Alex Ferguson’s latest display of petulance threatens to tarnish a formidable legacy

The FA’s failure to punish the biggest child in the playground makes a mockery of "Respect" campaigns.

As Sir Alex Ferguson strolled towards the tunnel at Old Trafford on Boxing Day, his arm draped around the shoulder of his match winner, Mexican striker Javier Hernandez, the most decorated coach in the history of English football could reflect on another job well done.

Rewind 45 minutes, however, and the 70-year-old Manchester United manager had been anything but calm and serene.

Fresh from watching his team concede two goals in a league match for the ninth time this season and incensed at what he felt was an offside strike against his side, the combustible Scotsman marched onto the Old Trafford turf to confront referee Mike Dean and assistant Jake Collin as the sides returned after half-time.

Dean, himself hardly a shrinking violet, was taken aback as Ferguson, more regularly a man to save his vitriol for post-match interviews, made a bee-line for the official and let loose - much to the delight of the watching 75,000.

Somewhat inevitably, once the tirade had passed and the match had been restarted, United shook off their festive lethargy and regained a stranglehold at the top of the Premier League.

Understandably, however, it was Ferguson’s conduct that attracted most column inches in the post-match press conference despite not registering a flicker of interest from the Football Association’s disciplinary committee.

While Harry Redknapp and Roberto Mancini found themselves in hot water over comments made about officials during the festive period, Ferguson also mysteriously evaded censure for his attack on Michael Oliver over the referee’s performance in the Manchester club’s draw at Swansea ten days ago.

To be fair, neither incident was much worse than any number of managerial indiscretions at league grounds all over the country every week and without a report from Dean, there is little under their own rules that the FA can do to punish Ferguson’s Boxing Day rant.

However, the sound of FA silence in the immediate aftermath of both fixtures was just another straw on the back of the most beleaguered of sporting bodies and an indication that there is one figure in English football operating above the law.  

I wrote in September how confused thinking over the Luis Suarez and John Terry racism sagas had drilled major holes in the credibility of the FA but this latest failure is arguably more damaging.

By neglecting to constrain the nation’s most prominent manager time and time again, the FA are not only setting a corrosive example to young players emerging in the professional game with an engrained sense of entitlement- but they are also adding to the entrenched sense of tribalism that continues to affect supporters, players and managers in England’s top division.

In fairness, respect for officials is only an easy notion to follow until your team cops a dodgy decision four minutes into injury time and Ferguson is not alone in failing to see the bigger picture.

For the man himself, such a series of rants are inconsequential and completely logical. If, by hammering an official or lambasting a journalist he can get a rise out of his players or, in last week’s instance, the crowd, he will have deemed the move justifiable.

And why not? The Scotsman is so rarely admonished for his displays of insanity that the risk of an occasional reprimand is more than worth the potential benefit.

But for a man so keen on securing his footballing legacy, surely Ferguson should be looking to leave a better impression as a human being as the clock winds down on his career.

As previous seasons have culminated in title winning moments for his club, Ferguson has been known to spend time away from the spotlight of the Premier League.

When his side captured a first league title in four years as Chelsea failed to win at Arsenal in May 2007, Ferguson himself was watching his grandson play a crucial school league game, rather than events at The Emirates.

In the wake of Ferguson’s conduct over the last fortnight, one has to ask what the 70-year-old’s grandson will have made of seeing his esteemed elder throw tantrum after tantrum on the hallowed Old Trafford turf.

Chelsea’s melodramatic former talisman Didier Drogba was eventually shamed into changing some of his ludicrous on pitch diving antics after a conversation with his young son, however it is difficult to see Ferguson having a similar conversation with his extended family.

This is where stronger FA action may actually help the godfather of the Premier League.

Ferguson could and should have been punished each and every time he missed mandatory press briefings at the end of matches covered by the BBC as a result of a 2004 documentary. Instead, the Scotsman was granted seven years of grace before the BBC themselves went to Old Trafford, bottle of wine in one hand and brokered peace.

The FA, fearing the influence of Ferguson, stood by and did nothing.

The reality is however, that Manchester United’s most successful manager would rather secure a third Champions League title of his tenure than temper any of his antagonistic instincts in order to be remembered as a great man as well as a fantastic manager.

Ferguson’s legacy, as he and millions of Manchester United fans may argue, will be defined by trophies captured and not by displays of occasional decorum.

Yet, if the FA are prepared to be harder on him and force some humility from Ferguson at times like these, the United boss might just be left with a debt of gratitude to the rulers of the English game when the final whistle is blown on his career. 

Alex Ferguson shouts at assistant referee Jake Collin during the Boxing Day match against Newcastle United. Photograph: Getty Images

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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?