Now John Terry has departed, the pressure is all on the FA

Muddying the waters of sport’s great taboo does no one any favours.

 

"We are in a game, and at the end of the game, we shake hands, and this can happen, because we have worked so hard against racism and discrimination."

Sepp Blatter, November, 2011

Ten months is a long time in football.

This weekend, the same people who called for Sepp Blatter to resign from his post as the head of FIFA for suggesting that victims of racist abuse should “shake hands” with the perpetrators, have forced Patrice Evra into doing just that when he took Luis Suarez’s hand before Manchester United’s game with Liverpool at Anfield.

The gesture brought widespread acclaim across several media outlets.

Former Liverpool hero Robbie Fowler went so far as to suggest that the pair should have come together and each lay some sort of tribute in the memory of the 96 fans who lost their lives at Hillsborough 23 years ago.

The events of 15 April 1989 were undoubtedly tragic, painful and a source of great anger for different parties but you cannot use it to try and paper over an issue that goes back even further than the terracing problems around Europe throughout the 1980s.

To specifically ask Evra and Suarez to acknowledge each other makes a mockery of the indignation from every corner that surrounded the Liverpool striker’s vocal outburst last year. Expressing sorrow, regret and sympathy at the events of Hillsborough is one thing, but hoping it can resolve all ills between the two clubs and forcing two of the main protagonists into a ham-handed gesture is naïve and painfully unrealistic.

Did it make any difference? After the tributes from Ian Rush, Sir Bobby Charlton, Steven Gerrard and Ryan Giggs, it took all of 35 minutes for some small sections of Anfield to start booing Patrice Evra for his role in the Suarez racism row. So much for unity and forgiveness.

The wounds of a rivalry that has existed for over 100 years cannot be magically repaired by sorrow - no matter how tragic and desperate an event it was.

Late last night, on the eve of his Football Association misconduct hearing for allegedly racially abusing Anton Ferdinand in a league fixture last year, John Terry called time on his England career. The Chelsea captain suggested the charge, pursued after he was cleared of the same offence at Westminster Magistrates’ Court over the summer, made his position within the national side “untenable”.

I believe that during his trial Terry would have been best placed to illustrate just how often racist language is used in the professional game and demonstrate to all just how much of a problem he believed it to be, rather than focus solely on his own plight.

The problem is that, regardless of indignant suggestions to the contrary, we all know that racist abuse is prevalent in the game.  

No amount of independent reports or calls from government will hammer this message home. Inducing players to visually respect each other for the benefit of the cameras serves only to further the Premier League brand rather than actually facilitate an improvement in race relations.

The open displays of racism and xenophobia that were common place 20 or 30 years ago in this country, and still visibly dog other European nations, have diminished, but it would be naïve of everyone to believe that the incidents involving Suarez and Terry represent a sudden resurgence in such abuse.

Despite this, the English FA and wider media have struggled to accurately define how racism should be tackled.

Can Suarez be rehabilitated in English football? Does every Evra handshake now represent some sort of acceptance of racism? Is Sepp Blatter’s utopian vision for world football vindicated because the FA and Premier League refuse to call a halt to pre-match handshakes and try and compel everyone to respect each other?

These are all questions and problems that should have been answered before the first charge was administered under this current crackdown to push racism out of the game. Because these questions remain to be answered, the FA’s stance is irreparably weakened.

As John Terry prepares to face his personal hearing with the prize he holds dearest, his England shirt, now no longer something he can lose, the pressure is all on the FA.

The independent disciplinary board are in an impossible position. Regardless of their decision, it is clear that Anton Ferdinand will not suddenly start shaking the hand of his former friend simply because it is found that Terry has no case to answer.

The hearing is not going to suddenly bring up a barrage of new evidence - the only difference will be that the standard of proof required to find Terry guilty is significantly reduced. 

If it is decided that Terry has no case to answer, how long before Ferdinand’s prolonged refusal to shake hands lands him with a charge of bringing the game into disrepute?

Similarly, what if, no longer compelled by the emotion of Hillsborough, Patrice Evra decides he cannot forgive Luis Suarez for his abuse - what course of action can be taken then?

In the last 12 months, the FA have allowed Fabio Capello to resign over the farcical way in which Terry was stripped of the captaincy and then enabled his replacement, Roy Hodgson, to publicly suggest that he would prefer it if the former captain of the national team was found not guilty- how is that for degrading the integrity of the organisation’s disciplinary process?

The media spotlight may be on John Terry this week, but the most difficult questions must be answered by the Football Association. 

John Terry. Photograph: Getty Images

You can follow Cameron on Twitter here.

Getty
Show Hide image

We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?