its high against Swiss Franc (hereinafter CHF). Mortgage loans denominated in CHF were extremely popular in that time, as the housing boom was at its climax, and CHF gave the opportunity to have lower debt service costs, thanks to gradual decline of CHF/PLN exchange rate and lower interest rates in CHF. Then came the turmoil on financial markets and PLN plummeted against currencies of highly-developed countries, deemed to be safe havens. In early 2009 the trend again turned back and zloty’s value in other currencies was back increasing. 2011 saw Greek crisis and printing money in the United States, so EUR and USD began to be regarded as riskier assets, while CHF still enjoyed the status of safe haven and kept strengthening against other, also major, currencies. In July 2008 CHF/PLN rate was at its ever-time lows at around 2.00, in June 2011 it climbed near 3.40. This translates into financial standing of homeowners who have taken out loans in CHF in 2007 or first eight months of 2008 when CHF/PLN rate ranging from 2.00 to 2.50, and who now are facing a problem of mounting debts. Currently many of them have so-called negative equity (what’s the Polish for negative equity?), what means their outstanding debt is higher than the market value of their property, but this is not yet the biggest problem, since as long as they settle their monthly payments in time, banks do not raise any alerts. The bigger problem is posed by rising debt service costs. Monthly instalments, as loans, are also denominated in CHF and then converted into PLN. If a debtor’s rate is 500 CHF, holding everything else unchanged, when CHF/PLN exchange rate was 2.20, a monthly payment was 1,100 PLN. When the rate soared to 3.40, the instalment soared to 1,700 PLN. Makes a difference, doesn’t it. When loan repayments make up a small portion of a borrower’s income, a borrower stays afloat, but if a borrower could only make ends meet when CHF/PLN stood below 2.50 PLN, a borrower is distressed.

The parliamentary election is coming and politicians search for various ways of “buying” votes. Election year is usually a period when politicians from ruling parties are more eager to give away gifts and those staying as opposition have inclinations to come up with promises of gifts they will give away if they win. Some of the Polish politicians have taken a leaf out of Hungarian book and put forward to freeze the CHF/PLN rate at 2.75 for the borrowers who have taken out mortgage loans in CHF at rates lower than 2.75. The difference between the market rate and 2.75 would be paid by the state. But who is “the state”??? Yes, my reader, it’s you, it’s me, it’s every person and every company that pays taxes in Poland. And this ridiculous idea is just another bail-out. Someone has taken a loan in a foreign currency and exposed themselves to a currency risk – cool, now they have to face the music. The scenario in which CHF/PLN goes up by at least 50% should have been taken into account when the decision to take the loan was made! And banks should have prepared sensitivity analyses, but as far as I know the recommendation of Polish Financial Supervision Authority that curbed lending in foreign currencies came into force some two years too late…

This is actually not the first time, in 2009 deputy prime minister Pawlak proposed to cancel legally valid option contracts between stricken companies and banks. The idea to freeze the CHF/PLN rate is not as shockingly silly as the Pawlak’s attempt to turn back time, but will not meet my approval.

On this blog there will never, ever be any consent for bailing out risk-takers. Either you take a risk and accept the rules of the game – you win or lose, or you just don’t engage in risky transactions. If there is to be a relief for troubled borrowers, why doesn’t somebody return me let’s say 200 PLN out of almost 900 PLN I lost recently on the stock market? I knew how aggressive speculation could end up and this time the worst scenario materialised. I made a mistake and covered the loss-making position far too late, thus incurring a bigger loss, but I’m the only one to blame, and I have no right to moan, just as some people with “encumberance in Swiss currency” do. I’m sick of listening to them griping and tell them politely that if they made their bed, they have to sleep in it. And they politely shut up… Maybe I’m ruthless, but those people really have to suffer consequences of their decisions.

Keep your fingers crossed on Thursday, between 10:30 and 11:00 a.m.

Gone is the longest day

A small anniversary - this is my 250th post - I'm half way towards being half way to hitting one thousand posts :)

Today a slightly "Jeziorkish" post - I strolled around my neighbourhood between 8:00 p.m. and 9 p.m. to snap some pics during the last hour before sunset. Picked out a few best and shared them here.

To the right - houses and historical (built in the first half of the nineteenth century) church in Stara Iwiczna. Typical for this time of the year in the evening sunrays illuminate northern walls of the buildings.

To the right - ul. Mleczarska which marks the border between Piaseczno and Nowa Iwiczna, here looking north from the intersection with ul. Energetyczna. Traffic not very sparse, but it's the beginning of a long weekend (I fail to notice this being burdened with learning).

To the right - a beatifully sunlit row of terraced houses by ul. Mleczarska in Piaseczno. As I passed by I didn't spot any of the dwellers in their gardens. Ain't it a sin to stay in when outdoors it's so glorious?

Again to the right - yet another view from ul. Mleczarska. The sun is blocked out by a foliage of a tree, but the last subeams manage to break through between the leaves. Magnificent? I'd be wary to  gloat over this photo. The upshot of my mini-outing I present here do not really come up to my expectations...

Surprise, surprise - I'm taking you back to late winter 2010, thaw is in overdrive, big snows are melting to uncover dirt, rubbish and turds.

And broadly the same place almost 16 months later, when summer takes over. Field in the foreground is overgrown with some oak, wheat, potatoes or God knows what else, houses in the background have been completed. All in all the atmosphere of the place remains slightly dull...

I turn around to snap houses on ul. Zimowa, I'm looking west, but the magic is gone after the sun has been occluded by clouds. Rains and storms are about to set in over the night.

Curiosity - to prove how infrequently I dabble in photography some stats - today I took my 2000th snap with my compact Canon and I've used it since July 2007. Shame...

Are we in 2008?

The title sounds at least weird, but this is exactly what occured to me quite recently. A few days ago I waited for my friend outside her office and I remembered the time when we met, during our internship at M********* Bank, it was in summer 2008. We looked back on those times and I put our memories into a broader, economic perspective. Then I discussed it with my colleagues at the office and they shared my observations. Three years have passed and economic situation is disturbingly similar to that in 2008. Just come to think of it...

There is a rally on commodities market, just like in 2008.
Rising prices of commodities have sent the inflation rising, just like in 2008.
Stock market has been underperforming for while, although scale of the correction is not as huge as in summer 2008 when the correction turned into a full-blown bear market.
Pace of GDP growth in developed economies is slowing down just like in 2008, there is a serious threat of double-dip recession in Japan and United States.

In 2008 world saw a spectacular turmoil on financial markets following the bankruptcy of Lehman Brothers bank. In 2011 we might witness a similar disaster. This time the biggest sore points are Greece and USA.

Problems of the former have kept us company from May 2010, when it transpired the country would be soon unable to roll over its debts. The default was somehow staved off with a huge bail-out package, but the issue remains unresolved and pain in the necks of European politicians and bankers is getting more and more severe. For the last 13 months Greece has been effectively a corpse, artificially kept alive by a drip of money flowing from the IMF and EU. If it hadn't been for those loans, the stricken country would have gone insolvent on 19 May 2010. This was fended off by the EU mostly because bondholders of the Greek government are mainly French and German banks, which had bought Greek gilts after collapse on sub-prime securities market, as government bonds were at that time deemed to be a risk-free investment. Those banks, if Greece defaulted on its debts would have to write off large sums of money, losses would deplete their equity, or even gobbled them up at all. To prevent a knock-on effect, governments would have to shore up capitals of those banks, but in 2011 it wouldn't be as easy as three years earlier. Then government bonds were treated as safe haven and so called "investors" were eager to help the governments meet their borrowing needs. Today, as government bonds are more or less risky assets, it would be impossible to finance another bank bail-out programme, or at least it would be hard, as potential debt buyers would require a generous rate of return. EU countries are bending over backwards to stave off the Greek disaster, but this looks unfeasible. If the next tranche of the EU / IMF funded rescue package is to be disbursed in July, Greece has to pass an austerity programme that would involve tax hikes and painful cuts in expenditures. Greeks, accustomed to welfare and bunking off, don't give a green light to the programme and the odds it will be carried out are getting lower. If Greece fails to meet requirements set by its lenders and the lenders don't give in and turn a blind eye on Greek governments fecklessness, the real bankruptcy is in the offing. And even if the next tranche is disbursed, problems of the country and its creditors won't be solved, but only postponed. Best case scenario for bondholders is soft restructuring, meaning write-downs on Greek government securities will bemade over time. And Greece itself is poised for a downfall, well-earned downfall... Grrece has long been effectively bankrupt. Everyone realises it, and everyone is afraid to speak it out.

USA are in a slightly better situation. For no apparent reason their debt is rated AAA, despite the fact the country is on its way towards a technical default. If the congress, where republicans have the majority, doesn't raise the debt ceiling by 2 August, the US government will have no money to buy back its treasury bills (by rolling over the debt), what means effective insolvency. Funnily enough, rating agency can downgrade US rating only if the debt ceiling is not increased. So if they keep on running up debts, triple-A rating would be reaffirmed. A farce? No, this is real, so the rating agencies grading US debt as prime investment are in for a disredit comparable to the one with sub-prime securities and Lehman rating. But United States have a way with its creditors that Greece doesn't have. USA can print as much money as they want and monetise their debt - this is the only way it will can be paid off, with the detriment to those hapless guys who hold US treasury bonds. I hope Barack Obama's face will adorn $10,000,000 banknotes and Ben Bernanke will deserve to look at Americans from a $100,000,000 note.

I'm looking forward to both imminent defaults. Both wretched Greece and wretched United States have worked hard to go default and there's no point in averting it. Of course many economists and probably all politicians would disagree with me and do their best to ward off the bankruptcies, as these bankruptcies would give rise to a turmoil on financial markets much bigger than the one following Lehman's collapse. Indeed, they would, but we need to suffer this stress to clean the air and finally learn the lesson from the crisis. Price for living beyond our means should finally be paid, conclusions should be drawn, bail-outs should become thing of the past, moral hazard should recede to the realm of academic discussions on economics.

But they won't...

And please don't ask me what the safe haven for money now is.
Government bonds - no longer
Stocks - will plummet
Commodities - will plummet
Bank deposits - why not, but given the current inflation profits in real terms are negative.
Gold - seems overvalued
Properties - somethign tangible, but don't expect the market value to increase in the coming years...

Won't make it before Euro 2012

Not much time has passed since I wrote about privatisation flop, but BGŻ IPO is a petty failure in comparison to big delays in Polish big road construction programme.

The road-building programme in Poland is one the longest ever developed in the world. Its beginnings can be traced back to late 1970, when socialism in Poland reached its growth limits and central-planned economy began to wound down. Late 1970s were the time when construction of Berlin-Moscow motorway was due to kick off. It did get under way, but soon works ceased for next 30 years. 1980s were the time of dreadful economic misery; in 1990s few roads were built. Road construction programmes saw better days in late 2000s, but the pace of development was surely too low. Before workers coul set out to work, clerks had to get to grips with all bereaucratic procedures that drag on and on. Then local residents showed how NIMBY approach works in practise, at the very end some eco-terrorist chained themselves to trees and put back to onset of construction works.

Finally, Poland became a big construction site (to draw on official propaganda dictionary) in 2009. Bereucratic procedures were completed, National Road Construction Programme was passed in parliament, Poland received a generous cash injection from EU funds for investments in infrastucture and, last but not least (to make the post look like a school essay) there was a big motivating factor that spurred the road construction spurt - the imminent Football Championchip due in 2012. According to all plans, most expressways and motorways are due to be opened less than two months before Euro 2012.

A big stride was essential if Poland wanted to play host to one to two millions of football fans coming from all over Europe. Our infrastructure was so run-down and underdeveloped that it required a huge effort to bring the whole mess into order. It was doable, but everything was launched far too late and schedules were so demanding that a small delay could pull the house of cards down. The time for facing the truth has come.

Real problems emerged recently. The glitch in construction of stairway on the National Stadium in Warsaw will postpone its opening ceremony by a few months, but it still doesn't herald any disaster, as it will be opened a few months before the first football match kicks off. Other stadiums are currently finished and they will be completed. Worse is the case of motorways, with key section linking Łódź and Warsaw. Tenders for five sub-sections have been won by three companies, including a Chinese overseas construction company - COVEC. In May it was revealed that COVEC failed to pay its subcontractors, the Company had serious problems with liquidity and it turned out that the construction project was beyond their capacity. Works on construction sites have been suspended and now the Polish government runs negotations with the Chinese company. The infrastructure minister avowes the motorway will be 'passable' (not mistake for 'finished') in early June 2012, but there are few people who believe it...

There's no doubt this motorway is simply vital to make driving from Warsaw to Poznań bearable. Actually from Warsaw to Poznań it even is, but the other way round it is much worse. Once you get off the motorway in Stryków, the ordeal begins. I travelled there last time in April and the journey lasted over six hours - average speed was then lower than 50 kmph... Next time I'll go to that Client by train...

For me much more necessary is the southern bypass of Warsaw which should facilitate everyday commuting to work. It is also quite sure that the section from Konotopa to Airport will not be finished - progress on construction of some junctions is pitiable and there is no chance it will be caught up. Plus there are some other obstacles, such as a council block still waiting for a demolition with its dwellers waiting for an eviction. Until today I had some glimmer of hope for construction of "Elka". Today I ventured to scrutinise the progress of works on the junction of the bypass and expressway towards the airport and ul. Marynarska and all my hopes were dashed...

I ventured there in the morning. The route, taken with all possible shortcuts, was covered on bike within 35 minutes. To the right - I cycled through a path linking Mysiadło and Jeziorki, at this time of the year more and more overgrown by grass and weeds, yet still cycleable. Just after taking this shot my camera signalled its battery was low so I gave up snapping until reaching my destinantion. Later it turned out it just bluffed, just like every mobile phone does when it cries for charging long before a battery is down...

I went up ul. Nawłocka, ul. Trombity, ul. Kórnicka, ul. Baletowa and the pot-holed ul. Hołubcowa. Then turned left and trespassed onto private property (I noticed the peculiar traffic signage on my way back, I still have remorse, caused by my innate respect for other people's privacy).

Then came the inspection. To my surprise ul. Hołubcowa still cuts across the bypass. The tarmac wasn't even ripped off the local street. Looking east - looks like a road in the future. In a distance one can see a flyover that takes ul. Poloneza over the expressway.

Looking west - and I'm totally disillusioned - the tunnel under the tracks is not digged in. When peeking at the site from trains I suspected the works were much more advanced, in fact the tunnel under the tracks still waits for its time...

Seeing the site from the train has the drawback of seeing everything very shortly. Getting there on foot doesn't give the opportunity to see everything anyway. Access to most parts of the site is restricted, and this is correct, but little can be seen if one does not look from above. To the right - I suppose this is a viaduct that will take the regular S79 road towards ul. Marynarska. Or not...

I took two more photos, but as they show very little stuff, there's no point in uploading them. The whole journey wasn't as enjoyable as planned, as despite hanging around for over a quarter I couldn't even snap any plane touching down... On the site the camera did not moan about battery running low so on my way back I could indulge in snapping... To the right - ul. Hołubcowa near ul. Sztajerka - a really enchanting place, but I wouldn't dare to go there by car... Unless I was a SUV-owner... Not, this is not a reason, nor a justification to buy such ridiculously big vehicles...

The next snap shows a run-down house by ul. Baletowa. Three years ago part of the roof wasn't sunken...

Where ul. Kórnicka meets ul. Trombity I turned back and spotted billows of smoke wafting somewhere over Okęcie. Back home I checked the news in the Internet and found out another bus was ablaze...

And at the very end, another pot-holed road, ul. Nawłocka. I don't know who imposed a speed limit of 40 kmph, as I would be afraid to drive there at more than 20 kmph, unless I was very intent on doing down underchassis of a vehicle... Maybe in a winter driving here on beaten snow would be safer...

At the end of the day I've reconciled to the thought these roads won't be finished by the football championchip, I don't want them to be finished that soon because I know haste would do more harm than good. I would rather see them opened in two years and finished properly. And for June 2012 - time to think about taking holidays and staying away from Warsaw when crowds invade the capital :)