Hope and fiction

Last week I was pleased to receive my membership pack from Tottenham Hotspur. As a season ticket holder, I am automatically registered as a member of the members' club, known as "One Hotspur". In the past the pack has been quite generously stocked, with all manner of team memorabilia, such as scarves and flags. This year the pack consists of a CD, with fluff for one's PC, and a DVD, with a review of last season, and a small cockerel badge. This is much the same as last season. Of course, there are also other, intangible members' benefits, including some merchandise discounts, but I have to wonder if it might not be better to simply reduce the price of the season ticket? I expect that it could be argued that the cost of reproducing a CD and DVD for season ticket holders would hardly offset the expense of a younger player's salary, so perhaps I am being churlish. However, I believe that the merchandise that comes with the Junior Spurs' Membership makes much more sense, both commercially and for generating long-term loyalty, as such tangible benefits enable the younger supporter to show their affiliation in a direct way. It provides for an open display of hope on the part of younger supporters, hope that their team will provide glory and trophies in the years to come!

Against this hope there is reality: like every other business, football is not immune from the credit crunch and recession. While much of the evidence suggests that the recession has already bottomed out, the ability to raise funds from the financial system remains more difficult than any time since the early 1990s. Interest rates may be at historic lows, but the drop in property prices over the past few years also means that football clubs have less collateral to put up against further loans. And with banks increasingly concerned over more risky loans, borrowed money to transfer in a player would seem particularly volatile. There can be few businesses with as volatile earnings as a top-flight football club. Indeed, there is some evidence to suggest that loans to football clubs could be seen as more toxic than some instruments in the derivatives markets.

With borrowed money in short supply, there can be no surprise that the football transfer market has been so quiet, apart from a small handful of "marquee" signings. These latter have not been financed in the more normal way, but are much more due to cash injections to (eg) Real Madrid and Manchester City from mega-wealthy new owners. Over the next few months I shall be investigating the debt position of clubs in the English Premier League to see if (i) there is any correlation to their League and Cup performances, and (ii) to see how sustainable their debt positions are. Past research on football has shown that there is a direct correlation between the "wage bill" of a club and its league performance. This evidence stands in stark contrast to the commonly-held view that it is transfer spending which is the key driver of success. Of course, there must be some degree of correlation between a player's wages and his transfer fee, but this is hardly direct nor monotonic.

As a fanatical supporter of Tottenham Hotspur, I have not been surprised that there have been very few transfers, the main exception being the transfer of Didier Zokora to Sevilla. Like many clubs, Spurs will need to sell before they can buy. And given Spurs' commitment to build a new stadium in the next few years, this financial pressure is probably more sever in N17 than elsewhere in the Premiership. Spurs had a miserable start to last season—the worst in the club's history—which was only turned around when Harry Redknapp was brought in as manager, ending with a creditable top-half Premiership finish and an appearance in the Carling Cup Final (lost to Manchester United on penalties). There is something of a consensus among Spurs' supporters that the current squad is essentially sound, requiring only some minor tweaking. Spurs need cover for centre-back, perhaps a better old-fashioned centre-forward, and most definitely a left-winger. In all other positions there is good competition for places. And yet, the transfer rumour mill has been busy with Spurs interested in central midfielders (Patrick Vieira!), right midfielders (David Beckham) and forwards from Real Madrid. These latter might make some sense if they are as replacements for outgoing forwards (Bent? Pavluychenko?), but other rumours make much less sense. On the one hand, Summer has often been regarded as the "silly season" in journalism; but on the other hand, sometimes truth is stranger than fiction!

Currently at Spurs there are several players competing for the right-back position: Vedran Corluka, Alan Hutton, Pascal Chimbonda being the top three. Now Spurs are apparently about to outbid Everton for TWO right-backs from Sheffield United. The cost of these two very young players (both named Kyle!): some £8m, a little more than the reported fee obtained from the sale of Zokora. Where is the logic? Unless two of these three are about to be sold—and there has been no reported interest in any of them—it is hard to determine why Spurs feel the need to add to their squad for this position. It is all the more insane when there are three positions (outlined above) in which Spurs do have a need. Is it any wonder that banks have problems in lending to football clubs which engage in such transfer practices?

And so the pre-season trundles along merrily. Last year, Spurs won all of their pre-season matches in style offering supporters a great hope for the season, which was soon dashed when the friendly matches ceased. So far, Spurs have beaten lowly Exeter City and tonight face the might of Bournemouth. While I recognise the main importance of such matches is much more about fitness and tactics than results, supporters do look to these public displays for omens of what is to come. These omens are more likely to be available when Spurs play in the Barclays Cup at Wembley at the end of July, and in the Asia Cup thereafter. For these games we might realistically begin to expect to see the manager begin to play his favoured formations and players, rather than just give almost everyone a game to improve their fitness. We hope that the expectations generated will not prove, like last season, to be a fiction.

Scouting for Boys ... and Girls!

It has been an interesting week of family achievements in my household. On Monday evening my eight-year old daughter was formally invested into the Brownies. The Brownies held their weekly meeting at a local park, and it was with great pride that we watched her make her "Brownie Promise" and receive the applause of her fellow Brownies. She has come a long way in the few short months in which she has been attending. Despite taking part in "Circuits 4 Kids" immediately after school and just before Brownies, she seems to have a great deal of creative and physical energy for her extra-curricular activities. We hope she will continue to enjoy Brownies for many years, and that she will graduate in due course to become a Girl Guide.

My son achieved the milestone of his eleventh birthday on Tuesday. It has been a great pleasure to have watched him grow and develop these past eleven years. He is a sweet-natured, good-humoured, funny and clever boy, with the occasional tendency to become melodramatic, which I suspect he has inherited from his father and grandfather! Next week he will be invested in the Boy Scouts at their annual Barbeque picnic. Like his sister, he has been attending for some months with great enjoyment of all the activities involved. The Summer weather (until this week) has meant that his Troop have been meeting outdoors in one of north London's Scout Parks for the past several weeks, with appropriate outdoor activities.

It is a matter of some personal pride that both son and daughter are now well-established in the Scouting movement. I began as a Cub when I was seven years of age, and continued in Scouting until after I commenced my undergraduate life at University, and could no longer find the time. All three of my brothers were also both Cubs and Scouts. My father provided a great deal of support to our Troop over the years, and was ultimately rewarded with a special Scouting badge which he wore with pride. It is reassuring that this wonderful organisation continues to inspire and teach young people, as well as provide them with a strong moral message about the importance of self within community.

In a few weeks my son will be finished at his primary school, where he already seems to have become entirely disinterested and motivationless. Both Year 6 classes did put on a wonderful end-of-year show, "Cinderella Rockerfella", which showcased the talents of each and every student in a rousing, all-singing, all-dancing extravaganza (unlike the boring school plays of my own era!). An enthralling two hours of almost-professional entertainment; much credit to the teachers for their patience and inspiration, as well as immaculate casting, choreography and direction.

In September my son will be starting life at his new secondary school, which is quite some distance from home, which will require him to wake up even earlier to meet the "school bus" at 7:15 am! It may be something of a rude awakening as he finds he has to suddenly become much more self-sufficient, although I hope that his upbringing to-date will stand him in good stead. With academic study at primary school having been virtually absent since Year 6 finished their SATs (my son calls them "exams to make the school look good", in which he is entirely accurate!), he may well find it difficult to regain academic momentum in September. He will certainly need "to hit the ground running". Over the next few weeks will be out and about buying his uniform and other supplies for the new school. Unlike my era, he will not require a school cap nor a posh briefcase! Equally, we will need to provide him with his own door-key and a mobile phone, purely for emergency use. I understand that some of his peers have already been bought smart new mobile phones; my son will receive an older "candy bar" style Nokia as it is entirely about functionality, not the shallow pursuit of status through shopping.

With half an eye on September, the upcoming football season comes to mind. My own team, Tottenham Hotspur, have yet to buy or sell any players. Indeed, it may well be that like many football clubs during the credit crunch, they will need to sell first to acquire the funds to buy. This is something of a Catch 22, as many clubs don't wish to sell a player unless they have a suitable replacement lined up! Despite a relatively quiet transfer market (apart from a small handful of very high-priced dilettantes), there is much for me to look forward to: Spurs are playing in both the Wembley Cup and also the Asia Cup, two competitions which are to be televised live on SKY. At one time I used to spend a great deal of time and money on pre-season matches, but find they do not offer much of a glimpse into how the team will perform, neither are they necessarily as entertaining as matches in "real" competitions. Still, after many weeks without football, a pre-season friendly or two will make for a good appetiser for the many event to come. With the recent collapse of Setanta, it will be interesting to see if ESPN can avoid making the same errors and come up with a business model which will make financial sense, and a product which (unlike Setanta) will appeal to the footballing public. More on this next blog.

Fixtures and transfers, Summer 2009

Earlier today the Premier League and other English footballing authorities published the fixture lists for next season (2009-2010). Like any other English supporter I had eagerly awaited this event, but now that it has finally happened I am beginning to question the sanity behind the expectation. As a Spurs supporter I am excited at the prospect of the first game of the new season being at home, although there is a little trepidation at the prospect of playing Liverpool. I am also delighted to be playing at home against Manchester United on my birthday. But on reflection it is hard to get too excited just yet.

In the first instance, the fixture list issued today is subject to some changes as the TV companies, primarily SKY Sports, gets involved and some fixtures get moved to a Sunday afternoon or Monday evening. This means that until we know the full extent of the televised fixtures it os not possible for the true football supporter to begin to make any other plans. How can we be expected to book our holidays in advance, or make plans to visit long-distance relatives and friends until we know the fixture list inclusive of TV dates? And the Setanta situation makes this all the more uncertain. There remains the possibility of Setanta not being able to fulfill its financial obligations to the football authorities in England and/or Scotland, which will involve other TV companies seeking to take over the TV rights, which is likely to lead to additional minor changes in the fixture dates as a result.

The likely changes for TV means that my excitement for next season has already become tempered by one constraint. But there is a second constraint which will also affect my excitement via expectations: the transfer market. At the time of writing I do not know what the likely Spurs line-up will be against Liverpool on August 15th (or 16th or 17th). Which players will the manager, Harry Redknapp, bring in to bolster the squad? Which players will he sell? After all, it has long been publicised that he will need to sell players to finance his purchases.

At this time of year the newspapers are full of new transfer rumours each day from each and every club. And such rumours are nearly always due to reliable inside sources. If this were really true then football would suffer more leaks of information than a leaky sieve. Indeed, the world of British politics would seem positively ethical and decent by comparison! But we all know the truth: rumours are part and parcel of the marketing of newspapers; they help to sell more copies. And there is also a greater likelihood of being able after the event to point to rumours which prove to be truthful if there is a wide diversity of rumours put forward in the first place. As any Finance student knows, the simplest way of reducing risk is to diversify!!

For those of us who watch transfer market activity, rather than focus on rumours, this has been something of a quiet transfer window thus far. We have had a couple of extraordinarily expensive player transfers, with Kaka and the Ronaldo going to Real Madrid. But the action in the Premiership itself has been very sparse to-date. For me the reason is simple: the credit crunch which has affected the rest of the world for more than a year has now bitten into football and profligacy is no longer viable. Most transfers tend to be financed via borrowings, largely from the banking system, but this is not as likely this year as previously. Banks are either unwilling to lend, or will only do so at prohibitive rates of interest or other very constraining terms and conditions. Like my team, Spurs, many Premiership clubs will need to sell before they can buy. And many clubs would prefer not to sell until they know they have a purchase or replacement in place. It is something of a "Catch 22" situation. At some point during the transfer window one or more Premiership clubs will 'blink' first, and buy before selling in the hope (rather than the expectation) that it will work out.

The situation of David Bentley at Spurs is illustrative. According to reports in the Press, Bentley has confessed to being in talks with Aston Villa, but does not wish to say more at this stage. Presumably this is true as Spurs have not issued any denial, thus they must have given Bentley permission to speak with Villa. But having paid some £16m for him last Summer, Spurs would seem unlikely to release him for a transfer fee of less than half, as reported to be likely in the Press. Knowing this the Press are speculating on player exchanges, with Ashley Young moving in the opposite direction, for example. With money available from the sale of Gareth Barry, there is some likelihood that Villa will seek a replacement as well as players to bolster their squad. But I would argue that they will need to seek 'affordable' replacements. Unless some of the wealthy benefactors of (eg) Manchester City or Chelsea make more money available for transfers, there is little money available this Summer. A greater sense of economic will kick in. And with greater regulation on the financial situation of football clubs in the not-too-distant future, even these clubs will need to think twice about spending above the norm.

So, with a sclerotic transfer market, some would argue that we may yet see most clubs fielding very similar teams next season to those who closed the 2008-2009 campaign, perhaps with a little tweaking. However, as the transfer window deadline approaches I fully expect to see some teams spend well beyond their financial reach as they panic to bring in new players. This is what leads to the demise of once-famous clubs, such as Leeds United and, more recently, Newcastle United. With more once-big clubs spiralling down the divisions, we can probably expect to see a downward spiral in average transfer fees into the foreseeable future. It will mean that the coaches will then be responsible for earning their salaries, and that prima donna players will be much more quickly found out. The days of football clubs continuously bilking the paying public for more funds to further enrich a handful of talented footballers are on the way out. The football supporting publics' financial cupboard is slowly becoming bare, with barely crumbs left. It is time that football began to truly earn the excessive rewards which it has become used to at everyone else's expense!

Expenses and ethics

I recall once reading that ethics was best defined as how you behaved when no-one else was looking. The implication being that one should always go beyond what is required by "the rules" for ethical behaviour. That any deviation from ethical behaviour cheapens and demeans the individual and the community of which they are a constituent part. In the past couple of months we have seen two clear examples of what happens when people in positions of power and influence (once referred to as "the great and the good") fail to behave ethically: banking–including other elements of the financial system–and politics in the United Kingdom.

For some time, the result of the credit crunch and the ensuing economic crisis was laid at the door of 'greedy' behaviour on the part of bankers and other financiers, with much of this criticism coming from politicians. The argument was generally that poor corporate governance had led to excessive risk-taking, which had led to systemic risk becoming manifest. Of course, where any investment is concerned there is always going to be an element of risk: some pay off, others do not. My question to the policy makers and other so-called experts is to define exactly when a risk becomes excessive. Is there a cut off point between acceptable risk and excessive risk, and if so, how can we measure it? That the system of bonuses in the financial world has led to a bias in decision-making is undoubted; the system of financial corporate governance is ONE of the key factors behind the recent problems in the financial world. But it is not the only factor, and poor corporate governance structures is something which the financial system has in common with too many other elements of the society in which we live.

Bonuses in the commercial sector mirror those in the financial sector; they are paid regardless of whether or not the company has been run in the best interests of the shareholders (the owners of the company). Surely, a bonus should be based on longer-term performance factors, such as whether or not value has been added to the firm? When bonuses are paid for failure there is no incentive for executives (and hence others) to apply maximum effort and achieve. I am reliably informed that there is an old Russian saying that "a fish rots from the head". Too much of our financial and corporate sector resemble this apocryphal Russian fish.

Of course, whatever the issues in the financial and corporate world, it could be argued that there is a mechanism by which shareholders could act to provide checks and balances. As large shareholders in many listed companies, it is perhaps surprising that pension funds and insurance companies have not been more active in their approach to ensure that remuneration was more closely tied with longer-term success. Perhaps if the members of pension funds had a greater say in the election of their Trustees and the investment strategy there would be better governance, which could then filter down? What seems to be missing is transparency and accountability. Of course, if those in positions of power took greater responsibility for their own roles, via a sense perhaps of noblesse oblige, such accountability would be internalised. But as we have seen far too often recently, the notion of honour among our decision-makers had long since left the building.

Nowhere has this been more starkly revealed than in the case of MPs expenses. Of course, the structure has been entirely wrong for quite some time. And the fact that some claimed expenses were within the rules yet seem excessive suggests that there can be no confidence when MPs (like others) are allowed to be their own watchdog. And it has to be acknowledged that not all MPs have been brought low by the revelations of scandalous expenses claims: many have indeed acted ethically, and not sought to bilk the system (and hence the taxpayer) for every penny available. But those MPs who have claimed for non-existent mortgages (for example) are guilty of fraud, and must be brought to book for their crimes. In a democracy there can be one set of laws, applied equally to all. If this principle is not upheld then we no longer live in a democracy, and any desire for honesty and integrity has long departed. It is a state if anarchy, in which those who play by the rules lose, and to the criminal victor goes the spoils.

It is interesting to note that the general public have been quick to condemn almost all MPs over the expenses scandal. But we must be careful not to put all MPs together. Some have acted ethically, not claiming as much as they would have been entitled within the rules. Some have claimed within the rules, but the rules were poorly framed (like so much governance elsewhere). Others have acted fraudulently, and need to be convicted for their crimes. But we, the general public, also need to examine our own behaviour in the workplace. While there is a difference in scale, anyone "borrowing" stationery from their place of work for private, personal use is guilty of theft, even though this has become an acceptable practice. Inflated expenses claims by employees are as fraudulent as an MP claiming for a mortgage which has previously been paid off; and both should be treated equally under the law. As a well-known philosopher once said: let him without sin cast the first stone!

We live in a world in dire need of a return to a strong moral compass, via the implementation of better and more reliable governance mechanisms. Rewards such as bonuses should act as incentives to improve the lot of all, not to feather one's nest at the expense of others. The top of the tree must set a clear example for those further down; the roots and branches will always emulate the behaviour of those at the top. There can be no doubt that this governance vacuum is partly responsible for the economic crisis in which we currently find ourselves. But, ethical behaviour would mean that the system is not to blame at all. We need a better system of governance in all of our institutions because it has become abundantly clear that far too many people are morally, ethically, and personally corrupt. We have become a decadent society. It is time to take stock and review quickly and efficiently the way in which we operate and then make clear and effective changes for the longer-term. In the meantime, a large number of MPs and corporate executives should finally do the right thing and resign. The British public deserve an immediate general election, to be fought mainly on the issue of rules of governance.

Spring has sprung...

It is Easter Monday. A Bank Holiday throughout the land. And it is the middle of Passover too. Such holidays are traditionally meant to signal the beginning of Spring, with all that entails.

Spring is a time in which the newborn of animal kingdom make their first appearance. It is a time when nature's plant kingdom signals its rebirth with vivid colours of new flowering plants, more green leaves on the trees and lush green turf reappearing. It is a time in which humanity responds with a more optimistic demeanour; a return to a happier way of looking at life after the dark short days of Winter.

Being England, this Spring Bank Holiday weekend is marked in the all-too-usual way: rain on Saturday, and grey miserable skies overhead since. But the spirit of the British remains undimmed in spite of the less than favourable weather, both in the natural atmosphere as well as the economic atmosphere. The British have resumed their passionate affair with renewing their homes and gardens, with spending continuing (apparently) apace on DIY projects, new plants and other gardening projects. I believe that no nation comes close to the British when it comes to the magnificence and variety of personal and family gardens. Other nations have outstanding public gardens and places, but the temperate climate of Britain and the temperate nature of the British makes for a formidable array of "outdoor rooms" in the United Kingdom.

It is partly for this reason that over a month ago I felt that Britain was not as doomed to the oppressions of recession as much of the media would have us believe. While the phrase "Dunkirk spirit" is oftentimes overused, it is an admirable description with the way in which the British deal with times of adversity: they remain optimistic and make their best efforts to combat the negative forces, both individually and collectively. There is a traditional British sentiment which allows the collective forces of the people to be much more important than the powers of government. (As an aside, I hope and pray that these collective forces will be brought to bear in bringing to an end the madness of the proposed ID scheme, which can only be seen against the background a continued fight for personal freedom during a thousand years of British history as the travesty it truly is!).

The British four-day weekend of Easter provides not only a time to take stock of our housing and gardens, but a brief respite from the rigours of the hectic unrelenting work-week which dominates out lives in modern Britain. It is a time for families to renew their ties, and for communities to do so too. Although religion is less important to many people now than in previous decades, Easter provides a time for even the less religious to attend church and reconnect with their co-religionists. For the Jewish people, Passover is a time of remembrance of the Exodus from slavery in ancient Egypt. The Passover seder meal (which Christians recall as Jesus' "last supper") brings families and friends together to continue the familiar rituals and symbolism of three thousand plus years. This oasis in the desert of work gives us all a chance to sip from the waters of freedom and put our work burdens down, if only for a few days. Nonetheless, we will return to work tomorrow (Tuesday) in most cases refreshed and with renewed vigour, and in some cases glad to be back at the old routine.

For football fans the Easter weekend signals the turn into the final straits of the season. The end of the season is now clearly in sight, and with each match the final League tables move into ever clearer focus. The remaining Cup competitions become increasingly interesting as some teams are knocked out while others continue to fight for their place in the history books. For supporters of teams which are unlikely to win any trophies but are safe from the despairs of possible relegation to a lower division, Spring signals a time for longer-term thinking: to consider the strengths and weaknesses of the current squad, and to engage in endless speculation about the Summer transfers which keep football alive during its otherwise dormant period. It is hard to recall a season in which the competition to win the Premiership as been so keen; equally the competition to avoid relegation out of the Premiership remains equally uncertain, with so many teams still within a few points of each other.

At the foot of the Premiership it is entirely possible that all three teams from England's north-east—Newcastle, Sunderland and Middlesbrough—could be relegated this season. Long regarded as a hotbed of football passion, this would be a disaster for the north-east in both football terms and the associated economic costs that would likely result. For football fans in the south of England the loss of all three teams would mean less travel expense in both money and time! It is interesting to speculate why there has been this sudden cluster of geographic football disaster in the north-east. Surely if it were truly the hotbed of passion that it is so often proclaimed the supporters would be able to contribute more fully, both monetarily and in their vocal support for their teams, to prevent such problems from occurring. Perhaps football no longer commands the passions of England's north-east as it once did. More likely in my view is the importance of the choice of managers: too often English teams select a manager who was once a great player. But this is to ignore the lessons of history: almost none of the players who won the World Cup for England in 1966 went on to have anything more than mediocre (and often disastrous) managerial careers. This has been seen most recently with the appointment at Newcastle of Alan Shearer as manager. While a favourite son of the north-east as a player, he has no credentials nor background as a manager. It is "last roll of the dice" by the Newcastle United board to prevent relegation. If it does succeed it will be more likely due to the charisma of Shearer being able to turn round the psychology of a team in almost free fall downward momentum, rather than via tactics and team selection. With Shearer's appointment coinciding with the first appearance of the green shoots of Spring in nature, it may well prove to be effective by default rather than by design!

Spurs: living la vida loca

Following an incredible win at Villa Park on Sunday, my favourite football team, Tottenham Hotspur have now reached the heady position of 11th in the Premiership. This is a fantastic achievement on the part of manager Harry Redknapp. When Spurs sacked his predecessor, Juande Ramos, and appointed Harry, Spurs lay at the foot of the league table with only 2 points from 8 games: 2 points from a possible 24. As well as that remarkable transformation in Premiership fortunes, Spurs also reached the Carling Cup Final for a second consecutive year, albeit losing to Manchester United on penalties. One has to wonder: what is the secret of this success? After all, the squad is essentially the same as that available to Ramos...

I would argue that there are a few "secrets" behind the Spurs' transformation. In my mind, there is no doubt that Redknapp is an excellent man-manager, capable of bringing the best out of those players at his disposal. This has been more than amply illustrated by the return to international form of mercurial winger Aaron Lennon and the greater ability to play of club skipper Ledley King. Against this, one has to wonder if Harry can put his magic to work on the likes of David Bentley. Before transferring to Spurs last Summer, Bentley had been a star player for Blackburn, attracting the best kind of attention from football's pundits and journalists alike. Yet he has not yet been able to recapture that kind of form in a Spurs' shirt, although he will always be remembered for THAT GOAL scored in an amazing 4-4 draw at the Emirates. It is my personal hope that the close season will see Bentley acquire his previous form and become a Spurs legend next season.

In addition to personal relationships, Harry Redknapp also appears to be a decent top-flight tactician. His tactics have mostly been designed to bring out the best performances from Spurs and also to deny the opposition. And as the season has progressed and he has learned his players' various strengths and weaknesses he has increasingly got the tactics correct. Of course, no manager can ever get it right all the time, but his ability to change things quickly when they do not appear to be working shows a manager who has the flexibility to change things when needed, and the maturity to not worry about losing face. This was illustrated at Villa Park: the choice of Didier Zokora at right-back was presumably for the added pace to defend against the pacey Ashley Young. Yet Young gave Zokora a torrid time. It was not too long before Zokora was replaced by Vedran Corluka. Although a significantly slower player, Corluka is an excellent reader of football matches, and soon had Young "in his pocket".

And so, at the time of writing, the optimists are looking to Spurs to reach as high as 7th in the Premiership, although the league is so tight that relegation is still a mathematical possibility. The form of Spurs under Redknapp suggests that the latter is unlikely, but there is still some way to go. The performance of the central midfielders needs significant improvement; I have yet to be convinced that (eg) Palacios offers anything different in that position to Zokora, although he still may require much more time to settle in at a new club. And while the improved form has meant fewer goalkeeping errors, it is still an area that requires consideration. The 4-4-2 formation does not make best use of the little Croation genius, Luka Modric. And the left-side of midfield seems to remain enigmatically an unsolved riddle.

No doubt, come May and the close season these will be matters to which Redknapp and his management team turn their attentions. Summer will be an intriguing time for the transfer market, especially with many teams throughout the world suffering from the effects of the credit crunch and ensuing recession. It is a show that I would not miss, any more than I would miss an episode of "The Apprentice" with Sir Alan Sugar, which commences next week on Wednesday (March 25th).

Tottenham Hotspur 2008-2009

For the avid Spurs' fan like me, this season has been of largely ignominious and forgettable proportions. Aside from a trip to Wembley in early March for the Carling Cup Final there has not been a great deal in the Spurs' cup of cheer. And while the occasion at Wembley is always something to look forward to, and the game itself was not too bad, the loss to Manchester United on penalties was disappointing, even if I try to regard their victory as pyrrhic. After all, the record books will show that Spurs lost the final, and in future decades no-one will wonder about the details. For Manchester United it is simply another notch on their almost-inevitable trophy gathering journey through the 21st century.

Sports have a dimension which parallels other aspects of life, in that momentum always plays a big part in determining how destiny will play out. The adage that "success breeds success" is one simple linguistic recognition of that fact. In football, as in other sports, momentum can be a cruel or pleasing mistress. This applies to both momentum within a game as well as over the course of a season. With my beloved Spurs, the loss of the first eight games this season was a downward momentum too difficult to turn around easily, and one only matched by the downward march of stockmarkets and macroeconomies. Such an extended downturn has only one obvious solution to football's decision-makers and fans alike: sack the manager! The dismissal of Juande Ramos paralleled that of his predecessor, Martin Jol. The only key difference being that Jol had twice brought Spurs to fifth position in the Premiership, close enough for anyone connected with the Club to smell the heady feast offered at the Premiership's top table: a place in the UEFA Champions' League. Thus, when Martin Jol's team failed to continue its momentum in 2007-2008 from a season earlier, the dashed expectations meant only one thing: sack the manager!

It is hard to find a Spurs' fan who believes that Spurs should have persisted with Juande Ramos; not so with Martin Jol. The current manger, Harry Redknapp, has done a magnificent job in turning round Spurs' fortunes, stopping the downward momentum and managing to instill enough confidence in the players to begin upward momentum. But Redknapp is not every fans' cup of tea; there remains question-marks over his ability to take Spurs to the next level, assuming that he can actually help avoid relegation. But the Premiership table is so tight, that even this cannot be taken for granted, but neither can the possibility of finishing as high as seventh (which would constitute a minor miracle of Biblical proportions!).

The return of Spurs' favourites Robbie Keane and Jermaine Defoe has served to uplift the spirits of Spurs' fans, but is not in and of itself the root cause of the momentum turnround. But there remains much work to be done in the close season if Spurs are to fulfill their undoubted potential next season. Putting to one side the possibility of transfer market activity, and assuming the same squad in place in late August, I would like to see the following occur:

• A more mobile midfield, with players making better movement off-the-ball.
• A strategy than allows for a team which includes Keane and Defoe (never before achieved successfully) as well as Modric and Lennon, but the Modric NOT played on the left.
• Successful medical and physical therapy to permit Ledley King to play almost every game during a long, hard season.
• Two proper central midfielders, capable of playing box-to-box, rather then the more modern view of a holding midfielder in front of the defence and a more attacking central midfielder. Surely any two from the trio of Zokora, Jenas and Palacios is capable of this? And with Tom Huddlestone as well (may his mobility and confidence improve) why not?
• David Bentley playing to his full potential. To-date he is nowhere near replicating the form which brought him to the public eye at Blackburn, but he has not become a bad player overnight. He needs to work on his pace for sure, but somehow he seems to be lacking on confidence.
• Better performances and goal-scoring from Roman Pavlyuchenko. While has played a Russian season and then an English season with no break, his commitment has been unquestionable despite his obvious tiredness. With a Summer break I would like to see him scoring goals more regularly in the Premiership. He has the ability.
• Better defending as a unit: this does not include only the back four, but also the rest of the team. As Bill Nicholson was fond of saying, a team defends from the front.

Despite a modern failure to win enough trophies and qualify for the Champions League, Spurs remain one of the biggest clubs in the Premiership. This is on the basis of the quality of the supporters at both home and away matches. Spurs are one of only two teams who have managed to maintain the same crowd levels when relegated, unlike Manchester City of Newcastle, two so-called big clubs from alleged football hot-spots. And if Spurs were relegated again there is no doubt in my mind that the supporters would not desert in their droves, but continue to support in their tens of thousands. Indeed, the vocal quality of support ensures that Spurs always have their "twelfth man".

Providing Spurs can maintain employment of their quality players I am confident that 2009-2010 will prove to be a breakthrough season for Spurs. It mainly depends on having the momentum of a good start in the first ten games, and then continuing with some high degree of consistency. Just the thought of next season is already exciting me; I best go and prepare to renew my season ticket!

Quantitative Easing

So the Bank of England has decided to opt for expanding the money supply in an attempt to give the economy the quick-start necessary to prevent a deeper and longer recession. After successful attempts at reflating the economy with interest rate cuts, the previously unthinkable has become not only thinkable but doable. So what exactly is quantitative easing, and will it make any difference?

Before the current recession, the global information economy as we now know it did not quite exist. The previous recession of note was in 1991, when the Internet existed but not within the realm of the general public. One of the consequences of the explosion of global information has been something of a "dumbing down" in the provision of news and other items. This may also be partly an "Americanisation" of news; the CNN factor if you will. Consequently, journalists no longer write articles without concern for headlines, it is the headlines which come first. No phrase can be written without first exploring if there is a "sexier" way of saying it. What is now referred to as quantitative easing has always been referred to in Economics textbooks as expansionary monetary policy: expanding the money supply directly. Most Intermediate Macroeconomics textbooks will examine the impact of such policies using tools such as the IS-LM diagram—first posited in 1937 by the late Nobel Laureate John Hicks—or the Aggregate Demand/Aggregate Supply Model.

Using the IS-LM model, the evidence suggests that in a recession the LM curve is horizontal or near-horizontal. And there is no doubt that we are currently in a recession, which has been both swift and steep. When the LM curve is horizontal monetary policy has no effect whatsoever; it is entirely ineffective. The late John Maynard Keynes likened the use of monetary policy in a recession (or depression) as "pushing on a piece of string"; i.e it would be next to useless. And there have been plenty of occasions when this has been tried in the past and failed.

Given that the policy-makers at the Bank of England are highly intelligent people, with a more profound knowledge of Economic theory and history than myself, one has to question the motive for them engaging in a policy which they know to be ineffective. I can only think of one: they feel the need to be seen to be acting in the face of a recession which does not yet appear to most to be dissipating. However, while I would expect such motivations from elected politicians, I would not have expected the same from appointed technocrats, who must be completely aware of the long-run damage that excessive monetary expansion—excuse me, quantitative easing—can do to inflation rates.

If quantitative easing is not the solution to reducing the impact of a recession, then what is? In a previous posting I argued for expansionary fiscal policy in the form of tax cuts. I still maintain that this would be the best way forward, although this may no longer be an available option given the huge bailouts of so many companies already underway. However, the only true remedy for a recession is to try and turn round public and business confidence, which takes time. With the slight improvement in the weather as winter gives way to spring, we may begin to see the first signs of a change from total pessimism to a more realistic outlook. Barring any additional catastrophes or wars, then I fully expect the recession to begin to end during the late months of Summer 2009. Let's hope that fate does not prove me wrong!

TransAtlantic musings

The occasion of a family wedding took me to the United States just before Valentine's Day. I had lived in the USA for a decade or so in the 1980s, and had been in San Francisco for a few days last Spring. But having now lived in one place--London--for so long brought both places into a start contrast with one another. And the fact that both countries are now in the throes of economic recession made this contrast all the more intriguing.

During my week in the USA I spent several days in the Pittsburgh PA area followed by a few more in my old home town of Asheville NC. The weather in the former was a fresh, vibrant cold and lots of snowfall while the mountain resort of Asheville was sunny and mild. The sense of recession in the USA seemed to me much more tangible than in England. It was a hot topic of conversation, with everyone wanting to know how people in England were reacting to and dealing with an apparently severe economic downturn. From a purely central and north London perspective the recession has not yet had much of an impact. Apart from when I am at work, lecturing on Macroeconomics, the topic is rarely one for conversation. Most people seem to be continuing with their lives as beforehand, with no immediate panic about the future. The Tube trains and buses remain as overcrowded as ever; the shops continue to sell their wares to the same numbers of people, although this recession seems unusual in that many retailers have actually reduced prices (unlike past recessions, where such price flexibility was not so prevalent).

In the USA I felt that many prices continued to be significantly cheaper than for similar products in the UK. This was most noticeable with cars and petrol. In the USA the latter is selling for just below $2 a gallon, while in the UK it is around £1 per litre, almost 4 times as much. A saloon car which might cost £10,000 or more in the UK is currently selling for some $7,000 in the USA. Food prices in supermarkets seem much the same in both countries, but it still remains significantly cheaper to eat out in restaurants in the USA than in the UK. These differences are much the same as I first noticed when I lived in the USA, more than 20 years ago. But the recession seems to be much more marked in the USA, and it may well be that the price differences are due to this. Certainly, the greater flexibility and much less dependable welfare situation in the USA means that it is a more volatile economy, more prone to the swings of the business cycle. While people in the USA are more fearful of the recession—understandably so, as so many people rely on their employers for provision of health care insurance—the USA is also likely to be the first country to emerge from the recession, and probably at a faster pace of growth than any other country. This reveals that the USA's strength—its economic flexibility—is also a source of weakness, enhanced by the much more market-dependent health care there.

So what of this recession? It has probably come upon us much more swiftly than almost anyone expected or predicted, but neither is it as bad as some commentators have argued. At least not yet. We are a long, long way from a second Great Depression like the 1930s, and the recessions of the early 1970s and 1980s seem much worse for any ordinary people who lived through them. And although it would be churlish to begin to talk of "green shoots of recovery", there is every possibility that we have seen the worst. Unless there is a major catastrophe to derail the beginnings of recovery, it would seem that the end of the recession will begin in September (at the earliest) or by early 2010 at the latest. This recession, like so many others in the past, followed on the heels of a banking crisis. Banking, like the entire financial system, can only operate on the basis of confidence, which has become seriously eroded in the past year. Confidence, like any form of trust, takes years to build but can be destroyed in a matter of minutes. Lack of confidence is reducing slowly; full confidence will take years to restore. But as long as confidence is not being further eroded there is every possibility that uncertainty in the general economy will reduce and we will see economic growth restored in the near rather than the distant future. Some of this will be engendered by the various "stimulus packages" (i.e. expansionary fiscal policy) being put in place by governments around the world. That so many of these involve the bailing out of lame ducks concerns me as a precursor to further moral hazard; I would have preferred to see the stimulus in the form of reduced taxes for individuals, rather than a recurrence of policies which failed to be effective in the 1970s. But that is a discussion for another time. For now I must sign off and relive the memories of a recent wonderful holiday in the USA, and dream of going back there again as soon as my bank balance permits.

Any interest in another rate cut?

So the Bank of England has decided to reduce the bank rate to !%, its lowest ever rate. The main motivation behind this is presumably to get people to increase their personal and corporate spending based on a lower cost of borrowing. And with a recession already under way there may be some who would argue that the Bank of England has to be seen to be doing something. Well, perhaps, but there are strong arguments to suggest that this rate cut will not achieve what the previous four have failed to do.

Almost all analysts are agreed that the root cause of the current almost-global recession is the "credit crunch", a liquidity crisis. What the Bank of England's decision seems to neglect is on which side of the market for loanable funds the problem actually lies. The credit crunch is a phenomenon whereby lenders are reluctant to lend due to increased risk aversion, a lack of confidence in the ability of the borrower to repay, which may be more apparent than real. On the demand side there is no lack of desire to borrow: indeed "retail therapy" has become almost a national sport. The lowering of the Bank's base rate will do little to stimulate consumer spending, in part because banks and other lenders remain overly cautious, and also because so many retail lenders continue to raise their interest rates. While the Bank of England makes history reducing tis own rate of interest, one of the key providers of credit cards, Capital One, has raised their rates of interest. I guess we all know what's in their wallet! Capital One has argued that it has become more difficult for them to acquire the funds which they effectively lend out to their credit card holders. It is in remedying this aspect of the credit crunch which the Bank of England should concentrate its efforts, rather than using the blunt instrument of interest rate reductions ad absurdum.

Basic macroeconomic theory tell us that in a recession, when the LM curve is virtually horizontal, monetary policy will be largely ineffective. Under such a scenario expansionary fiscal policy is much more effective. Unfortunately, instead of perhaps increasing government spending on long-term infrastructure projects this government has chosen to bail out the very people who have put us where we are: the heads of the banking system. While there is little doubt that a bail out of the banks was warranted--and certainly preferable to allowing wholesale failures--surely the price should have been the replacement of those who had done the damage? The bailout will do little in the short term to get aggregate demand rising. Given that it may be difficult for the UK government to spend more at this point, then we should look to permanent tax cuts to stimulate demand. A marginal cut in VAT will make no difference. What is needed is a significant cut in income taxes, preferably in reduced tax rates (not the future increases which Mr Darling has opted for). Cuts in corporate tax would help some struggling businesses, but without demand for their products it would do little to run round the economy and move it out of recession. The only remaining solution is to cut personal income taxes by a significant percentage. People are much more likely to spend if they feel they have more income than if they see some prices coming down marginally. If they chose to save any additional income it would have the added bonus of increasing the supply of savings available for borrowing, thereby reducing the rate of interest at a broader level than can be achieved by the Bank of England.

We have been here before, on several occasions in the past. We seem to condemned to repeat the same fallible mantra, which is why I have no interest in another rate cut by the Bank of England. Time for an election, perhaps?

The next Doctor?

Like many people I was surprised when the BBC announced the actor who would succeed David Tennant as Doctor Who. Not only had I never heard of Matt Smith, but when he appeared on Doctor Who Confidential in his first interview, he looked decidedly peculiar. Having watched the programme since it was first broadcast, I thought his looks best suited him to portray an alien rather than a dignified if erratic Time Lord from Gallifrey. This is a view I am now happy to rescind.

Last night I managed to watch the first episode of BBC's new cop show Moses Jones having Sky Plussed (is this a verb?) it on Monday. This slow-moving but atmospheric show set among London's Ugandan community has Smith as side-kick to the eponymous hero. With a convincing London accent, Smith showed himself to be an adept and accomplished actor. It was the realism of his acting without dialogue that convinced me that he would bring something of value to the legendary role of the Doctor. Of course, there are some four special episodes with David Tennant yet to be broadcast during 2009, to which I look forward with great pleasure.

Just one final comment for the BBC producers: why not bring back Paul McGann for a few special episodes of the eighth Doctor? He did a terrific job in the one-off movie, and it was always a shame that he did not do more shows. Time to dematerialise...

Keane to return

It was a great deal of pleasure and some schadenfreude that I welcome the return of Robbie Keane to Spurs. I was saddened when he decided to leave for Liverpool in the Summer, and felt the reasons to be somewhat shallow although not approaching the depths plumbed by Sol Campbell some years earlier. Keane had been reputed to have grown up in his native Eire supporting Celtic, so it came as something of a surprise to learn that learn that Liverpool had become his boyhood team.

During his earlier tenure Robbie Keane had been something of a talisman for Spurs: when Robbie played well so did the team. Even when he hit a poor run of form his energy, commitment and passion for the game always remained evident. There was never any doubt that a poor display would be a short-term temporary phenomenon, something which cannot be said of a great number of footballers in the top flight. I am eager to see if new manager Harry Redknapp will be able to achieve what others have failed to do in the past, and play a front line of Keane and Defoe, once the latter returns from injury.

There is an old adage that "you can't go home again". This has been the case for a large number of professional footballers returning to clubs they had previously played for after some time elsewhere. In this respect Spurs have a decent track record. Players as diverse as Teddy Sheringham, Jurgen Klinsmann, and Neil Ruddock have played for Spurs, then moved elsewhere, and then returned to Spurs to play successfully for a second time. With the return of Pascal Chimbonda, Jermaine Defoe and Robbie Keane to the Spurs' colours this trend seems likely to continue.

And so we welcome back Robbie Keane to the ranks at White Hart Lane. May he continue to average at least one goal every other game, and help us climb up the Premiership table to where we ought to be: in the top four. A win at Wembley on March 1st would not go amiss either. Come on baby, let the good times roll...