If we look at ordinary life in the UK we see that there are quite a few disinflationary pressures right now. Many of these have been driven by the fall in the oil price represented by the fact that even after this morning’s bounce the price of a barrel of Brent Crude Oil at US $44.39 is down some 56% on a year ago. This has led us to a situation where consumer inflation is described thus by our official statisticians.
The prices households pay for the goods and services they buy remain largely unchanged on a year ago. The Consumer Prices Index (CPI) – which measures these changes – shows that prices increased by 0.1% (or 10p on a £100 shop) in the year to July 2015. Annual inflation (the overall rate at which prices have increased over the last year) has been at or around 0% for the last 6 months.
Perhaps “noflation” would be the bets description of our official consumer inflation experience although of course other measures (RPI and RPIJ) do record low inflation.
The world of UK football transfers
A completely different situation emerges however if we now look at the world of Premiership football where the numbers are rising with dizzying speed! If we go back to July then the lights were flashing amber if not red. From the Guardian.
Raheem Sterling will undertake a medical at Manchester City on Monday after the deposed Premier League champions finally agreed a fee with Liverpool that could potentially rise as high as £49m for the England forward….Agreement was eventually struck on Sunday afternoon on a deal which will cost City an initial £44m, with a further £5m due in add-ons.
This represented quite a rise on the £600,000 that Liverpool paid for him back in 2010 as we mull how much he has improved as a player, although an add-on clause will have raised that towards £10 million now. It is also true that British players tend to be more expensive than foreign ones which is one of the reasons why premiership football has so many foreign players in it.
But we found ourselves reviewing the most expensive player under-21 and also the most expensive English player ever.
How did we get here?
Back on the 4th of June I suggested that we could see this.
A spending splurge this summer?
So a lack of world-class players has led to a Champions League slump for premiership clubs. The same clubs are now in this situation of having ever more money and a stronger currency meaning that Pink Floyd may be playing.
Money, it’s a gas
Grab that cash with both hands and make a stash
New car, caviar, four star daydream,
Think I’ll buy me a football team.
Let us be clear that the boom in terms of money for premiership football goes on and on and on.
England’s top division has passed the £3 billion revenue mark for the first time and widened the gap to its nearest rival, the Bundesliga, to over £1 billion. The Premier League now generates more revenue than La Liga and Serie A combined.
Not only has it surged but it is about to again.
The next deals will commence in the 2016/17 season, with the value of the live domestic element already confirmed to be 70% higher than the current deal.
What happened next?
If we progress in Question of Sport style we have already noted the Raheem Sterling transfer but that was gazumped by the same club last night as reports began to filter out of this. From the Guardian.
Manchester City are confident they have finally agreed a deal to sign Kevin De Bruyne from Wolfsburg for an initial €74m (£54m)……which could eventually be worth more than €80m (£58.5m) with performance-related bonuses, goes through.
There is still the question of the medical and a supposed matching bid from Paris St.Germain but we do have some numbers to mull. This is because De Bruyne was bought by Chelsea for £7 million (January 2012) and then sold to Wolfsburg (January 2014) for £18 million in what seemed to be a really good piece of business. Indeed I note some 20/20 hindsight trading going on as some bemoan the lack of a sell-on clause!
I am not the only person considering the issue of inflation here as I note these comments on Twitter from Paul Hayward.
Kevin De Bruyne’s price rose faster than a cup of coffee in the Weimar Republic.
Kevin De Bruyne left England in 2014 for £18m and is coming back in 2015 for £54m. He’s hyperinflation on legs.
Of course even the £54 million will probably be too low but it is treble the £18 million Wolfsburg paid as we mull quite an inflationary burst. I think I am being generous in saying that the £11 million profit they gave Chelsea was due to a skill improvement although I am sure that readers will have their own thoughts. Measuring output and quality is somewhat intangible.
What we can say is that Wolfsburg are certainly not distress sellers as they are owned by Volkswagen but it would appear that even they could not turn down such a sum of money which in the normal world of pretty much zero inflation you could buy quite a lot with.
The ever inflating Stones
As we review the issue of the quality and output of a young man who has played for England then a wry smile passed my lips as BBC Radio 5 live reported this last night.
Stones, back at his first club, was not his usual composed self and made an error of judgement when Winnall gave the home side the lead, inexplicably stepping over his goalbound shot.
Actually this is more favourable than the radio broadcast which blamed him for two goals. Let us make an allowance for what Hard Fi described below and move on.
Pressure, pressure, pressure pressure pressure
Feel the pressure
Pressure, pressure, pressure pressure pressure
Living for the weekend [x8]
However I note that the opening bid of £20 million was more than the £18 million paid by Leeds United for Rio Ferdinand some years ago and of course it has been replaced by £26 million and then £30 million. On the other side of the coin it did appear that around £34/5 million would be sufficient but that now seems to have been replaced by £40 million. In fact even that may be old hat as I listened to Danny Mills on BBC Radio 5 Live last night going £42,3,4 million.
If we believe the hype then there may be another launch forwards. From the Daily Star.
Chelsea are in talks with Juventus about signing Paul Pogba and are prepared to make a £73m bid for the midfielder.
What about the wages?
In the normal world there was some welcome news today especially for employees of Sainsburys. From the BBC.
Sainsbury’s has given its shop workers a 4% pay rise, the highest increase in more than a decade, to take staff wages to just above average for the sector.
It says 137,000 of its workers will see their pay rise from £7.08 an hour to £7.36 from the end of this month.
Putting it another way if Raheem Sterling is getting £200,000 a week then if all 137,000 worked for an hour they could pay him for five weeks and if Kevin De Bruyne is getting £250,000 per week then they could pay him for four weeks or so.
For those who are not football fans I guess the way that it hits the headlines at this time of year has them singing along with Green Day.
Summer has come and passed
The innocent can never last
Wake me up when September ends
For the rest of us we see a world where there is clear disinflation in commodities and oil and fears of deflation as the Chinese bubble bursts. However as soon as we try to apply any quality and output measure we see that there is an extraordinary bubble going on particularly in Premiership football. Ironically it will mostly be recorded as economic growth as I doubt there is a football deflator which will do the job. So just like any other economic bubble really, what could go wrong? Not even membership of the House of Lords is growing this fast.