CFA Conference: Tomáš Sedláček

CFAThe Economics of Good and Evil

Moderated by Attila Koksal, CFA, Unlu Securities

Tomáš Sedláček is the chief macroeconomic strategist at ČSOB, the largest Czech bank. He also lectures at Charles University and is a member of the National Economic Council in Prague. Previously, Dr. Sedláček worked as an adviser to Czech president Václav Havel. He is the author of Economics of Good and Evil and a regular columnist and radio and TV commentator. Dr. Sedláček holds a PhDr. from Charles University.

Key issues follow.

  • What is economics, and what is its crucial role in and broader responsibility to society?
  • How have stories and narrative shaped economic theory?
  • Why does studying the history of thought help us get rid of the intellectual brainwashing of the age, see through the intellectual fashion of the day, and take a couple of steps back?
  • What is the truth that only appears in financial crises, and how do we address the need to counterbalance today’s mainstream approaches to economics?


My session notes follow. As always, these are contemporaneous notes. I make no guaranty as to their accuracy or completeness.

Looking at economics from a different perspective

  • Most analysts see the economy as depressed
  • But if the diagnosis is wrong, the treatment is likely to fail
  • Herein lies the problem – the economy isn’t depressed; it suffers from manic depression
  • Very little analysis of economies in the midst of mania
  • First business cycle in recorded history – Joseph and Pharaoh (first successful macroeconomic prediction); therefore, save in the seven fat years to consume in the seven lean years
  • Prior to the financial crisis, we had seven very good years but didn’t save (in fact, negative savings); we have sold stability to buy growth
  • Not a slow slide, but a collapse at the peak – do we want “full throttle bankruptcy” again?
  • Not as afraid of our weaknesses as of our strengths
  • When Joseph advised Pharaoh, they survived the seven years without debt; do governments ever have savings?
  • How do we survive without constant growth? Why do we tend to assume that growth is (or at least should be) constant?
  • It is unsustainable to believe that growth must be constant; lack of growth shouldn’t lead to collapse
  • Debt doesn’t tend to increase during depressions, but during manias
  • There is a crucial and obvious difference between owning money and owing money
  • Understand the distinction between Gross Domestic Product and Gross Debt Product; “debt ceiling” = “debt pit”
  • Pay back debts when economy grows
  • Fiscal policy is a trick, pretending there is demand when there is none; monetary policy is a trick, pretending there is liquidity when there is none.
  • We need mood stabilizers to slow down the mania, which are more dangerous than the depressions
  • We’re paying far too much in debt for a modicum of growth during the lean years
  • “Debt” is New Testament Greek is the same word as “sin” – Wall Street prays “forgive us our debts”; right after the Lord’s Prayer comes the story of the debtor who is forgiven an enormous sum but demands payment of a small amount – 2008 in a nutshell (also, “credit” = “faith” in Latin)
  • Subject/object reversal – e.g., The Matrix (machines took over and enslaved humans); they exist all over – The Lord of the Rings (the ring doesn’t serve the original creator – does Golum own the ring or vice versa?); Being John Malkovich; the Incarnation
  • We are slaves to debt and thus losing our degrees of freedom – we sold them during the seven fat years
  • To “minister” is to serve – to protect and sustain; but not to create growth
  • Yet none of us wants to be the bad guy; we don’t want to make the tough decisions
  • We take to opportunity to print money away from politicians and give it to the fed because it’s too tempting; why do we allow debt to be undertaken by those same politicians?
  • Aristotle – use debt as little as possible as it’s too dangerous
  • “We don’t understand interest rates” – otherwise Greece’s bankruptcy would have been business as usual and interest rates there would have increased far more than they did
  • Interest rates make the time travel of money possible – we can consume now and force our children to pay the bills (it’s like alcohol, which also transfers energy from the future to the present; but the time travel is much shorter – from Saturday night to Sunday morning; would we do it at all if the hangover were irregular, as with the economy?)
  • The austerity debate – the question isn’t yes or no, but when
  • Today – grow faster (borrow) to pay our debts more efficiently…?


  • Economic models don’t work in times of crisis; we don’t live in a post-ideological time (we now think ideology is “truth”); economists tell fairy tales for adults; myths are stories that never happened but happen all the time
  • We now create a model (fiction) but believe it to be true wholeheartedly; in the morning it’s an assumption, but by evening it becomes an article of faith; we aren’t rational; we can’t forecast the future; we can’t order our preferences (we don’t really know what we want) – thus it’s easy to be misled (The Hitchhiker’s Guide to the Galaxy – the meaning of life is 42; economics is 42 in disguise)
  • How do we break the cycle? We need to sell growth to buy stability back; pay back debt
  • Wall Street wants to be left alone except when it needs bailouts
  • Re fiscal and monetary policies, the government needs to be counter-cyclical; tax more when times are good, but don’t spend the excess
  • Create an independent body (similar to the Fed) to manage government debt (the way the Fed manages the money supply)

2 thoughts on “CFA Conference: Tomáš Sedláček

  1. Pingback: CFA Conference: Post Compendium | Above the Market

  2. Pingback: The Halftime Report | Above the Market

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