Monday, September 12th, 2011 « Untold Arsenal: Arsenal News. Supporting the Lord Wenger; coach of the decade
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The Royal Bank of Football
by Brent Peugh
Many people have commented on this site on why Arsenal receives such negative media attention on so many levels. For many of us it’s as though there’s a black cloud following the team around with every opportunity seemingly taken to criticize and undermine the confidence and character of Arsenal by media pundits, radio hosts, journalists and fans alike. Why is this?
It’s been said that xenophobia is to blame for this negativity; having a French coach and lacking an English spine and all that. But if that’s the case one should look no further than Chelsea seeing as they have had a multitude of foreign coaches including their new acquisition and at this time could (and probably should) field a team with Ashley Cole as its sole Englishman. Xenophobia, therefore, seems more of a distraction than a solution to the question. Xenophobia may be a contributing factor but for this paper I will assume that this is mostly limited to fans and not an overriding factor
Seeing as the current sentiment in some quarters is that Arsenal is run more like a business than a football club, I’d like to explore this issue from an economic standpoint.
- But first a quick economics lesson:
In order to make this as short and painless as possible I want to focus on the interests and mechanics of modern money generation. That is to say, how our money is created and distributed and how understanding this practice can help us understand its influence in the things we love: like football.
Modern Money Mechanics:
The modern economic system operates and is perpetuated by the use of fractional reserve banking. This is the mode of currency creation currently used by the Bank of England, Federal Reserve Bank, World Bank, and virtually all Banks within the modern economic model.
To put it bluntly, banks are allowed to operate within a system whereby the value of all deposits may equal ten times that of the actual physical reserves. To visualize how this works imagine you deposit £100 at a local bank that’s just opened and currently has £0 in its reserves. Once you’ve made your deposit the bank is obligated to loan 90% of your deposit out to various other patrons at interest. The bank only keeps £10 of the initial deposit as reserves and then “creates” by way of bookkeeping entries the other £90 so that the whole £100 is available to be withdrawn. Essentially, even though the bank only has £10 of physical money they are allowed to state they have £100 which they can make fully available.
For more information on Fractional Reserve Banking see:
http://lisgi1.engr.ccny.cuny.edu/~makse/Modern_Money_Mechanics.pdf
http://www.centralbanksguide.com/fractional+reserve+banking/
http://www.econlib.org/library/Enc/MoneySupply.html
In order to understand how this has anything to do with football I want to pick a number between 1 and 2…billion. If you said 2 billion you just guessed how much only three countries spent on transfers in just one year.
- £2 billion. That number represents the transfer expenditures of top flight teams from England, Spain, and Italy in just 1 year: 20111
Now unless a full 60 teams from three countries are run solely by billionaire benefactors, it’s safe to say most of that £2 billion was financed through big banks. And lets not pretend that the interests of billionaires are not tied to those same banks. We’ve just seen how financing can exponentially increase the money supply and also the profits for banks and international financiers. When you break down the major financial players in the world it will come as no surprise that big banks and finance houses such as Lehman Brothers and Deutsche Bank dominate 90% of the industry. It should also not be surprising then that a self-sustaining and economically viable business would be looked at with contempt by an industry built on big loans and high risk.
Arsenal FC, however, is not merely a self-sustaining enterprise struggling to stay a float in an ultimately doomed and corrupted business. We are one of the richest teams in the world, one of the most recognizable brands in football and until recently we were proving against all odds that big money loans and high risk gambling is not necessarily the only way to be a successful team in the modern era.
That’s not to say we should join the ranks of Man City and spend the GDP of a small nation just to win a trophy or two. I would, however, venture to bet that Wenger’s economics lessons taught him to be very weary of banking and financing and to live within his means..
Conclusion:
Which brings us back to the negative light with which the media portrays our Club.
I would suggest that the banking world takes football revenues very seriously. Seeing as it’s the world’s most popular sport and generates gargantuan profits they’d be crazy not to. I would also add that the banking world has ways of undermining trendsetters if they’re setting the wrong trend whether it be through smear campaigns in punditry or using their media influence to loudly denounce the efforts of the innovator for whatever reason.
Big money interests have ways of getting what they want and getting their message across. The fact that Arsenal are running a successful club within their means and managing to do so with style is certainly sending the wrong message. In a culture of big spending and high risk gambling, Arsenal’s innovative and progressive business model is definitely one to be weary of, and quite obviously someone’s paying attention as Arsenal’s model is one that has been attacked and criticized in virtually every section.
Bibliography
Untold Economics
Dream or nightmare: a European superleague
Are Spanish clubs fighting back at last against Barca and Real Mad?
Rangers like Everton are right on the edge
If we didn’t have world wide scouting we would be like Everton: at the edge of the world
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