Fixing markets for failure never works...

****

The manager of former world cup winning side, West Ham United, Sam Allardyce has this to say about the Football League's incoming "fair finance" rules:

"The rules are going to cause absolute chaos and are going to destroy football as we know it unless we are very careful," he says.

"It's making finance more important. I am not saying that we want to put clubs into jeopardy – the Portsmouth scenario – but this is the entertainment industry, not a financial institution whose only aim is to balance the books."

The point Big Sam makes here is that the current rules aren't making lower league football in England less competitive - he comments in the same article about how the league is more "ferocious and volatile" than when he last managed in the Championship. Whenever the word "fair" crops up alarm bells should ring - indeed these new rules won't stop clubs failing but will make it ever more difficult for smaller clubs to build a successful run. And it won't stop clubs getting into financial trouble either.

But then no-one's listening. Always and everywhere fixing markets to favour failure doesn't work.

....

Ski-ing and the prospect of Greek default

We're told that Greece - despite this weeks latest bailout - is likely to default on its debts.

So, even if the EU were willing to take on all of Greece’s debts, Greece would be paying more than 10pc of GDP in debt interest. Of course, the EU isn’t going to do anything like that. No plausible market interest rate is going to be less than twice that level. So to repay its debts, Greece would have to be willing, for decades, to devote well above 10pc, perhaps closer to 20pc of GDP simply to paying interest. 

You see, Greece is going to default - the bondholders are going to have to get a haircut. It is inevitable...is it not? Or does the postponing of the inevitable - what nature ordains - reduce the likelihood of that inevitability. Let me explain with a ski-ing metaphor.

When I learned to ski the instructor, in an effort to break my habit of leaning back, explained (in a fabulous French accent that I won't reproduce):

"Ski-ing is controlled falling over. Because of gravity you are going down that hill, what we do is agree with nature that we will fall over but put it off until we get to the bottom. And then we don't need to fall over."

The longer we postpone default, put off Greece's moment of tumble, the less damage that fall will do, the haircuts become number three rather than number one and the lenders - sovereign or private - have time to order their affairs so as to minimise the loss from default. And you never know, the inevitable might not be inevitable?

Mind you the Greeks aren't noted for prowess at winter sports!

....