Who caused the devaluation?

21.11.2013 - EB

When a company makes a bad investment and needs to reflect this in its accounts, it takes a write-down. The company usually does it as a one-off charge, with the hope of recovering from it in the next reporting period. This is basically what the Czech National Bank did on behalf of the country. All crown-denominated assets were written down by 5%, with the stated goal of producing higher economic growth next time. The country has been spending more than Kč 1 trillion per year, but without the desired effect. If the CR were a company, and if the CNB were its finance department, it would examine the outlays to determine where things went wrong. And lo and behold, it would find bad investments like the Blanka tunnel, ČEZ's foreign acquisitions and domestic divestitures, and all those overpriced IT projects. Yet nowhere in the CNB's explanation for the currency intervention do we find anything about the people who in effect forced the devaluation of the Czech crown by stealing the country blind.

Glossary of difficult words

write-down - a reduction in the book value of an asset because it is overvalued compared to the market value;

one-off - done, made or happening only once and not repeated;

outlay - an amount of money spent on something;

lo and behold - used to draw attention to an interesting or amazing event;

divestiture - the action or process of selling off subsidiary business interests or investments;

to steal/rob someone blind - to rob or cheat someone in a comprehensive or merciless way.



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