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Why are you writing about this when the economy is up the swaneee. I would have thought some insight into the collapse of sterling and its effects would be more of interest...

The collapse of sterling will make our countries exports a good deal more attractive to overseas buyers and therefore help to kick start the uk economy, which is exactly what's happening in the us at the moment, their economy is treading water based on exports alone.

It has the reverse effect of making things far more expensive for us to buy. Have you tried a holiday in Europe.... , its 20% plus more expensive and the dollar is close to that too.
Devaluation is bad not good.

@3

Which means more people are having holidays in the UK. This keeps £ in Britain and boosts our economy a little.

Your analysis that devalution is bad appears to be based on a small number of criteria which is basically your expenditure. I think that is very short sighted.

I would love to see the pound get weaker simply because I understand that if it doesn't the chances of a huge recession get bigger. With a weaker pound our producers actually give us a chance to keep unemployment low through exports while on the other hand it gives a certain element of protection for producers who wish to sell goods in Britain itself.

Like a lot of people I take several holidays a year to Europe and I understand the rising costs. But holidays are not a right, and it is not a right for them to be cheap. At the end of the day I would rather take one foreign holiday a year and have a good economy at home based on production, than many cheap foreign holidays and a country with an economy is tatters.

Its not just holidays, its everything we buy from abroad that will cost more.
Devaluation is inflationary. How much inflation is difficult to see just now but its bad news, its never good.,

Why is he writing about football? Because it's yet another example of and - if nothing else - a metaphor for our continuing obsession with get rich quick schemes. The 'Enronomics' (and sheer greed) that sustains football in the short terms cannot be maintained. It's why Robert mentions football alongside the dotcom boom, tulipomania, subprime and the UK's ludicrously jet-fuelled housing boom. Look at Leeds Utd - a team that went bankrupt only to find it didn't even own the assets - ie the players - it thought it did and that it was legally committed to paying part-salaries to players who had already left the club. So sterling takes a dive and you applaud it - hoping against hope that good old manufacturing - the golden zombie of the British economy that successive governments have, it often seems deliberately, tried to kill - will once again rise from the grave to save us all with its export earnings. (Don't forget that according to the Blue Book, manufacturing - the grubby- handed, oilybrowed, sweaty and deeply unfashionable business of actually making stuff - added almost twice as much value to the uk economy as the masters of the universe in the city in 2004.) But maybe the big problem is that our continuing reliance on imports gives us far less room for manouvre than we once had and the decline in sterling and our own supply bottlenecks will instead create further inflationary pressures, and then... Still we can always get down the park and have a kickabout.

Why haven't you blogged on the Chancellor comments at the weekend ?

Football is important, but surely the worst economics crisis in 60 years is more deserving.

And I disagree with your Arsenal comments, Arsenal produces profits year on year and isn't beholden to owners who rack up debts and can do a runner faster than the best players.

I tend to agree with post numbger 1, our country is falling apart, people are losing homes and jobs.

I couldnt care less what happens to these premadonnas or the PL, its overhyped and thus overvalued - plus it doesnt put gas in my car or food on my table.

Why do the comments never pertain to the content of the blog? This isn't a soapbox.



The least understandable issue surrounding the flood of money into the premiership is why?

Why do arab/american/russian businessmen want to plough huge sums of money into football clubs that amount to pure losses of hundreds of millions of pounds?

Why do they not want to invest it to make a gain, or invest in a game of chance where the payoff is cash based? Even if a club win a lot of trophies, they are not going to turn a profit, and if they do win everything then what is keeping the investors interest up once everything has been achieved?

These businessmen are not local, they have no ties to the clubs, they simply form a use for their spare cash and a distraction. That distraction could well turn out to be temporary and the big question is what happens when they get bored and leave the clubs? Do they take their cash and run, call in their loans? Who will pay all of the inflated wages the clubs are contracted to pay?

It could end up very messy...

The economy is not up the swanee - yet! Economies go up and down over a cycle and exchange rates, for example, is one way for the slack or excess to be corrected. As to those who cannot go on holiday because of the current exchange rates, well, words fail me. There is no absolute right to go anywhere. I can't afford to buy the car that I lust after. Tough! I'll have to save up or buy something else.

#9, you ask why?

Sometimes its to get a British Passport ;-)

@5

You are right it will make imports more expensive. However, as I stated it gives an oppurtunity for producers in this country to bridge the gap, increasing employment and becoming more self reliant.

So for example, why buy apples from Chile when apples from england now become cheaper due to changes in exchange rates.

Also a couple of people have stated why few people have responded to the topic in Prestons blog. This might be because the topic is so removed from the lives of ordinary people. Preston is talking about huge collections of capital being transfered from the middle east to Britain. He is trying to make it relavant by using football as a backdrop. That still does not make it relavant to people's lives.

I'd like to echo previous comments - we are in the middle of a sterling crisis, Darling's comments at the weekend were surely worthy of a blog, the government is intervening in the housing market, the bank liquidity scheme is about to expire, and you write about football?

As the father of a highly talented motor racing driver I am of course impoverished and have foregone holidays and many other luxuries and neccessities for the past three years or so.

Finding sponsorship for young drivers is incredibly difficult so if anyone has the email addresses of this chap in Abu Dhabi then please post it here.. :-)

Interesting article, are economists finally monitoring asset bubbles and when might they start recommending including them in monetary policy?

That football transfer prices are still rocketing might also imply that globalists still see economies of scale in the industry. This means we are going to see the wholesale disappearance of clubs that only 5 years ago were considered institutional. Global kills Local, so say goodbye to your favourite Football clubs.

Football is obviously an underrated agent of global industrialization and economics.

What's happening in the Premier League is a microcosm of the bubble that precipitated the credit crunch.

People have such short memories. with reference to exchange rates, the dollar is presently at the level it was about 4 years ago vis a vis the £. Did people feel disadvantaged then or reflect that then or think that the pound was weak? No, of course not. I can remember the pound at 2.40, but I can also recall it almost reaching parity - one for one. That is one of the fundamental functions of exchange rates - it prevents for example governments printing money ( Zimbabwe). What we are seeing at the moment is a correction from all our overspending in the last few years and one of the casualties is the overseas value of the pound. Yes, it does import inflation, but then that will subdue imports, promote exports, correct balance of payments and ultimately revalue the pound upwards. And so it goes on. We have too understand that the good times don't last forever and it would be sensible to save something for the rainy day. But also know that the so called bad times, are still pretty good really and they will eventually come to an end.

What on earth is 13 talking about? There is no sterling crisis. How old are you? Where were you when we pulled out of the exchange rate mechanism - 1991 I think. Then bank rates were put up to 15% to prevent a run on the pound. They were at 14% in 1983 to shore up the currency and in 1976 the Chancellor had to go cap in hand to the World Bank for emergency loans. Those are sterling crises. There may be individual problems at the moment I don't doubt, and as I have said before a lot is of to our own making, but there is no sterling crisis.

Actually, from the point of view of students of economics, this is an unusual and fascinating market. I think Mr Peston hasn't mentioned one development which is relatively new - that of borrowing players for a fee. This is equivalent to leasing an asset rather than buying it, and perhaps suggests that the most intriguing part of a club's finances won't be on the balance sheet in future. The game may be shifting towards a revenue account basis in which contracts have little value because effectively they're not enforceable. But then, how useful are they in business? If your MD doesn't want to work for you anymore, how do you make him?
I wonder whether simple non-compete clauses may find their way into player contracts, saying that players can't return to the Premier League for 1-2 years after leaving their present club.

Since the footbal clubs seem to have all this money, why not a windfall tax?

Transfer fees in football have risen so ridiculously as foreign clubs try to balance the massive gains the premiership clubs have got from sky money and the smaller domestic clubs try to take there slice of the money the top four gains from the champions league. Its that simple and doesnt need linking to foreign investors. Like most people have said this blog is irrelevant.

What a good idea from 20. Windfall taxes are normally on profits and here we have lots of money being available through investors - you can't really tax that! But what about taxing the transfer market in the same way as stamp duty on houses?

I'm curious about just how high ticket prices have to go before football fans refuse to pay them. This racket is largely paid for by the fans and, with multimillion pound transfers remaining in vogue, I can't imagine prices coming down any time soon. There must be a break-point at which even the most die-hard fans say, "How much??" and simply walk away.

I'm equally baffled by beer prices. In the south west, a pint costs not far off 4 quid (and that's the tasteless, mass produced foam churned out by the megabreweries, not the stuff that is actually worth drinking). I'm already drinking out a lot less but, worryingly, most drinkers seem to be willing to pay any price. Do brewers really believe prices can be continually pumped up without consequence? Or have pub drinkers simply abandoned any sense of value for money?

OMG! Economics and football in the same article wonders will never cease!

There is a lot of money around at the moment and the English Premier League is the current favourite location for billionaires to ostentatiously flash their cash.

Some day soon they will move on to fine art or horse racing like many of the current Arab investors started in or maybe even fast cars (two Grand Prix in the Middle East already) and then the balloon will burst.

After all only one of them can win the league title and only one win the Champions League.

Things get very boring if you aren't winning.

From my point of view.
This ManCity event is like making Bank Robbery legal.
Radiant Dottie

18
Thats real Gordo speak, next you'll be telling us that Gordo hasnt broken his Golden rule and that inflation is only 2%

First of all let me offer my heartiest congratulations to all those long suffering Man City supporters on winning the biggest jackpot of all time and I wish them and their benefactor the very best of luck in their quest to secure the holy grail of football.

That aside I still cannot fathom out why any extremely wealthy person from abroad should want to indulge themselves in spending vast sums of money on buying an English football club and then spending even more money in acquiring a bunch of over priced and grossly overpaid players. It beggars belief to know that some of these clubs are now valued more highly than many large businesses that employ hundreds of people. Perhaps this is the last frontier of a western society whose hedonistic lifestyle is ready to implode on itself.

These wealthy investors are investing in British football because it is something to do. If you are a billionaire you have more money than you could ever possibly spend so what to do? Well winning the Champions League seems a lot of fun so attempting to win that is pursued. Why English clubs? Well to win the Champions League you want an English, SPanish or Italian club. Spanish tend to be owned by the members I believe and Italian one's privately. Many English clubs are public and so easier to acquire.

The problem is when they get bored with it and look to sell.

26
I have not commented on the "golden rule". As for inflation, it is almost all imported - oil and food driven mainly. All non oil based economies are suffering as a result. What would you suggest is done about this? This is fundamentally a different situation than we have faced in my lifetime. In 1976, inflation was 26% and as recently as 1991 it edged into double figures. Both times a lot, but not all, of the reason was home grown- wage spiralling and/or government policy. There is some government complicity in the present situation of course. Mostly a relaxed attitude to money growth supply from which both you and I have benefitted. But it could not last and we are paying the price. We have to take the medicine - money will become tight. We have had an unprecedented period of low inflation and no doubt this led to us all becoming complacent. In the meantime, the inflation will shake out of the system ( unless there are more world problems ) and is forecast to be below the target of 2% by the 3rd quarter next year. No doubt the moaners who want to blame anybody but themselves, will have moved on to another problem by then. How about car prices - remember them from a few years ago? The government was at fault, "rip off Britain" and so on. That seems to have gone off the front pages, though strictly speaking it should come back with a (relatively) weaker pound. It is good to see more comment about English football - now there's a rip off if ever I saw one.

Why dont the government charge a "Stamp Duty" fee on these huge transfer fees.

Most average families in the UK have to pay a fee for the rights to buy an asset to live in.

Football players are the club's assets, without them they would not survive in same way we need a home to live in!

Start charging 1% Stamp duty fee on UK Club to club transfers for players.

Any thoughts from anyone or am I way out with this ;-)

Robert's article is using the present football bubble as just one example of all the other asset bubbles we've seen in recent years. The interesting question is why all these bubbles are happening. One reason seems to be that too much of the world's wealth/income is now in the hands of the very rich, who can't spend it on consumption but instead seek to "invest" it in some asset or other.

A second reason (not affecting football as far as I know, but definitely affecting other asset bubbles) is the pension industry. In the old days, a company pension scheme achieved a steady state, where working members paid money in and retired members took money out and spent it. Now it's all about each individual "investing" their savings - creating a huge pool of money looking for some asset or other to invest in.

There is simply more "investment" money floating around than useful things to invest it in - little of it actually goes into real investment in the nation's future (education, training, infrastructure, etc). Hence asset price inflation and bubbles.

The solutions seem obvious. First change the balance of the tax system to redistribute back from the rich to the poor. This would reduce the asset bubbles but boost consumption, helping stave off recession. Secondly remove the tax relief on pensions and use the additonal tax income to increase the State Pension to an acceptable level, which would have a very similar effect.

I think in "bubbles" usually lots of people do one single thing for basically the same reason that makes lots of sense to all of them... then--suddenly it doesn't anymore and lots of late entrants lose money alkl at the same time.

In the premiership situation, the various millionaires, billionaires, oligarchs and now, entire countries are doing the single thing of buying control of football brands---but for many different reasons---and so the moment when it all suddenly doesn't make sense anymore doesn't ever arrive in the way it does when run-of-the-mill financial bubbles burst.

For the Americans the motive seems to be tranfserring tried and trusted methods of making money from the NFL and NBA to a more "global brand environment"...what people in the last century used to call "Football"...this model has relied on debt and being able to periodically re-finnace debt...and this model is just about crunched.

For Roman Abramovich it may be as much about converting Russian-based assets that could be confiscated at extremely short notice into exploitable assets beyond confiscatory reach... the only "football" land in Britain that might just get near giving a return on investment, if converted at some stage to residential property, is in Chelsea..... at some point the fans are liable to be told they definitely need a stadium that can match their club's new stature ambitions..probably beyond the M25 somewhere...

For The Middle Eastern State treasuries buying a club perhaps fulfills more strategic, political ends....if Dubai had invested in a much loved but perienially struggling NFL or NBA team (and circumvented to an extent the salary cap) they may have faced a less xenphobic response when the Dubai Ports bid for the US ports was underway.

All these models are different in motivation and so all are liable to end at different times ---the American leveraged one is already looking very "last century" and may, on Merseyside already be very close to being succeeded by the Middle Eastern model.

But the losses in this are less likely to be financial (money will be lost but ultimately by people who can afford to lose it---and have acheived their goals in any case) as much as emotional when the dried out shell of what used to be called "the club" is what is left when the "money" moves on.

I tend to agree with post numbger 1, our country is falling apart, people are losing homes and jobs.

I couldnt care less what happens to these premadonnas or the PL, its overhyped and thus overvalued - plus it doesnt put gas in my car or food on my table.
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Sir, why on earth would you want to put gas in your car?

It is interesting how these bubbles are slowly bursting often with rather brutal consequenses. The commodity boom of the first half of 2008 has now burst, prices off 25%.
Many investors who bought commodity funds on 30th June will be feeling sore. Just like those who were told by the investment community to get overweight in Tech in 2000.

The London housing boom has burst and will include the £10m plus market as well. These Russian buyers didn't want to live in Belgravia, it was just cool at your Moscow dinner party to say you were in market.

And now we have the consequences of the oil price boom which has doubled incomes in the Gulf in the space of 18 months. When oil falls to $40 next year (impossible you all say but what if Congress allows offshore drilling) then those Gulf incomes will half and they wont want a $30m footballer.

Some Gulf investors have just paid a huge sum for a Hollywood Studio. When your balls start ruling the brain its time to exit. Remember the Japanese who were set to rule the World in 1990, they bought into Hollywood and that was that for Japan

Robert, as usual is right on the money.

Our celebrity culture and valuelesser (new word) society is leading to lower personal values and fewer things of real value. Those things we as a nation should cherish are being eroded by a lack of foresight and bad planning. Too many people take the easy money, from whereever it may be offered, and with it sell our birth right and that of our children down the Thames.

The beautiful game which was nurtured in Sheffield 150 years ago is now ruled by a foriegn dominated body and the premier clubs are being used as playthings by businessmen, soon to be predominantly foreigners, who are not natural supporters of the game itself. They are jumping in the current biggest game in town and will just as quickly leave it when the mood takes them.

Meanwhile the true supporters (the average working man) are paying for all this through ever increasing gate prices and Sky subscription etc. When "local" fans can't afford to go to the games the atmosphere will change and both home and overseas rights and replica sales inevitably plummet these bubble makers will move on and we will be left with subprime teams and a devalued society.

Robert you misunderstand Arsenal. They play the beautiful game, trophies are unimportant. Young players join to become the best players they can be and play the mythical "total football". Then they can leave and chase mega bucks and trophies. Adebayor is a prime example of a player who could have left this summer but eventually chose not to. But he will probably leave next summer and I hope he does. Moving over and making space for the next prodigous talent is now the Arsenal way and long may it survive.

Sometimes football is art.