The Times They Are A-Changin’: Too Big To Fail 

 

 

“The world is my expense
The cost of my desire”  

Today we consider what happens when an entity believes in their exceptionalism. 

 

For differing reason, both cast themselves as being above the rules, laws, and accepted norms. 

Trump wants to rule America as a dictator; the constitution and the protections deigned to provide a bulwark against this are his enemies. The courts, the constraints imposed by Congress are an irritation stopping him. Above all, he knows best. Anyone who disagrees is a communist, an idiot, or anti-American. 

However, our story of exceptionalism begins in football, with the revelations that Manchester City have been found guilty of 114 charges of what is essentially financial wrongdoings. 

Everton suffered a similar fate, and were deducted points. Chelsea, under their new owners, offered-up the misdemeanours of the previous incumbents and were fined. 

Aside for the sheer numbers of counts bought against City, the big difference was that the others cooperated and admitting their mistakes. 

The majority of the club, 81%, is owned by a member of the Abu Dhabi royal family. People who are effectively the law, de facto they aren’t used to being told what to do. A fact that is totally at odds, with the constitution of the Premier League (“PL”), which is a private company limited by shares, operating as a corporation governed and wholly owned by its 20 member clubs 

Each of the 20 holds a single share, giving them an equal vote on league rules, policies, and commercial deals, with approval decisions requiring at least a two-thirds majority. 

The Football Association holds a special golden share that grants it veto power or approval rights over specific governance areas, such as appointing board directors.  

Since the formation of the PL money has come to the fore, to the extent that financial power is indivisible from success on the pitch  

City have been one of the key exponents of this, dominating English football, with, it must be said, some wonderful teams.  

Where this goes, is anyone’s guess, but if the guilty verdicts are correct, then the entire foundations of their achievements must be called into question. 

Perhaps, the real issue is the ownership. No one can be bigger than the group, or the game  

 

‘if the guilty verdicts are correct, then the entire foundations of their achievements must be called into question’

 

Of course, this wouldn’t be the 21st century without political ramifications, and our exports to the UAE  are C. £16bn. 

Overseas, we have seen examples of no club being too big to be punished. 

In Italy, as a result of the Calciopoli match-fixing scandal, Juventus, a more storied club than City, were relegated to Serie B and started with -9 points. They were also stripped of 2004-05 Serie A title, and downgraded to bottom of 2005-06 table. 

Turning to the US, last week’s summit with China  was described by the FT as “Pomp prevails over substance as Trump hosts Xi”. 

Xi has been content to watch as Trump fritter away America’s status,  as he risks becoming a lame-duck president, presiding over an increasingly polarised and disunited electorate, with a substantial likelihood of an economic shock and market correction.   

 

‘an increasingly polarised and disunited electorate, with a substantial likelihood of an economic shock and market correction’

 

The USA has effectively gone all-in on the success of AI, with markets reflecting this as they price-in America’s continuing dominance in technology, finance and geopolitical might and power.  

Trump’s biggest mistake appears to be the ongoing war with Iran. The military failure aside, the economic  chaos this is causing is diminishing his credibility with voters. 

The most obvious indicator is the inflationary energy crisis, highlighted by the surging price of diesel. In January, a gallon cost $3.5, todays it’s $6.5. 

In a last, desperate throw of the dice, Trump is reported to be considering an export ban of American diesel  to temporarily reduce domestic prices.  

This, if it were to happen, would breach multiple contracts, but, as a businessman, he was famous for this, refusing to pay contractors for their work or demanding that they settle for partial payment. His tariffs broke decades of international agreements.  

That aside, it appears that it would do little to help most Americans with affordability problems, due to  regional differences.  

U.S. diesel exports come from the Gulf Coast, and cutting off those exports would reduce diesel prices in and around Texas, but would result in higher prices for the rest of the world,  including large parts of the US. Both the Northeast and the West Coast buy much of their diesel from other countries, meaning that an export ban would impact them as much as those on other countries.  

 

‘Trump, as a non-believer in renewables, has put the US on the wrong side of the world’s energy future’

 

Trump, as a non-believer in renewables, has put the US on the wrong side of the world’s energy future.  

One side sees the future as “electrotech”,  powered by solar and wind-power, which is dominated by Chinese production of solar panels, batteries and more. 

The other is samo same, more fossil fuels, which, because of fracking, Trump sees as America’s strength. This may help the US, but, with the rest of the world realising the US is an unreliable partner, they are, therefore, an unreliable supplier. 

As criticism of his regime increases, Trump is seeking to control the narrative, banning news teams from CNN, MS Now and Politico. As his presidency continues, there is an ever increasing gap between his self-perceived invincibility and the reality of his waning influence. 

 

‘both are rooted in exceptionalism, the assumption that both are too big to be challenged, and a refusal to accept the constraints of rules and laws’

 

Federal courts are ruling against him, previously supine Congressional Republicans are defying him. His -62% approval rating is an indication that his aura of authority is fading. 

Charlie Sykes, a conservative author and broadcaster, said: “We’re headed for a collision between a lame duck who has no respect for the constitutional norms and an opposition that may have some power to hold him accountable. The paradox is the weaker he gets, the more dangerous he gets.” 

Clearly, there is a considerable mismatch between the situation with City and Trump’ America. However,  both are rooted in exceptionalism, the assumption that both are too big to be challenged, and a refusal to accept the constraints of rules and laws. 

 

“Who is right? Who can tell?
And who gives a damn right now?”  

 

A somewhat esoteric piece today as we weave two disparate situations—Manchester City’s financial misdemeanours and Trump’s increasingly authoritarian rule of the US—into one, hopefully coherent narrative.

The common thread is that both stem from exceptionalism; the rules don’t apply to them.

Equally, both threaten to undermine the status quo.

City, despite creating wonderful teams that have played almost fantasy football, appear to have built their entire edifice on breaking the rules.

Others breached the rules to a far lesser degree, admitted their transgressions and were punished.

City continues to believe they have done nothing wrong, although being found guilty of 114 counts suggests otherwise. In my view their belief suggests they haven’t transgressed as the rules are wrong!

Trump equally sees the rules—in this case the constitution—as wrong because they inhibit him from governing how he wishes. Essentially, he believes he is right and everyone else is wrong; they are all communists, idiots, or non-patriots.

Trump’s punishment will come in November’s mid-terms. City’s, well, who knows; but I suspect the punishment won’t fit the crime!   

Lyrically, we start with Sleep Now in the Fire” by Rage Against the Machine, and finish with “Disorder” by Joy Division.

Normal service, or, what passes for normal here, will return

Philip. 

 

@coldwarsteve

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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