Monthly Archives: January 2016

Silly cartoon on government economic policy

Asset bubble


Leave a comment

January 20, 2016 · 1:23 am

Sanders and Clinton

The other day, I thought I’d check out how Hillary Clinton and Bernie Sanders compared when Americans were asked to choose between them and a prospective Republican candidate. The results surprised me – in a head-to-head against any one of Trump, Cruz, Rubio or Bush 3.0, Sanders out-performs Clinton.

According to Real Clear Politics, a right-wing news site that, among other things, averages American polls, Hillary would beat Trump or Bush, while losing to Cruz or Rubio. Against Trump and Bush, Sanders scores bigger victories, albeit marginally in the case of Bush. A defeat for Clinton against Cruz is turned into a healthy Sanders victory, while a comfortable victory for Rubio against Clinton is turned into a very narrow one against Sanders.


As I said earlier, this is pretty much the opposite of what I’d expected, though perhaps a few caveats are in order. These polls aren’t being conducted that often, and tend to vary wildly. The Republicans have also been attacking Hillary for going on a decade now, while they haven’t felt the need to go after Sanders. If they did, perhaps those numbers would change.


Leave a comment

Filed under Politics, US Politics

Are we headed for another subprime crisis?

Before we started pretending that government deficit caused the global financial crisis, it was widely recognised that it was caused by irresponsible bank lending. Rocketing house prices fuelled a lending bubble that was, in effect, little more than a legitimised Ponzi scheme. Banks could afford to lend to people who couldn’t really afford mortgages, because the rapidly increasing price of the house was enough to cover their losses in the event that the borrower couldn’t repay. Everyone needs shelter, and so for as long as prices went up, and banks could attract new customers, the gravy train could go on.

Like any Ponzi scheme, however, it all came down eventually. While economists and traders had been egging each other on, convincing themselves that sub-prime mortgages were safe as (excuse the pun) houses, the system quietly mounted in size. Banks plunged themselves further into debt to be able to lend even more money for buying houses, blind to the possibility of failure. A little wobble in the US housing market suddenly turned everything sour, as the entire financial sector suddenly remembered that prices could go down as well as up.

The rest is history, though that history has since been revised. As house prices plunged, and the government felt compelled to rescue the financial sector, economic uncertainty (as well as a healthy dose of reality) depressed demand, shrinking the economy. Since then, we’ve gone through some largely unnecessary cuts to a depressingly partisan range of government services. The economy has “rebounded” largely on the back of free-flowing credit from the once-again-booming London housing market.

There have been several recent changes to housing in the UK. Two in particular almost seem designed to repeat the mistakes of 2007-08. The first is the extension of right-to-buy, the second is the ending of secure tenancies. Together, these funnel people into home ownership, whether they can afford it or not. As secure tenancies end and the private housing market continues to hurtle away from reality at startling pace, council tenants are confronted with a choice: scrape together the cash to buy the place, or submit to the insecure, overpriced world of private renting.

This is incredibly expensive, given that public money is subsidising each purchase, and doesn’t benefit those most in need of support with housing. Tellingly, however, it does benefit mortgage lenders. Lots of nice, insecure borrowers who can be charged high rates of interest and then have their more-valuable home sold on in the case that they do default. Lots of low-income borrowers funnelled towards home ownership during a period of booming house prices; something sounds familiar.

Leave a comment

Filed under Economics, Finance

The Perez paradox

Rafa out, Zidane in. It seems strange that Benitez was allowed to limp on for a few weeks after the mauling at the hands of Barcelona. Perhaps he was meant to get the sack immediately, but Zizou wasn’t quite ready to take the reins. He probably still isn’t; it’s easy to point to Pep as evidence that a club legend managing the B can come through, with little experience, and achieve success. It’s probably a bad comparison, though. Pep is a remarkable individual, a supremely talented manager who should be considered an extreme case, not the norm.

Perhaps – as former Real President Ramon Calderon insists – Florentino Perez had tried to appoint others, but nobody particularly wanted to sip from his poisoned chalice. After Perez’s ill treatment of the popular and talented Ancelotti, sacking him a year on from a Champion’s League win for essentially no reason beyond “we’re Real”, it’s clear that no manager will have any notion of job security.

On top of that, they clearly don’t have much control over the transfer kitty and it seems that Perez leans heavily on the managers in terms of team selection. In short, a manager faces this situation: they have 12 months from starting to win the Champion’s League, and must do so with a fundamentally unbalanced squad while also favouring Perez’s vanity signings when it comes to team selection and then follow that up with a La Liga or CL title the next year too.

Additionally, in order to control the rampant egos of Madrid – looking at you Ronaldo – and pacify the unrelentingly demanding fans, they have to be a big enough name to command respect. In short, this sets up what I call the Perez paradox: any manager talented enough to succeed in this situation will be clever enough to avoid it like the plague.

Pelligrini, the first manager of Perez’s current tenure, put it this way: “I didn’t have a voice or a vote at Madrid. They sign the best players, but not the best players needed in a certain position. It’s no good having an orchestra with the 10 best guitarists if I don’t have a pianist. Real Madrid have the best guitarists, but if I ask them to play the piano they won’t be able to do it so well. He [Pérez] sold players that I considered important. We didn’t win the Champions League because we didn’t have a squad properly structured to be able to win it.” Pretty damning.

With a situation like that in place, it’s not hard to see why the best managers aren’t available to such a huge club. With the best managers off the table, Rafa Benitez stepped into the breach. On paper, he has an excellent CV, but the two stellar achievements – his duopoly-breaking Valencia and CL-winning Liverpool – were over a decade ago. It’s hard to imagine that Madrid faced off fierce competition from Europe’s top sides for his signature. With no recent success, Benitez lacked authority and with his aloof style he couldn’t inspire loyalty. Combine that with the Perez straitjacket of an unbalanced squad, and the failure was predictable.

Now we come to the Zidane appointment, and with the Perez paradox in mind, the appointment makes more sense. After the 0-4 rout, Perez called around. Mourinho picked up, and shouted something about referees, physios and the end of days. Pellegrini rejected his call three times. Ancelotti picked up and told him a polite “no”, Pep picked up and just laughed. No manager “big enough” for Madrid considered this job a career step-up, and Perez was increasingly desperate.

In steps Zizou – a unique solution to the Perez paradox. He has no managerial career that can be wrecked by a disastrous spell with Madrid, yet his obvious ability as a player and footballing intelligence will ensure that the players at least listen to him. He’s familiar with the squad already, and the fans love him enough that they won’t mind him getting the job. The appointment could turn out with Guardiola-like results, but it doesn’t need that to be considered a success. Right now, Madrid need some discipline and stability. Zidane – the legend more than the man – might just be the one to bring it.

In the long term, however, this is not a viable solution to the Perez paradox. Unless Zidane can start a dynasty, the same problem will occur, but this time there won’t be a club legend waiting in the wings to pick up the pieces. Even if Zidane does remarkably well, a dynasty would be hard to set up – eventually Florentino will grow angry at Zidane’s refusal to reply to his daily email extolling the benefits of the 2-0-8 formation, and sack him. In the long term, getting rid of Perez is the only Real option.

Leave a comment

Filed under Football, La Liga