Elsewhere in this seminal publication, Charles Abrahams begins his series on The Fruits of the Magic Money Tree, writes Ian Charles (no relation.) That the Tories tell us “There is No Magic Money Tree” points to the reality that there indeed is one, and they have been shaking it for decade upon decade. You have to remember that Tories lie about EVERYTHING. What they mean is, “There is a Magic Source of Money, but you can only have some if you borrow it from us and pay us rent, for ever.”
Charlie has been talking to me about the folly of running a national fiscal surplus (your economy heats up and then crashes) and the wisdom of a deficit. The Government puts in the money needed (some people call this QE or Quantitative Easing, and then everything should work out OK.) “Isn’t this inflationary?” I asked him. “Not if there are things for your money to buy,” he replied. Think about the creation of money. Most of it is done by large credit organisations, issuing Debt to ordinary people, businesses, smaller financial organisations and so forth. Charlie’s point is that the money comes from nowhere, and its main purpose is merely to create a stream of interest paid by us to them.
Mike Ashley, owner of Newcastle United, has agreed that although he’s very rich, he cannot compete with ‘countries’ for the purchase of new players. Where would he find for example 200million Euros to buy Brazilian star Neymar from Barcelona? If he could, then the price paid by someone else might then have been 300million. Paris Saint-Germain, the French football club who did buy Neymar, are owned by the Government of Qatar, themselves attempting to avoid running a fiscal surplus which has to be disposed of quickly. Houses in London can only realistically change hands for so much money; 40 million quid for a mansion is clearly silly money, particularly if you have no intention of living in it.
Far better to buy a football club and buy up every decent player you can who is likely to improve in the future; it uses up far more dosh. Neymar went so cheaply because his ‘trigger price’ was only 200m. This value was part of his contract under Spanish regulations, where his employers could not refuse to let him talk to anyone coming in to buy him at that price. Real Madrid have put a Billion Euros as trigger prices on two players who are (arguably) past their best, Cristiano Ronaldo and Karim Benzema, but the younger James
Rodriguez, on loan in Germany, has a trigger of only half a billion. Some Government-owned club, or Manchester Citeh, or PSG (again) or someone else, perhaps Chinese owned, will trigger his escape clause and put a billion on his head. Or will it be that other youngster PSG ‘bought’ on loan for 166million, Kylian Mbappé, aged 18 with one season under his belt, who is the first to transfer between clubs for a billion – pounds, euros, or dollars? These are stupid amounts of money, but the only thing limiting them is the very slight fear of falling foul of UEFA’s financial fair play rules. Ask PSG how those work? A small fine and a future transfer embargo starting in 2014, which ran out in time for them to continue their big spending plans. What we have to remember is that this expenditure is part of a need to get rid of a national fiscal surplus; it was by choice that George Osborne, Barack Obama and leading neoliberals liked to run deficits.
By Ian Charles
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