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Freddie Mac, Merrill Lynch and Mike Ashley

mikeashley 6064662 Freddie Mac, Merrill Lynch and Mike Ashley

A while ago, an SNL skit featured an ad for a book that could get you out of debt and save your life.  It was called “Don’t Buy Stuff You Cannot Afford.”  It’s a book that the CEOs and owners behind Freddie Mac and Lehman Brothers, as well as Mike Ashley, may want to look into purchasing.  If they can afford it.

In the United States, the economy is poised on the brink of a massive downturn.  A country that prided itself on big business and small government has turned to tax-payers to bailout her once-mighty corporate investment firms.  And now both American Presidential candidates are calling for more government regulation, an uppercut to the normally sacrosanct American free-market ethos.  It is a telling indication of the depth of the mortgage crisis.In these troubling economic times, we look to the stern looking talking-head economists for reassurance that ‘business knows best’.  According to our modern day business leaders, and contrary to what our parents told us (the ones that lived through the Great Depression), it’s apparently okay to spend money you don’t have for the sake of quick buck around the corner, because “tomorrow is another day.”  Mike Ashley seemed to reassure everyone when he took on Newcastle without seeming to pay much attention to the cost of running and expanding a football club that was already in massive debt.

Yet the simple fact remains that if you buy stuff that you can’t afford, you will eventually lose it, whether its big screen tvs, sub-prime mortgages, or Newcastle United.  Mike Ashley, like many so-called ‘top-level’ CEOs in the United States, realised this core truth when it was already too late to salvage his stake in the club.  Ashley is now in the position of turning to whomever is willing to takeover a debt-saddled club at a devalued rate.  He fell into the same trap as many of the now-bankrupt firms that handed out bunched-up mortgages like they were candy, only to see the housing bubble burst and the mortgages default.

There is an intriguing connection between the fallout at Newcastle and in the mortgage crisis in the United States.  Failed bank and sub-prime mortgage victim Northern Rock once sponsored Newcastle, and investment groups from the United Arab Emirates had been swarming around the ashes of both NUFC and the now-bankrupt Lehman Brothers firm with a mind to buy; both eventually said no (you know the world is at a crossroads when, at a time when the world is heating irrevocably from carbon dioxide emissions, football clubs and investment firms alike have to turn to Middle East oil producers in order to save themselves from debt).

While economically miles apart, Ashley’s soon-to-be-sold Newcastle and American investment firms reflect a larger pattern in modern commerce — spend what you don’t have today in the hope that tomorrow you will make it back.  Or, in another words, ‘Buy Stuff that You Cannot Afford.’  It’s a philosophy that spurns innovation, effeciency and long-term stability in favour of shareholder satisfaction, and it is wreaking havoc both in football and in the wider economic world.

Perhaps therefore instead of laughing off NUFC fans’ protests, we might take their lead and start paying attention to the owner behind the curtain.  More must be done to prevent reckless, poorly thought-out investment schemes that favour an easy dollar over long-term stability.  Skeptical pundits are often fond of saying that the owners can do what they like, and this is true only insofar as we let them.  Perhaps more needs to be done on a regulatory level so football ‘lovers’ like Mike Ashley can spread their nostalgic cheer in the pub and not in the boardroom.

Richard Whittall also invests in the money-losing venture that is A More Splendid Life.

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