Of course, the World Cup is an almost planet-wide distraction. And yet, at least for the time being, half of humanity almost does not play it, including the United States, India and China. This year, the victor will be a Member State of the European Union (or almost a member if it’s Croatia) , one of the world’s most politically ill regions.
Of course, this event also tells us a lot about rising nationalism, which we are worried about everywhere. However, at least for the moment, there has been no extreme delirium, neither in the Russian stadiums, nor in the competing countries; and support for one team has never resulted in xenophobia against others.
If we took these signs seriously, we could conclude that Europe is not doing so badly, and that populism does not threaten us as much as we say.
However, there is no doubt that it is also necessary to observe, and take much more seriously, other signs coming from the football world; signs that are much more important and much more revealing of what is to come. More specifically, on Sunday, July 8, a few days before the final of this World Cup, and in almost total discretion, one of the biggest European clubs, AC Milan, well placed in the Serie A (national championship), has now been placed under the control of a US investment fund, Elliot Management, because its Chinese owner, Li Yong Hong, who bought it last year from Silvio Berlusconi, could not pay repay its loans.
The irony: American and Chinese companies, from countries that practically do not play any football, competing for the ownership of one of the largest clubs in Europe, whose value is estimated today at more than €500 million!
What a symbol: these two countries are fighting over a prized jewel of the European football economy; a particularly clear sign of the coming dominance, by firms from these two countries, over the main companies of the Union.
The essence of this matter is not the fate of this Italian club, which is a collateral victim of the financial difficulties of a Chinese fund and of the rapacity of his American creditor: the latter will resell soon to another shareholder who is crazy enough to pay a price that is disproportionate to its profitability.
Rather, the essence of this matter is that other firms in China, as in many other emerging countries, in the United States as well as in Europe, and in many sectors, are now over-indebted, and thus continue to borrow at increasingly high rates in order to repay their loans—after increasing their equity on valuations much higher than what their shareholders can ever expect to receive as dividends. The fate of the Chinese fund is waiting on it. And their assets will pass from hand to hand, without the employees having a say.
Everything is set in place for a new global crisis: over-indebtedness, crazy valuations, rising interest rates, protectionism and slow economic growth. We have known this very often in History. And even less than ten years ago.
Can we prevent this crisis?
For the moment, we have not found any other solutions other than to cure evil with evil: you are too indebted? You fear not being able to repay your debts? It is urgent, you are told, to incur more debt in order to honour your dues.
One day, in a month or in three years, someone will start being afraid. And the lenders will sell at a loss in order to not lose everything, and to avoid being the last to believe that the valuations of their assets can rise to the sky. And here, again, the crisis will begin.
But unlike what happened ten years ago, we will no longer be able to use either the weapon of public debt or declining interest rates. The former is at its highest, while the latter is at its lowest.
Much worse is ahead.
Nonetheless, this may be not as bad, the World Cup will end in universal joy … And the next event is already brewing …
j@attali.com