Poland’s Coming Economic Collapse: A Story in 8 Tweets

Your humble blogger is trying to dig herself out from under a pile of overdue estate administrativa, hence my temporary absence. But guurst sent along this sighting about Poland’s spending plans, which look destined to drive Poland into even more severe inflation and a currency crisis. It looks like Ukraine will not be the only country that breaks itself in attempting to break Russia.

So forgive me for taking the easy way out and simply hoisting one-time NC writer Philip Pilkington’s informative tweetstorm.

To Pilkington’s final point, Poland has already been in a row with the EU over its refusal to change its judicial structure and other matters. That has largely been put aside for the moment due to Poland’s hawkish stance against Russia.

So what happens when Poland’s economic tsuris leads to its working age adults departing in droves to earn income elsewhere? Oh, and coming maybe only a year or two after Europe contending with refugees from Ukraine?

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  1. albrt

    Why would Polish people wait a year or two to bail out? The problems will be coming to a head much sooner than that.

    1. Yves Smith Post author


      Difficulty of getting a job or housing anywhere outside Poland.

      What I suspect will develop among Polish expats seeking employment in more promising countries is what we have in Southern California: big groups of immigrants (most often unrelated, they are here to remit money home) in way overcrowded housing, like 8 adults in a 2 bedroom apartment.

      1. PlutoniumKun

        This is already the situation in Ireland, but I’ve not heard it yet with Polish people – at the moment, Brazilians are the ones bed sharing (I don’t mean that in a sexy way) in addition to the population of Chinese/South and SE Asian students. There is a big Polish population in Ireland, mostly settled (i.e. here a couple of decades with families, etc), but so far I’ve not seen any evidence of a wave coming in. Strolling past my local building sites there are a lot of east European languages, but not specifically Polish, in contract to a 20 years ago – most seem to be Bulgarian or Romanian. Pretty much all spare accommodation has been booked up by the government for Ukrainian refugees. They are even now trying to rent holiday cottages.

        As the UK slumps, then its hard to see where the slack is to take in workers to relieve the pressure. Ireland has probably the healthiest economy in Europe, but construction is undergoing a major retrenchment and rising interest rates always chokes off the supply of casual jobs. Risking inflation is also hitting the casual service sector.

        1. digi_owl

          Norway as well.

          Right before covid there was even articles about how union inspectors needed police escort on construction sites thanks to mafia threats.

          Something that i don’t recall hearing about until Schengen flung the borders open.

      2. Matthias

        Large parts of the building trades as well as nursing, etc here in Germany run on polish labour (and other Eastern European Labour) to the point that Poland had issues fulfilling their own needs. There are simply not enough young Germans entering the trades. So this has largely already happened 2 decades ago, Yves. The question is rather, what will happen now that the German economy collapses, will they go back if it is worse in Poland?

      3. Earl Erland

        Not being religious I know nothing of the Entities that are said to create and destroy. Anyone playing with Poland? I did not see that in PP’s Tweets.

  2. Darius

    Philip’s thread has some vehement replies denouncing it. Saying for one that a lot of the defense spending is domestic. Are they leaving important things out?

    1. Yves Smith Post author

      I think this is putting fingers in ears and yelling “nyah nyah nyah.” He has the goods on a current basis with this: “With $17bn of new contracts with the US and South Korea, they’ve already hit 2.5% of GDP. ALL of that money flows abroad!” The math is correct. $17 billion is indeed 2.5% of Poland’s GDP of $674 billion.

      In light of that, I find it hard to believe that even as much as 30% of the going-forward increase in spending is domestic (more manpower and maybe some more facilities).

      1. Patrick Donnelly

        Indeed. All wasted.

        Where are the intellectuals in Poland?

        Are they waiting until they get the numbers to heave out the bribed and extorted leaders?

        This applies to nearly every European nation joining the Crusade against Orthodox Christianity.

        Human animal volatility increases with Solar conditions. The next 3 decades are going to deteriorate into something very interesting.

      2. Joe

        Military contracts are often multi-year. GDP is single-year. You’d have to adjust by contracted payment schedule in order to understand percentage of GDP.

        Second, major military contracts often come with mandatory industrial offsets, involving manufacturing and other work in the buying country. You’d have to know that too.

        1. Yves Smith Post author

          The $17 billion is for South Korea alone over three years, for purchase of KOREAN-MADE equipment and Korean-made is seen as advantageous. That does not include the value of US equipment. From an October 27 article in the Korean Times:

          The South Korean defense industry sold over 21 trillion won ($14.7 billion) worth of defense systems and weapons to Poland this year, double that of Seoul’s total defense exports in last year alone…

          Experts said the European country’s preference for “Made in Korea” weapons is because of Korea’s continuous investment in R&D and its production capacity as the country is technically still at war.

          “There are not many companies around the world that can make massive number of weapons within a designated timeframe. South Korea is one of very few (firms) with stable production capacity coming from its readiness of preparing the war for the past 70 years, not to mention the cost competitiveness,” said Yang Wook, an assistant researcher at Asan Institute for Policy Studies….

          Hyundai Rotem is also planning to construct a K2 tank and K9 howitzer production factory in Poland for local production starting from 2026, where active technology transfer is expected, according to the company.


          So no local factories until 2026 and a new factory will not be terribly productive in its first year. So this $17 billion is entirely Korean-origin, contrary to your assertion.

          An article on Defense News said that Boeing was a big supplier of orders. Boeing has a big local commercial manufacturing operation in Poland. I read a few defense procurement articles about the Polish buys from the US. They were pretty hand-wavey on the role of Poland in manufacturing.

          1. kam

            Korea is the one country that makes China’s quality control look good.
            Korean bearings ? Make sure you hire plenty of mechanics for field work.

          2. Not This Again

            Not to put words in Joe’s mouth, but I think he is trying to say that when a country buys, say, $1000 in foreign military goods, there is **by law** a requirement that at last X% of the total must be reinvested in some manner or another in the buying country.

            Depending on the particular country’s legislation, the offsets do not need to be from the same deal, and often they don’t even need to come from the same company–they just need to be made overall within a specific time period by the sum total of companies within the selling country. Think of it as a sort of “balanced budget” amendment with respect to military goods and services.

            The percentage and time frame through which the offsets occur vary by country or program.

            Incidentally, it is useful to know this–when Boeing says that country X should buy their product because $YYbillion will be reinvested in the country in the form of high-paying jobs, etc, what they are really doing is touting the offsets that were legislated by the purchasing country.

            At least this is my understanding.

            1. Yves Smith Post author

              Poland is changing from making Soviet gear to Western/US. It likely does not have facilities that can do that. We’re way past the era of generalized manufacturing that can be relatively easily switched to other uses, as in WWII.

              So even if there is such a law in Poland, I imagine it was necessary to get a waiver for at least the first few years and/or count things like training and maintenance as local content. There was much surprise about the big Boeing order and this may have been the unspoken reason.

              1. Polar Socialist

                AFAIK, the Abrams deal had no offset requirement, but one of the main reasons Poles went for the Korean tanks was the huge industrial offset included in the bargain. That, and bad experiences with Leopard reliability.

      3. David

        I think he’s confused. Defence/GDP figures of this kind are not for one year only: indeed, that would be impossible, because defence budgets and contracts don’t work like that. I think the situation is that defence spending will progressively increase to 5% of GDP over a number of years, and that, within that increase some 17Bn$ has been set aside for weapons procurement. Absorbing systems like this will have massive infrastructure and training costs and, in addition, we don’t know how much of the contract value is in ammunition, support and spares, so it may well be that the headline figure will actually be spent over, say, ten years, with negotiations for a second major tranche of support to follow. In general, countries do extremely well to spend 40% of their defence budget on new equipment purchases. Since this is extra money, the percentage may be higher in this case, but even so I’m pretty sure that wages, salaries, currency fluctuations, POL, support, training and most of all maintenance is going to take up a lot of it.

        In my experience, the Koreans are tough negotiators, but there is no point in them promising more than their industry could deliver, and anyway there is a limit to how quickly the customer can absorb new equipment. For that reason, these contracts tend to be actually negotiated (as opposed to announced) by tranches, often corresponding to operational units (eg one tank regiment.) There is often a complex stage-payment process, tied to delivery dates and acceptance of the equipment.

    2. skippy

      WOW who cares where the funds are booked … its only the flows that matter over a balance sheet and how that effects primary investors and administrators ….

      Its like Oz is going to build Nuclear subs on a lark …. MBA wand says presto – !!!!!!!

    3. PlutoniumKun

      I think that there is a lot more going on than the raw figures indicate. For one thing, there are often complex arrangements with military imports that can allow for deferred payments (ask the British post WWII who found to their horror they were expected to pay for all those US destroyers). There is also the question of to what extent the euro operates as a sort of parallel currency in Poland which could mask the weakness of the domestic currency.

      But the Polish government does seem particularly inept when it comes to economic matters, so it wouldn’t be surprising if they are just pasting over problems hoping they’ll go away or that somehow they will squeeze some aid out of Germany or the US (much of the Polish establishment is strongly anglophile). But Poland is a TBTF country, its not like Greece.

      1. kam

        “(ask the British post WWII who found to their horror they were expected to pay for all those US destroyers)”
        The terms of Lend/Lease were clear from day 1.
        Britain had the choice of learning German (it was the 2nd language of the Saxe-Coburg-Gothe Royal Family) or folding into the new American Empire.
        Poland, like Ukraine, will know the price of subservience to an erratic dying Empire soon enough.

        1. Michaelmas

          kam: The terms of Lend/Lease were clear from day 1 … or folding into the new American Empire.

          That story has interesting wrinkles. The UK’s cash-strapped Attlee government, looking around postwar for sources of income to pay off those debts and others, sold fifty-five Rolls-Royce Nene jet engines, then the most powerful and advanced in the world, to the Soviet Union in 1946-47. In the Korean War, the USAF then found its F86 Sabers outmatched by MiG-15 jets in which the Soviets had installed reverse-engineered Nene engines that consequently flew higher and faster than any US planes.

          The Eisenhower government came down hard on the UK, making clear that nothing like that was ever to happen again.

          The air conflict during the Korean War is a unique, relatively understudied episode in history since it’s the only time when jet fighters carried out WWII-style dogfights without radar and by eyesight, but at altitudes of 30,000 feet and at jet speeds. John Boyd and his theories were a product of the Korean air war, and James Salter — also a USAF fighter pilot there — wrote his first novel, The Hunters, based on the experience.

          1. JTMcPhee

            This is all totally f__ked. Seems pretty clear the world order, whether New or Fair, is circling the drain. Locked into contracts for military crap that is single use and often not fit for purpose. Ruling elites who don’t give a crap about pretty much anything other than short term everything.

            Speaking of examples of how it really works, like the Nene jet engines sold to the Soviets, how about the milling machinery some Japanese super corporation sold to the Soviets for a couple of million bucks. The Rooskies were at a deficit in submarine stealth because they could not machine precise propellor profiles, so theirs would cavitate, making little bubbles that imploded and made noise the US/“NATO” hydrophones could hear. Soviet attack and boomer subs suddenly became very quiet, thanks to the new, improved props. Required the US to spend many billions to up their detection game. Now the Russians have stolen a march with hypersonic precision weapons and other stuff, down to the simple ability to make millions of 152-mm artillery shells, many of them also precision guided. And the cycle of futility accelerates, as the profit motive and the paranoia crank it up with each infinite pass through the churn…

            So the US elite has set the conditions for Europe to self-destruct, the US is a hollow man with cancer and emphysema, everyone in the Combined West is going to be hating the Russians and maybe the Chinese for maybe prospering and surviving, assuming climate demolition allows for that, and there’s always the chance that some, crazed death-wish idiot in the US will pull a Gotterdammerung and nuke the planet (hint: don’t give Bolton or Nuland the keys to the Nukemobile.)

            All you smart people who examine the entrails and understand bits or larger parts of all this vastly corrupt and tightly coupled collapse: what, if anything can be done to change the trajectory of it all?

            1. Paula

              Well stated in MHO. And I wonder how many of these commentators have boots on the ground, are out in the streets, holding signs and putting their lives, reputations and livelihoods on the line like us commoners and like the scientists who are warning against climate catastrophe and nuclear war and whatever else we face as humanity in total. Isn’t it so easy to say, but so harder to do.

              1. synoia

                Now does one undderstand the cause of decline and fall of empires?

                The Roman empire took much longer to fall if the Constinopie arm is included. Empires They not go quietly into ttne night.

      2. Yves Smith Post author

        The US military-defense complex might do that because it’s part of the hegemony projection exercise, but I would anticipate the Koreans are less generous in giving financing.

        1. PlutoniumKun

          This is true, but Korea is certainly engaged in ‘supporting’ much of its military exports in order to get a foothold in new markets. ROK has become maybe the most aggressive new kid on the block in defence exports.

          It also should be said that military contractors have long mastered the art of minimising the upfront costs of weapons in favour of squeezing profits from longer term parts and support supply. This is one reason why there is such a gigantic gap between the quoted ‘flyaway’ costs of many aircraft/tanks/ships and the real 20-30 year costs of those systems.

    4. begob

      Try Richard North’s TurbulentTimes – certain (seeming Polish) commenters are bullying about with verbal flick-knives.

      I stopped dropping in on that blog soon after the invasion, since it went all Chauvin – like Sicsempertyrannis. But North has taken the measure of the missile strikes since September, tying them in with his views on the UK energy market.

  3. The Rev Kev

    Said in a comment a while ago that western countries likely bet the bank on a quick Russian collapse followed by a fire sale of all it assets which would retrieve not only the financial positions of the western countries but the entire western financial system as well. Well it didn’t work out that way and now it is time for a margin call big time. But I refuse to believe that Poland is the only one where things are going to hell like this. It may be that they are the canary in the coal mine and I would guess that more than a few countries will find themselves in similar dire straits. What may really push Poland over the edge would be a mass flow of refugees from the Ukraine in the next several weeks which I believe to be all but inevitable. And it is not likely that the EU will bail Poland out as the EU has a few scores to settle with Poland as Yves mentions. Time for a Rev prediction then if Poland truly is the canary in the coal mine.
    The year 2023 will become know as the Year of the Financial S*** Show.

    1. Patrick Donnelly

      You are so often correct, but the point of The Joke and present and future pandemics is to collapse the banking cartels. Russia is merely an anvil.

      Possibly we will then get even worse banking cartels, but at least they will have more assets to leverage than ever before. Possibly they will vanish forever. I also believe in Santa.

    2. begob

      On your margin call comment, watching the UK’s bond yield rise over the summer (excluding the Truss freak out) I got the impression the country was being marked to market. For all the talk of Russia’s war aims and strategy, I wonder if its strategists are dwelling on the unintended effect the shock of invasion seems to be having, and adapting to the new conditions. That suggests they sit tight.

    3. Robert Hahl

      “What may really push Poland over the edge would be a mass flow of refugees from the Ukraine in the next several weeks which I believe to be all but inevitable.”

      Yes they would like to, but how? Are they all going to walk to Poland in the dead of winter? Without electricity there will be few trains and not much auto fuel, few snow plows working, no warm shelters along the way, etc., etc. It seems that people are going to freeze in place. The official advice from Ukrainian mayors that they should leave just seems like pretense, designed to give us the impression that ordinary people can leave, but I don’t see how they actually can.

      1. Valerie from Australia

        Good point. It makes you wonder if these ordinary people are hating Putin right now, or hating their own government for getting them into this mess.

      2. Yves Smith Post author

        John Helmer said the Russians were sparing the trains from western Ukraine to the border countries. They have been planning for a refugee exodus.

      3. Mickey Hickey

        People can leave, the Russians have avoided killing civilians, the more that leave the better it is in their eyes. The Russians seriously underestimated the problems in Ukraine. The EU Commission has indicated it will provide assistance to countries admitting genuine refugees. When Russia ramps up its campaign of demilitarisation and denazification the refugees will without a doubt be genuine.

    4. Valerie from Australia

      “Western countries likely bet the bank on a quick Russian collapse followed by a fire sale of all it assets” You, RK, or whoever said it, nailed it! Why else would Europe take such a risk? Surely, someone, in one of those EU governments, brought up the idea that Russia could cut off their energy supply. I reckon Europe thought they were safe because it would be months before winter 2022/23 and the proxy war would be over by then.

      These intelligence agencies in the U.S. and Europe are really useless. Even I, a mere armchair observer, figured out that Putin, a clearly intelligent and strategic thinker, had been planning for every contingency – especially sanctions – that the “collective west” could throw at Russia, before embarking on this military operation. How is it that the countries of Europe didn’t understand who and what they were up against?

      Russia is clearly waging a “war” of attrition. All Putin has to do is wait it out and Europe is going to implode. Do the Poles really think they are going to come out on the winning side?

      I would have thought that the sabotage of the Nordstream Pipeline would have been a moment of truth for the EU. While I don’t claim to know the mind of Putin, I wonder if Europe had, at that point, reached out – regretted sanctions, agreed to Putin’s initial terms in Ukraine and retreated from U.S. influence – if it could have saved itself. But now it’s too late. Putin has given up on his dream of Russia being accepted as part of Europe and has turned elsewhere.

      When I read the comments, I can see nothing but hardship for Europe.

      1. Keith Newman

        @Valerie from Australia:
        Various explanations as to how all European governments could possibly have been so shortsighted and clueless have been discussed at Naked Capitalism over the last few months. They include a combination of incompetence, EU bureaucratic inertia, US social, cultural and military dominance, corruption at the highest levels, belief in their own propaganda and others I’ve forgotten.
        I too find the lack of concern by European governments for the welfare of their populations and industry quite remarkable. Evidently there are no Charles de Gaulles or Willy Brandts in Europe today, nor anyone of even remotely similar stature.
        It boggles the mind to think this mess could have been avoided if Ukraine had become neutral like Austria and given its Russian minority the same rights as Quebec has inside Canada.

        1. Karl

          Assuming a Russian implosion followed by a “fire sale of Russian assets”, unrealistic as this is, suggests an antecedent root cause in terms of shared cognitive bias/illusion, also known as hubris.

          If true, hubris probably infected institutions (NATO, EU, the DC establishment) long ago. It probably took decades for the in-breeding of beliefs to bring about the huge blind spots we’re now seeing (in very poor decisions).

          Where was “patient zero” in the hubris infection? Did it start with the neocons in the US or our MIC? Or were the neocons infected by the extreme Russophobia in the European right? Certainly, in the US, there were domestic political economic factors at play as well over the years–the pandering to important emigre consituencies and promising MIC jobs for votes–that caused too many in power to believe their own BS about the good West vs. the evil Russia (and now China).

          What gets me is that after US failures in Iraq, Afghanistan, Syria, Libya,Yemen, etc. the infection persisted. How could anyone continue to believe “Russia is just a door-kick away from collapse” happy talk?

          We have long noted the neocon tendency to double down. Is this the explanation–that the US and Europe are suffering a massive infection of hubris that is manifested as collective gambling addiction? And after failure in Ukraine, will we double down again over Taiwan? When will this stop? When someone destroys the casino with nukes?

  4. Patrick Donnelly

    Poland has always been a problem for surrounding countries. It has often disappeared totally, meaning a mafia type of collective defence then happens. They need to stop the nonsense. By all means buy arms, but from the EU and Poland.

    I recall the prediction in 1976 by Herman Kahn, that Poland would be an American ally. With a collapse by the USA, Poland and many other nations may become much more sensible.

    Until then … it is just so much entertainment to those who think they know history. So sad, but what to do?

  5. Altandmain

    What is ironic about this situation is that Poland may very well find that it needs Russia. Russian energy and other natural resources are critical to the Polish economy. Without them, the standard of living falls.

    The problem is that the Polish government has a policy of deep hostility towards the Russians that makes any sort of rapprochement impossible.

    It’s not just Poland. Germany is another example of a nation that is extremely reliant on the Russians. I suspect that the majority of the European nations will be in this economic crisis state very soon.

    All of this was entirely self inflicted and the Russians are looking more than ever towards Asia for their future.

    1. Patrick Donnelly

      This is totally in line with AUKUS policy.

      They are pulling the strings. After a stint in ‘power’, the favoured few will get a lucrative lecture tour … around the USA.

  6. Strontium-90

    Interesting, South Korea’s emerging role. Seoul aggressively after Poland’s second order of three nuclear reactors. The first $20 billion tender for three AP-1000 units went to Westinghouse. Mind you: as of a couple years ago, nobody in the DOE ever imagined another AP-1000 would be built, never mind the fact that financing for the deal is still in disarray, with Poland pleading for Westinghouse (just recently emerged from bankruptcy itself), to take a higher equity stake.

    The Koreans are said to have been more than a little miffed that they lost out to Westinghouse, controlled by Brookfield PE, given that KEPCO: a.) offered better financing terms and b.) is one of the few companies to prove (in UAE) they can build complex nuclear projects within budget and on time.

    Now, the fact that Seoul is mixing it up on the defense front leads me to think KEPCO is in line for the second tranche, underscoring the continued linkages between military and nuclear industrial programs in developed economies. Russia’s seizure of Zaporizhzhia only underscores the need for a beefed up military if one is to take the atomic path.

    1. Karl

      Thanks for this info. I never knew South Korea was into building nuke generators. After a bit of googling, it looks like (as of 2019) the APR-1400 reactor received a license from the NRC, so they may be exporting to the US. Or trying to. Maybe they’ll succeed where others have failed?

      It does seem that after the Vogtle cost overrun debacle (total cost of $25 billion) the future for new nuke plants in the US looks dim indeed.

      It’s another example of how the private sector CANNOT do big complex projects like this on time and on budget. US utilities said they learned so much from their mistakes in the past. Not!

  7. Random Voice of Reason

    In October 2022 the budget surplus stood at PLN 27.2 billion, as reported in Rzeczpospolita by Anna Cieślak-Wróblewska.

    1. Yves Smith Post author

      Huh? This is random voice of crazy.

      Poland had a government deficit of 1.9% of GDP in 2021. It was projecting a deficit of 4.3% for 2022 as of April. In July, they said it might be lower (https://www.reuters.com/markets/europe/poland-eyes-lower-than-planned-2022-deficit-says-finance-minister-2022-07-15/).

      Poland also just passed a 2023 budget with a US$13.8 billion deficit (65 billion zloty). https://www.reuters.com/markets/europe/polish-cabinet-backs-2023-budget-with-65-bln-zloty-deficit-pm-says-2022-08-30/

    2. Marlin

      If this is for a single month, that is quite unrelevant information. Depending on the country, e.g. tax liabilities of corporations can be due in a single month and produce a surplus, even when the deficit for the whole year is high.

  8. Freethinker

    The European countries’ strategy against the Russian threat their US master created is an interesting suicide attempt, it’s like being so angry at having eczema that you pour petrol over yourself and light a fire to remove it. If you survive, you have a long period of pain from the third degree burns followed by the scars-for-life, to remind you whether that was a good idea or not. The Russians must be wondering what happened to turn so many of their neighbours so easily into a death cult, triggered by such simple propaganda that should be suitable only for children.

    This is effectively a European Energy Economic winter olympics or cup competition. Which country will fall first, where will you be in the domino cascade? The last moron standing will win and the citizenry can clap hungry in the dark to keep warm. But the real prize, a good portion of the last of the world’s concentrated hydrocarbon resources will now flow east, leaving Europe to slide back into the dark ages.

    1. Art Thomas

      “…suitable only for children”

      The children I know are smarter than that and have an intact sense of self. Children love life.

      The death cult is suitable for adults who have sold themselves into political slavery.

      1. digi_owl

        Or think they have a gated community overseas to retreat to when the fan gets overloaded by all the manure coming its way.

        Wonder how many of them have an always warm private jet waiting at the nearest runway.

  9. Advait

    “That large a deficit is difficult enough to fund for a rich country like Britain or even the United States.” -Philip Pilkington.

    This made me laugh. It seems that Mr. Pilkington thinks that Britain and the USA both don’t have full monetary sovereignty (FMS). Surprise! They both do have FMS. That means their only constraints on national spending are the availability of real resources (labor and materials) and the possibility of inflation. Japan has a much larger deficit and the Japanese economy is doing just fine, thank you very much.

    Countries like the Britain, USA and many others that have FMS can effortlessly service their national debt by simply using a keyboard to type numbers into accounts. Why? Because they have FMS! I kindly suggest that Mr. Pilkington read “The Deficit Myth” by Dr. S. Kelton to get a correct understanding of how national spending really works.

    In countries with FMS, national taxes in no way, shape or form fund national spending. And countries with FMS have no need whatsoever to borrow money. Why borrow something you can effortlessly create in any amount?

    In countries with FMS, the national debt is, in reality, the private sector surplus. Anyone who thinks the national debt of Britain or USA needs to be “paid off” simply doesn’t understand how national monetary operations work in a country with FMS. They still believe the silly and wrong myth that the national govt budget is like a household budget. It’s not.

    The USA and Britain are monopoly currency issuers of a fully sovereign, fully fiat currency. They are not currency users.

    Poland doesn’t use the euro thus Poland likely has a large degree of national financial sovereignty. Thus their budget deficit is their private sector surplus. Thus they can deficit spend with no problem as long as they do it wisely.

    The Polish nation would be really, really unwise to give up their national financial sovereignty (just look at Greece). However, the greedy, anti-democratic billionaire elites of Europe would be really happy if this happens.

    1. Basil Pesto

      Many/most NC commenters are MMT literate at at least a basic level. But:

      Thus they can deficit spend with no problem as long as they do it wisely.

      Well, quite

      MMT itself points out that countries with monetary sovereignty cannot “deficit spend with no problem”, ie to an unlimited extent. See Mitchell, Wray etc. How this applies to Poland and their current account deficit specifically, I don’t know enough to say.

    2. skippy

      Sorry but MMT does not fix trade issues in the near term due to CAD being an investor issue … hence the response to the Lizz thingy …

    3. vao

      Thus they can deficit spend with no problem as long as they do it wisely.

      As far as I know, Poland, as a EU member, must still comply with budgetary “Medium Term Objectives” that seriously reduce the degrees of freedom it has regarding deficit and debt (though less strictly than Eurozone members).

    4. Joe Well

      A fully sovereign government can command resources without budget constraints per se (other than hard resource limits) within its own country, NOT ship entire percentages of GDP to South Korea and the US. That is inflationary because that spending will inevitably crowd out spending on vital imports of stuff that cannot be sourced locally, notably fossil fuels and most metals.

      1. digi_owl


        The ongoing gambit ever since WW2 has been to get smaller nations to make themselves dependent on vital consumables from one world power or other in exchange for raw materials.

        That way said powers can make the smaller nations collapse by withholding purchases for a while and watch the exchange rate go pear shaped.

      2. Karl

        Not all deficit spending must be economically wise to be wise, especially in wartime. If Poland thinks it is more secure as a nation state with more “defense insurance”, it might be justified. This spending might be justified in other, more practical and political ways.

        I suspect Poland is currently making big bucks as NATO’s main depot for sending and repairing war material going to/from Ukraine. Pentagon orders depots to be built and Poles (or refugees) are then hired. Poland could use those DOD dollars to buy Zlotys (to pay the workers). But maybe DOD has other ideas. We know (for example) that the Pentagon wants South Korea to “sell” or otherwise transfer 100K 155mm shells for Ukraine. Are those dollars to come from the DOD? Maybe the Pentagon has other plans for the money in the dwindling Ukraine aid fund. Maybe it requests (nicely) that Poland use its Ukraine-war-generated dollars to buy the shells from SK. Surely, since Poland is such a big supporter of Ukraine’s war, it should be willing to help! Such help would appear as “Polish debt” on its national accounts (I believe).

        Incidentally, it’s quite possible that some of Poland’s high inflation is due to so many Zlotys flowing to war-related work in Poland, and being spent by workers on consumer goods in limited supply there (due to “bottlenecks”)?

        This is just a way of saying that there is probably a back story to this story…. Truth is (Mercouris makes this statement often) we really don’t know what’s going on!

    5. JW

      ‘Only’ inflation, which then depresses your currency which then leads to more inflation etc etc. If you think its fine to have hyperinflation, then yes Poland can keep pressing its keyboard.

    6. kam

      FMS ? Why not print $500 Trillion today?
      Any nation that has to trade or borrow from another nation does not have FMS.
      The past 15 years of counterfeiting national currencies and borrowing unlimited debt (claims on the future) has now come home to roost.
      The new Feudalism has arrived, and no castle anywhere on this planet will provide safety for the Criminals that have robbed lesser beings down to the carpets on the floor.

    7. Skip Intro

      The catch is that these arms purchases, and indeed many essentials for Poland will not be denominated in Zlotys, so they will be laden with Dollar and Euro denominated debt which they will not be able to print away, and will end up paying for with infrastructure… or whatever collateral they may have. If the currency falls too far, imported pharmaceuticals, e.g. will be out of reach (just look at Greece).

    1. david

      so 250 Abrams Tanks cost Poland $20 million (250 for $5 Billion), the Russian Armata just coming into production is $4 million, but lets call it $5 million each or for $5 Billion – ….you get 1,000

      Quantity is not effectiveness nor quality nor protection from incoming missiles but Armata is rumored to be formidable on all key metrics.

      given Poland has also bought the F35 for $176 million each, might be a great shoot out in the field for Consumer Reports to cover the action on each option.

      1. Michaelmas

        David: …given Poland has also bought the F35 for $176 million each, might be a great shoot out in the field for Consumer Reports to cover the action on each option.

        Yes. It would be interesting to see how well those F35s (max. speed Mach 1.6) do again MiG-25 Foxbats (max. speed Mach 3.2) or MiG 31s (max speed 2.83). The Poles I’ve rubbed up against have had an almost childlike faith in the superiority of US military kit.

        For that matter, back in 2015 during the Greece-Troika faceoff, much of the Greek debt then had been taken on for military expenditures — ostensibly for equipment and ordnance to defend against Turkey — so Greece had, maybe, the second-most biggest military in Europe at the time.

        It didn’t happen of course, but it was amusing to think of how different things might have been if Greece had had the stones to simply drive its tanks north into Europe, all the way into Berlin or Brussels.

        1. JTMcPhee

          Recall the tale of a Greek official not even involved in the purchase of submarines from the same yard that built the Kaiser’s and Hitler’s U-boats. He was given a briefcase full of cash, like $100,000, by some German representative, just part of a broadcast campaign to be sure the many palms that needed greasing were adequately lubricated. As I recall, turns out the subs never became operational with the Greek navy, which has not done so well since the Battle of Salamis. Leading, naturally, to eventual “austerity” and lots of despair and suicides in Greece. Just one of the many episodes of horror comedy in the world today…

  10. Marlin

    While I think the argument, that the spend on weaponry is multiyear is valid, Eastern Europe in general and Poland specifically face some additional serious problems.

    Demographics [ https://en.m.wikipedia.org/wiki/Demographics_of_Poland ]: The Polish birth rate has dropped massively in the late 80s and early 90s. While this provides an initial boost due to lower costs for small children, eventually – namely now, when the reduced generation hits the labour market – this is a massive drag. I therefore as well strongly doubt the political possibility claimed in the answers to Pilkington, that Poland can reduce its “large” social spending. If the share of population in retirement age is rising AND you face higher energy costs (I don’t think gas will be imported for the pre-war prices ever again), that people on low income have more trouble to handle, you can’t politically reduce your social spending.

    Investor reluctance: Due to massive Western propaganda, so far nobody considers the possibilities, but once the reality of a Russian victory in Ukraine is more widely accepted, countries like Poland and the Baltics will come under increased scrutiny. Mortgages in Kherson to Kiew based banks were voided. Who will not apply some risk premium on investments done in countries neighbouring Russia and being hostile in the future?

  11. Wukchumni

    Poland is a little interesting to me, as it’s economy experienced hyperinflation with a 600% inflation rate after the fall of the iron curtain, whee doggies!

    I’ve noticed that countries which have hyperinflated in the past are likely to do it again…

    1. vao

      That’s nothing.

      Just like Austria, Germany, Hungary and Russia, Poland experienced a bout of hyperinflation after WWI which in its case amounted to 13440% in seven months from June 1923 to January 1924.

      1. Wukchumni

        It doesn’t take much…

        People get hung up on the post WW1 hyperinflation which was utterly ridiculous~

        Mexico went from 12.5 Pesos to the $ in the late 70’s to 3,300 Pesos to the $ by the early 90’s, which corresponds perfectly with the rise in immigrants to the USA, its the economy, stupid.

        Put it this way, in the end a Peso was worth 1/264th of its previous value against other currencies.

        The damage was done…

        1. vao

          Ah, yes indeed, but the discussion was about Poland, so…

          Anyway, I already stated the following: Hyperinflation after WWI in the aforementioned countries was fundamentally caused by

          1) a sudden disappearance of industrial capacity (German Ruhr occupied by Belgium and France; Czechoslovakia independent from Austria-Hungary; revolution and then civil war in Russia…)

          2) accompanied by states trying to buffer the effect or rising prices caused by scarcity through subsidies (e.g. paying inactive Ruhr workers, extra raises for government employees, etc).

          What do we have now throughout Europe? A sudden reduction of industrial capacity (plants for paper, fertilizer, steel, aluminium, glass, agro-industrial produce, among others, are shutting down partially or totally), while governments invent and disburse various kinds of subsidies and allowances to support people throughout inflation. These are precisely the two conditions that caused hyperinflation in the past, and I fear that this is not going to end well.

  12. Cervantes

    A random data point. I used to buy fruit preserves (strawberry, blueberry, peaches, etc.) from Walmart’s Great Value brand, which surprisingly had simple ingredients of just fruit, sugar, and pectin. These items were imported from Poland. A couple months ago, I noticed the Great Value items were no longer gathered together in a highly visible spot, which was confusing. I did get some Great Value strawberry spread, but after eating some of it I noticed that its ingredient list now included high fructose corn syrup and it no longer had the imprint of being imported from Poland. On my next visit, I ended up buying overpriced Bonne Maman, a French brand which was the only one at the store seeming to have the simple ingredient list preserves should have (fruit, sugar, pectin). I surmised that Polish industry is indeed falling on hard times.

  13. Lex

    Poland doesn’t have much choice but to spend on defense now. They’ve dumped a bunch into supporting Ukraine and stocks need replacing. I’d imagine that the contracts with South Korea come from a realization that the happy talk from DC about resupply of Poland was just that and at best contract fulfillment was years and years out.

    It will get very complicated for any Polish government. Friendliness with Ukraine likely lasts only as long as there’s active conflict. Between the aid Ukraine has no hope of paying back and refugees/migration the old antagonism is likely to re-emerge. It’s already barely beneath the surface at the popular level.

    1. David in Santa Cruz

      This is what’s most interesting to me. Poland has made evident that their domestic politics are hostile to the coming influx of refugees and they’re going to want to beef-up their border security as a result. This will be especially true if they must police a re-drawn border with Russia. I know little about contemporary Polish domestic politics but the support for last year’s stand-off on the border with Belarus to prevent the entry of Syrians, Iraqis, and Kurds should be instructive. The Poles seem willing to make sacrifices to maintain their culture.

      The U.S. made all sorts of hand-waves about replenishing stocks of weaponry and ammunition sent to the “Ukrainians” but it lacks the industrial capacity to perform. Thus the Poles are buying from the Koreans, who are quite adept at modern industrial production. Another example of the intellectual and moral bankruptcy of American neoliberals, who seem to have no conception of what it took to be the “Arsenal of Democracy” in the mid-20th century.

  14. Stephen T Johnson

    An interesting piece.
    I think there’s an interesting question about which of the EU /NATO nations will be the first to go off-piste, and I think it’s got two factors, relating to both the level of economic distress modified by the level of national enthusiasm for the cause of “sticking it to Putin” / sucking up to the US.
    It’s much harder to tell how much real enthusiasm there is in these countries for all this, notwithstanding the non-stop propaganda barrage, but I think there’s a stronger willingness to suffer for the cause in Poland than most.
    At a guess, Italy may be an early collapse due to lack of real animus.

  15. BlueMoose

    There have been recent discussions on making some spending cuts, somewhere. One mega-project that is being discussed in the proposed Solidarity Transport Hub (CPK).

    ‘Solidarity Transport Hub (STH) is a new greenfield airport, prepared by Polish government since 2017. It is to be built in 2027 with capacity of 40 million passengers annually in the first phase. Its most important feature will be an integration of air, rail and road transport.’

    A few of the more reasonable players are starting to realize in today’s deteriorating economic environment, it just doesn’t make sense anymore.

  16. KD

    Fools rush in. First, the entire EU area has massive inflation. . . caused by energy prices. . . not some 1970’s style wage-price spiral. Second, given the CAD, Polish money is flowing out of the domestic economy, meaning that if the government doesn’t do deficit spending, they are going to collapse economy or Polish citizens are going to have to go into hock to private money lenders. Third, much discussion above about the defense contracts being multi-year and often involving a domestic component, so you can’t just add it to the CAD (which probably reflects some level of defense spending anyways). Could it be that the speculators will pounce on the currency? Possibly, but Poland looks healthier than the UK right now from my perspective.

  17. dandyandy

    Poles would not have made these decisions by themselves.

    I would think that now the Master has dethroned Germany as the main force in Europe, another tip of Master’s spear needs to be forged. Terms of partnership seem clear too, Master will provide fiat and the new most faithful attack dog will provide cannon fodder.

    Similar to Ukraine, but just one tick to the left.

      1. dandyandy

        It seems they are. We’ll know for sure when Mortimer and Randolph reenter the scene with the phrase that defined their existence: “Turn the machines back on”.

    1. Michaelmas

      the new most faithful attack dog will provide cannon fodder.

      Already providing cannon fodder, if Russian sites and Telegram commenters are right.

  18. Sausage Factory

    ample reward for their vicious Russophobia and endless US brown nosing, the amount of far right wing rhetoric coming from Polish politicians (and the number of Polish ‘mercenaries’ fighting and dying in Ukraine) they deserve what is coming, time is running out for them. The next few months should be both interesting and instructive especially to those other rabid neo fascists in the Baltics.

    1. Wukchumni

      I was soaking in Arizona hot springs a decade ago not too far from Las Vegas and there were 5 or 6 soakers in their 40’s who were speaking Polish, and I asked who was the Polish plumber?, and as if on cue, they all pointed at one another, and laughed heartily…

  19. manderson

    Perhaps the Polish are looking at this from an M&A standpoint. Their military expenditures will be financed by the increase in GDP from their soon acquisition of their historic lands in Ukraine. Need to spend money to make money.

  20. Mickey Hickey

    Douglas MacGregor an interesting and talented ex military man has made comments on Poland. One of them was “Poland has opened the gates of the lunatic asylums and sent the inmates to take up all the high level positions in the Polish government. The hatred toward Russia displayed by government ministers is bordering on suicidal. In Ireland there are 350,000 Poles who are looked upon as being serious, responsible,hard working people. How did they get saddled with such a dysfunctional gov’t.

    1. dandyandy

      The responsible and hardworking ones have all emigrated and left the field open for psychopats. Happened to most eastern european countries.

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