Bad, bad deflation

It seems that EU and USA currently fear deflation more than anything else. After all, the argument goes, decreasing prices motivate people to postpone consumption, which adds to the downturn.
This seems like an obvious truth but it is unlikely to be the only consequence of deflation, or even the most important one.
This is a banking crisis, during which the value of banks' assets decreased significantly. Plus, they perceive every asset as much more risky than before. Therefore, they are not willing to lend money because they do not have enough of the assets to feel safe. The deflation, plus at least in Czech Republic obvious hunger for deposits (interest rates are highest I have seen in the long time despite low rates set by CNB), motivates people to save. Saving on a banking account instead of in cash in the attic has twice as high rate of return and if there is one thing clear from this crisis, it is that the banks' deposits are safe.
Increased deposits will make banks to feel safer and to start lending again. This will re-start investment, which will require new employment, which will make everybody feel safer and start spending again.
From still strong reluctance of banks to lend, it seems that the government shortcut to just motivate people to spend seems unlikely to work, especially in the US, where the levels of consumption were not sustainable in the long term

P,S. I prefer to be a lender, not the borrower. Personally, I prefer deflation also because of this. But I believe that it may not be as harmful to the economy as everybody thinks so, given the type of crisis we are in.

Not so helpful protection

I recently started a new job. It's pretty time intensive - 60 hours a week is a norm, on average. More when necessary. The work is interesting, well (or even extremely well paid, depending on your criteria), colleagues are smart and the whole atmosphere is friendly (so far, as far as I can tell). So the hours seem acceptable.
Sometimes, there is just too much work and the workload increases to unreasonable levels. In the US, the firm asks you to measure true hours working. You report truthfully (there is really not reason not to - if there is not enough work, you are expected to be home, "on the beach". And if you get to insane levels, somebody will come and help you (seriously, man).
The great socialist left (and right) in Europe, probably at the end of the industrial revolution, decided that working about 50 hours a week a year should be illegal. Why the rule might make sense if you work in a factory for minimum wage, it does not make much sense for highly qualified jobs, when you actually want to work more, but should not. Nobody can tell how much you actually work, of course, but you have to report the hours and such reports have to be archived.
This idea of protection is actually harmful. Instead of truthful reports, you have to lie, otherwise your employer (and thus also you) would have a problem. It may be ok to lie to the government (it is not for me, but so what), but it is really stupid that you have to lie to the company that wants to know, but legally cannot (should not) for its own protection.
If I may ask, I don't want any more protection like this. Thank you.

What do you like doing?

I spent last two weeks wondering what I really like doing. What is fun?

What do you like to do? What do you look forward doing? What do you think about doing when you do something unpleasant?

I guess most people don't need to think about this. It just comes to them naturally. It does not to me, probably because I like to do most things (when I accept I have to do them). It actually is a tough question for me.

I think I just found the answer. I feel happy.

The end of capitalism

Dilbert Blog is probably the best blog I know. Funny, smart, surprising, honest and to the point. It is written by a non-economist with great economic intuition. Adam Scotts' investment advice is based on the idea that you (or nobody else in the long term) cannot beat the market, which is quite well understood by most economists and confirmed by his experience with his own management of money, when compared to Goldman Sachs.

The last post is mostly wrong, however. He claims that we will soon see the end of capitalism because

Capitalism was conceived before the Internet, and before the gears of commerce became computerized. The system could absorb a lot of con artists because they didn't have the ability to steal fast enough to cripple the system. As you know, that has changed. Crooks in expensive suits now have the ability to swindle trillions, collectively, thanks to the efficiency of the system. And idiots in expensive suits can do even more damage.

This is mostly true but the result is not the need to abolish capitalism. It will encourage people (most people) to be more careful. At least I will try. Most smart people will. And the governments should stop caring about stupid people. Not because they don't deserve it but because it encourages stupidity.

Further comments suggests lack of understanding what the money is:

The balance of power has swung to the crooks and the market manipulators. Even if we could regulate away these problems, it's already too late. There isn't enough money left to support the planet under the current social systems, at least not when the boomers start retiring and unemployment starts climbing.

Whether or not the capitalism can support current social systems does not depend on how much money are being printed out but how well it can motivate people to work and how efficient the production can be. The biggest danger then comes from the (stupid)restrictions on trade. The people possess the technology to feed ourselves and to sustain and well increase our average standards of living (even if for some part of the society the standards of living might go down). The question is whether there will be sufficient incentives to use that technology, to keep looking for more efficient ways of producing stuff and to sell it.

Finally:

But the biggest change could be in what sort of consumption is allowed under the new economy. Most of our problems were caused by people who couldn't control their own spending. Banks could tighten their credit requirements but that won't be enough to stop the spending junkies from depleting their own nest eggs. So you might see some forced savings rules in the new economy.

No, the problem was not caused by people borrowing money they could not afford to pay back. It was caused by people willing to lend them and even more by people who bought such debt or were willing to bet that it was a good debt. Some stupid people will always try to spend more than they can afford to. The only thing the government needs to do to make their life miserable (thought not unbearable), not support them or save them to discourage such behavior.

The interesting question is whether anything can be done with the herding behavior (causing bubbles and their bursting) but most likely not.

ODS

So our great president VK wants to leave the party ODS (which he founded more than 10 years ago). Well, when he does that, I will join, or at least think seriously about doing so. Not that this is going to happen anytime soon. He is hoping that the party will consider his threat credible. I don't consider it a threat, it's a great opportunity. Not just for the party, for this country, too.

Tmou X.

The dream finally came true. This weekend I was a member of the winning team (Prahory) in the game (competition) Tmou. The game starts at one place, this time Velodrom. All teams (450teams, 2000 people) receive first code (cypher), the solution of which guides them to the second level, where the next cypher is hidden. This goes on for about 20 hours, during night and cold weather. Tmou is one of many games like this in Czech Republic-probably the oldest one here and the most famous.
We were leading since the third level, even though one team was able to catch up at the last but one level, so we had to run for it.
Apart from happiness, I feel certain emptiness. Winning Tmou was an important goal, and it was really hard to achieve it for a long time. Yet, there is nothing left now. I don't feel like going to another game any time soon. I'm sure other teams can appreciate this. Our team won last year as well, even though I was in San Diego and could not participate.
Our team was created about 6 years ago and made a significant progress since them. Previously, we solved the cyphers in the style "One person, one cypher"-most cyphers were broken by a clearly identifiable individual. Currently, we cooperate so well that we cannot tell who broke any particular code. We talk about the cypher, everybody mentions curious facts and ideas. In a few minutes the procedure (the idea) is clear and what remains is somewhat boring part of actually doing the work that may take an hour or so. While this sounds great (and it is, if you want to win the game), it does not feel so. There is no particular moment to remember, no clear point in the game in which you were helpful/crucial/indispensable.

And the big question at the end is: "What do I want to achieve in my life now?"

The extent of the crisis

This does not seem like a reliable information but if true, it is unbelievable:

Europe was especially hard hit as previously placed truck orders were canceled. After Volvo cleaned out those orders from its books, the net order intake in the third quarter was a mere 115 trucks, compared to nearly 42,000 trucks in the same period last year.

If that keeps going on, we will live through some interesting times.

Wolrd War III

Imagine that a major war (affecting lives of at least 1 billion of people) happens in the next twenty to fifty years. Which country would you think will start it?

I would bet on Russia and I consider such war quite likely. Especially if the current crisis worsens, the price of oil decreases even further (who would guess that the price of oil will more than halve in a year?), the economic hardship will encourage or force the couple Medvedev Putin to use nationalism deeply rooted in the Russian culture. Russia has (dubious) claims for land of many countries (Georgia is one of them, but there are many more), it has large number of people outside it borders. And it is quite easy to argue that they need protection. Exactly the same way Hitler justified taking parts of Czechoslovakia. Russia has potential conflict with China but it may be equally likely to go west, to re-establish its presence (and former glory) in Central and Eastern Europe.

The big question is whether one can trust NATO and EU structures to stand united behind its members. I would not trust Sarkozy (or any French) a bit. But it was England who betrayed Czechs before WWII. And it may be hard to rely on Americans, unless they have a radar here. So let's build it quickly...

Our president

Our dearest president is an idiot. "His" party lost the elections for finally doing something (in contrast to the time when he was a prime minister-he talked about reforms but haven't done most of them), most notably for their reform of health care system. Some people even mention very unpopular, yet very necessary, end of rent control.
Our president recently said: "If you would ask me if I remember any reform done in the past few years, I wouldn't be able to name any". Well, except the one or two that lost the ODS (his) party the elections, obviously. But those do not count, right?

Well, our president is just using this opportunity to get even with a guy he did not like from the very beginning, who took the position of head of the party from him and whom he tried to "kill" right after he (Topolanek) was elected to lead the party.

I would not bother to write about this, except that the government after 20 years of total failures, finally seems to understand what needs to be done. The quality of their work is not at what most western democracies are used to, but it moved from East to West in the past two years more than ever before. It would be a pity to see such government fail.

Czech Health Care System in Numbers

According to the recent statistics, socialized health care system in Czech Republic spent 17493 CZK on curing the patients and 74 CZK on preventing the diseases, per insured, for the last year.

No, there (probably) is no error in the magnitude of these numbers...