In Milton Friedman’s 1980 PBS TV series Free To Choose, Friedman drew a simple graph showing that, mathematically, there are only four ways to spend money.
Spending your money on yourself is efficient. Tonight’s Special, prime rib with a small side dish of kale, looks like a good deal.
Spending your money on other people is efficient too. She’ll have the mac and cheese.
Spending other people’s money on yourself is not so efficient. The Wall Street Hedge Fund Managers’ Annual Dinner will be at Maxim’s in Paris.
But spending other people’s money on other people is the way government spending is done. Free caviar for all Americans! Whether they like caviar or not. And get in line because there’s nothing except caviar, and it will be rationed.
P.J. O’Rourke, “My Coffee Klatch With Rand Paul: The Kentucky small-l libertarian (and likely presidential candidate) talks with P.J. O’Rourke about philosophy, money, and hopelessness”, The Daily Beast, 2014-09-27.
September 2, 2015
June 14, 2015
It is, as the Reg‘s Jennifer Baker puts it, “just a happy side effect”:
Belgium has taken international trolling to the next level by minting a €2.50 coin to celebrate the Battle of Waterloo.
France had objected to the plan to mint a €2 coin to mark the 200th anniversary of Napoleon’s defeat and Belgium duly scrapped 180,000 coins. France said the battle “has a particular resonance in the collective consciousness that goes beyond a simple military conflict”.
But the plucky Belgies didn’t take the French manoeuvre lying down and unearthed an obscure piece of legislation which allows EU countries to unilaterally mint new coins, provided that they are in an unusual denomination.
June 12, 2015
Gresham’s Law states that bad money drives out good money. This can happen in both inflationary and deflationary monetary environments. Basically, it must means that people will spend their “bad” currency first to get the maximal value out of it, and save the “good” money for the future because it will not depreciate as fast. That’s why you see socialist government inveighing against “hoarders”, “wreckers”, and “speculators” — the good money is biding its time and flushing out the bad money first.
For example, consider the US fifty-dollar gold coin. These coins are collected for their numismatic value and not their currency value. In fact, these coins are useless as actual currency. Why? The value of the gold and silver in the coins far outstrips the face value of the coin. Gresham’s Law would drive the coins out of circulation — either they would be melted down for bullion, hoarded, or traded as barter (not currency!) for objects of similar value.
Monty, “Inflation, Deflation, and Monetary Policy”, Ace of Spades HQ, 2014-07-11.
June 3, 2015
In The Diplomat, Nigel Collett reviews a new book by Ferdinand Mount called The Tears of the Rajas: Mutiny, Money and Marriage in India 1805-1905:
It was the discovery of a book by his aunt, Ursula Low, published in 1936 and entitled Fifty Years with John Company, which opened Mount’s eyes to his family’s history and led to the writing of The Tears of the Rajas.
His aunt’s book, a work long ignored and derided as an eccentricity by her family, was a biography of her grandfather, General Sir John Low. What staggered Mount about his aunt’s account was her matter-of-fact recording of the massacres, mutinies and mayhem in which her grandfather and many of her relatives had been involved during their colonial careers. For General Sir John Low had, during a career in India that lasted from 1804 to 1858, seen the brutal suppression of the mutiny of his own regiment at Vellore a year after his arrival in India, the “White Mutiny” of European soldiers in the East India Company’s Forces in 1808 (which resulted in the massacre not of the European mutineers but of the Indian soldiers they led) and finally, in 1857, of the Indian Mutiny itself, which erupted at a time when Low was the Military Member of the Governor General’s Council.
More than this, Low, in a largely political career up until the outbreak of the Mutiny, had been intimately involved in policies which led directly to it, including the removal from power of three Indian potentates to whom he was attached as Resident (the Peshwa of Poona, the Raja of Nagpur and the King of Oudh) and the annexation of their lands. He was at one point, in yet another posting as Resident, personally involved in detaching a large chunk of Hyderabad from the lands of the Nizam.
During his service, Low had watched, and other members of his family had been involved in, the British annexations of Sind and the Punjab, the conquest of Gwalior and the disastrous attempt to depose Dost Mohammed, the Shah of Afghanistan, which led to the catastrophe of the 1st Afghan War. Mount’s title is well chosen: Low literally reduced several of his Rajas to tears.
Perhaps more stomach-turning than this, especially to a British reader, are Mount’s revelations of the dishonest policies followed by almost every Governor General of India towards India’s native princes, policies driven by pure greed, conducted with cold ruthlessness in utter disregard of treaties, promises or any code of honor, and hidden beneath layers of hypocritical cant. Much of this has not been made generally known. Few, for instance, in the Far East, will know that as the First Opium War in China ended in 1842, another began in India, for the British conquest of Gwalior was aimed at the control of the opium it grew independently of the East India Company.
The removal of misgovernment was all too frequently the fraudulent public excuse for the imposition of direct rule and the canard of the protection of the peasantry from their own rulers was little more than a front for taxing them more efficiently. Add to this noxious behavior insulting racial pride, ignorance of culture and tradition, and a religious evangelism that persuaded army officers that it made sense to tell their Hindu and Muslim soldiers that they would go to Hell if the wars into which they were leading them resulted in their unconverted deaths, and there seems little need for further explanation of why it all ended in disaster in 1857.
While I can’t claim to have read deeply in Indian history during this period, I still think the best introduction to the at-best-ambivalent legacy of British rule is the fictional exploits of Sir Harry Flashman by George MacDonald Fraser (especially the original Flashman, Flashman and the Mountain of Light, and Flashman in the Great Game). How many other novels have extensive footnotes about all the historical characters and situations the fictional hero encounters? Oh, right … for the younger set: trigger warning in all the Flashman novels for racism, sexism, imperialism, militarism, violence, and pretty much anything that would offend the ears of a
young Victorian lady modern university student.
May 25, 2015
Deflation occurs when there is not enough currency in circulation to meet the needs of the economy. Here again, the classical definition focuses on falling prices rather than an insufficient currency stock, but deflation is primarily a monetary phenomenon.
It is the economic version of anemia: too little blood is reaching the body. Each unit of the currency goes up in value relative to the goods and services available, but because the stock of currency isn’t growing fast enough, it starves the economy of investment capital. There isn’t enough money to build out existing business, to create new ones, or to hire new workers. (This is in part what happened during the Great Depression of the 1930’s.) Inventories shrink, but new goods aren’t being produced due to the lack of investment capital. Eventually the economy grinds to a halt as production withers away.
Specie currencies are more prone to deflation than fiat currencies for the simple reason that fiat currencies are not based on scarce (and thus valuable) resources like gold, silver, or what have you. There’s only so much gold and silver to go around, and sometimes the supply of bullion can be interrupted for long periods. (Sometimes this is even done deliberately by rival nations or speculators.) Also, because the value of gold and silver is set outside the control of government or authority issuing the currency, it limits the kinds of monetary policy the sovereign can conduct, especially during times of crisis.
Monty, “Inflation, Deflation, and Monetary Policy”, Ace of Spades HQ, 2014-07-11.
May 18, 2015
Inflation is a phenomenon that occurs when the value of a given unit of currency becomes debased in some way, and prices then rise to offset the currency’s loss in value. The standard definition of inflation is given in terms of rising prices rather than falling currency value, but that’s misleading. The value of goods and service don’t increase so much as the currency’s value relative to those goods and services decreases, so inflation is more of a monetary phenomenon than a market-price phenomenon.
The more the currency loses value, the higher prices denominated in that currency rise. The classical example of hyperinflation is the 1921-1924 hyperinflation in Weimar-era Germany, though in modern times Zimbabwe’s currency has undergone the same radical devaluation.
What causes a currency to become devalued? There are many causes. With specie currency like gold and silver coins, debasement is usually physical — in former times coins were “shaved” or “clipped” or adulterated with baser metals. The clippings could then be melted down and recast into new coins, but the clipped coin could still be passed off at full value (until the merchants got wise and started weighing and/or assaying the coins). This is why coins began to have milled edges — it made the practice of clipping easier to spot. A variant of the “shaving” debasement strategy is one carried out by the treasury or mint itself: reducing the amount of gold or silver in a coin, but leaving the face-value of the coin the same. This happened often to the Roman denarii — as the Imperial stocks of silver bullion waned, each coin was reduced in weight but mandated to retain the same value. (In modern fiat-money times, coins are generally manufactured out of base metals like nickel, tin, and zinc, but even so, the value of the metal is sometimes still higher than the face-value of the coin.)
In a fiat money regime, debasement is usually the result of creating too much currency for the economy to absorb. If the money supply exceeds some thresh-hold (it’s very complicated to figure out exactly what that thresh-hold is), you have more units of currency chasing the same amount of goods and services — which means that the real unit value of the currency will drop and prices will go up.
Another way a fiat currency can become debased is to arbitrarily re-value your currency relative to the market, or relative to other currencies. If an issuing authority declares the value of a quatloo to be three quatloos to a dollar, even if the market is trading at five quatloos to a dollar, the currency will be debased because it’s not actually worth what the issuing authority says it is. Prices go up, and the government usually responds by implementing price-controls, and in turn the goods and services simply become unobtainable at any price because producers won’t continue to produce at a loss.
No good or service has an absolute value. The value of a good or service is what someone is willing to pay for it. Currency is a specialized good, and is subject to the same law. If the stock of currency grows faster than the value represented by that currency in the wider economy, the currency is in an inflationary state.
Monty, “Inflation, Deflation, and Monetary Policy”, Ace of Spades HQ, 2014-07-11.
January 30, 2015
Over at Ace of Spades H.Q., Monty takes us back to Philosophy 101 to show the economic version of Plato’s famous story:
If you had occasion to take a Philosophy 101 course in college, you may remember the allegory of Plato’s cave. Plato meant it as a discussion of what “reality” is — whether it is an absolute thing, and whether humans can experience “reality” in its totality or if we are limited only to what we can experience and measure. The idea is that what we can sense and measure is only a subset of a larger reality that we cannot perceive directly.
I’ve long thought that this allegory works quite well for economics in many ways, especially as it pertains to concepts of money and wealth.
Take a dollar out out of your pocket and look at it. What is it? It’s many things, actually: it is money, so it must be a store of wealth, a unit of account, and a medium of exchange; it is a manufactured good, intended by its manufacturer to be used as currency; it is a work of engravers’ art; it is a complex piece of technology (especially modern bills with the various anti-counterfeiting countermeasures); it is a carrier for the oils, dirt, and germs of the people who have handled it; and so on.
You can think of money as a special kind of battery, only instead of storing electricity, it stores up economic value which can be expended at a later time. And just as a battery can store energy but not create it, money can store value but not create it.
It turns out that this dollar bill is a pretty complex object, all things considered. And yet it isn’t a “real” thing in the sense Plato was speaking of. Whatever else it may be, a dollar is not in itself valuable; it is rather a signifier of a real thing we cannot see directly. A unit of money — whether a dollar, a franc, a pound, or a quatloo — is only “real” insofar as it signifies some existing value in the economy. (We can think of some value as being latent as opposed to realized, as it often is with investments. We invest in expectation of value being created and providing some kind of return on the investment. No value appears spontaneously out of the void. The invested capital is based on already-existing assets; a return is only realized if the endeavor creates additional value. Interest income or dividends don’t just magically materialize — interest income is your share of the value added and payment for the time-value of the money you invested. Nothing comes from nothing, as Parmenides reminds us.)
That dollar you hold in your hand is the shadow cast by something of value in the world of real things.*
* One way in which the Plato’s Cave allegory doesn’t work well in the monetary sense is when considering an essential property of money: fungibility. For money to be money, it must be fungible — that is, a dollar bill is exactly like any other dollar bill in terms of how it behaves in a monetary sense. I can buy a candy bar with any dollar, not just one specific dollar. The Plato’s Cave allegory draws a 1-to-1 linkage between the “real” object we cannot perceive and the shadow we can perceive, but with money it is more like a probabilistic wavefront that only collapses when you spend the dollar.
This means that, in the economic sense, our “shadow” of a real world good or service is not a particular dollar but any dollar.
January 23, 2015
At Worthwhile Canadian Initiative, Nick Rowe explains just how important Milton Friedman still is in economics today:
I can’t think of any economist living today who has had as much influence on economics and economic policy as Milton Friedman had, and still has. Neither on the right, nor on the left.
If you had a time machine, went back to (say) 1985, picked up Milton Friedman, brought him forward to 2015, and showed him the current debate over macroeconomic policy, he could immediately join right in. Is there anything important that would be really new to him?
We are all Friedman’s children and grandchildren. The way that New Keynesians approach macroeconomics owes more to Friedman than to Keynes: the permanent income hypothesis; the expectations-augmented Phillips Curve; the idea that the central bank is responsible for inflation and should follow a transparent rule. The first two Friedman invented; the third pre-dates Friedman, but he persuaded us it was right. Using the nominal interest rate as the monetary policy instrument is non-Friedmanite, but the new-fangled “Quantitative Easing” is just a silly new name for Friedmanite base-control.
We easily forget how daft the 1970’s really were, and some ideas were much worse than pet rocks. (Marxism was by far the worst, of course, and had a lot of support amongst university intellectuals, though not much in economics departments.) When inflation was too high, and we wanted to bring inflation down, many (most?) macroeconomists advocated direct controls on prices and wages. And governments in Canada, the US, the UK (there must have been more) actually implemented direct controls on prices and wages to bring inflation down. Milton Friedman actually had to argue against price and wage controls and against the prevailing wisdom that inflation was caused by monopoly power, monopoly unions, a grab-bag of sociological factors, and had nothing to do with monetary policy.
December 3, 2014
Money is a symbolic system, the purpose of which is to facilitate exchange and to act as a recordkeeping technology. That money is so very important to our everyday lives and yet has no real connection with physical reality is the source of many apparent paradoxes and contradictions. These are the best of times, these are the worst of times.
Measured by money, things look relatively grim for the American middle class and the poor. Men’s inflation-adjusted average wages peaked in 1973, and inflation-adjusted household incomes for much of the middle class have shown little or no growth in some time. The incomes of those at the top of the distribution (which is not composed of a stable group of individuals, political rhetoric notwithstanding) continue to pull away from those in the middle and those at the bottom. The difference between a CEO’s compensation and the average worker’s compensation continues to grow.
But much of that is written into the code. If, for example, you measure inequality by comparing the number of dollars it takes to land at a certain income percentile, with a hard floor on the low end (that being $0.00 per year in wages) but no ceiling on the top end, and if you have growth in the economy, then it is a mathematical inevitability that incomes at the top will continue to pull away from incomes at the bottom, for the same reason that any point on the surface of a balloon will get farther and farther away from the imaginary fixed point at its center as the balloon is inflated. This will be the case whether you have the public policies of Singapore or Sweden, and indeed it is the case in both Singapore and Sweden.
Purely symbolic systems are easy to manipulate, which is why any two economists can take the same set of well-documented economic data and derive from it diametrically opposed conclusions.
With economic models, we are a little like Neo in The Matrix, before he takes the red pill: We are not in the real world, but in a simulacrum of it, one that has rules, but rules that can be manipulated by those who understand the code. Economic models and analysis are very useful, but it’s worth taking the occasional red-pill tour, leaving behind the world of pure symbolism and taking a look at the physical economy.
Welcome to the paradise of the real.
Kevin D. Williamson, “Welcome to the Paradise of the Real: How to refute progressive fantasies — or, a red-pill economics”, National Review, 2014-04-24
November 12, 2014
Banking is a service, […] and a service has a cost associated with it. Modern banking has all kinds of fees and charges associated with it. But depositors are often charged for keeping too low a balance in their savings or checking accounts, not too large a balance. What’s going on here?
Central banks have created this monster via the regimen of ZIRP (Zero Interest Rate Policy). This is a way of implementing Keynesian stimulus, but central banks have run up against the liquidity-trap wall: interest rates cannot fall below zero. Monetary policy stops working at the zero-interest boundary.
For central banks, the problem is that in a slow-growth economy (or actually a recessive one) a paradox arises where rational behavior on the part of savers leads to bad results: consumers save their money out of concern for the future, but the economy — starved of the cash that fuels it — slows still further. This is the argument behind Keynesian stimulus; inject more (newly-printed) money into the economy until people stop being scared and start spending freely again (with their own money and borrowed money). The danger of inflation looms, however, so central banks try to implement various regimes to keep it under control (with varying degrees of success).
This theory founders on the shoals of reality, alas. It’s rational for people to save money, particularly during bad times, because people believe their currency stock to be an appreciating (or at least a constant-value) asset. But when a sovereign inflates (devalues) its currency to solve a short term economic problem, they run the risk of damaging confidence in the currency itself. Inflation may inject some nitrous oxide into the engine of the economy for a short time, but the outcome may be a blown engine (i.e., a ruined currency, as it was during the Weimar era).
When people lose trust in a fiat currency, it’s nearly impossible to restore confidence in it. Trust is all a fiat currency has — without trust, fiat currency is just worthless paper. This is really the core of the sound-money argument: deflation is bad because it can stall an economy and make debt servicing murderously difficult, but inflation is worse because it wrecks the currency itself. Hard-money currency regimes may be somewhat prone to deflationary cycles, but at least they never go to zero value; they always retain some value. Fiat currencies can go to zero.
Monty, “DOOM: The Wrath of Draghi”, Ace of Spades H.Q., 2014-11-06.
September 20, 2014
I’ve seen this CBC link mentioned several times by US commentators:
American shakedown: Police won’t charge you, but they’ll grab your money
U.S. police are operating a co-ordinated scheme to seize as much of the public’s cash as they can
On its official website, the Canadian government informs its citizens that “there is no limit to the amount of money that you may legally take into or out of the United States.” Nonetheless, it adds, banking in the U.S. can be difficult for non-residents, so Canadians shouldn’t carry large amounts of cash.
That last bit is excellent advice, but for an entirely different reason than the one Ottawa cites.
There’s a shakedown going on in the U.S., and the perps are in uniform.
Across America, law enforcement officers — from federal agents to state troopers right down to sheriffs in one-street backwaters — are operating a vast, co-ordinated scheme to grab as much of the public’s cash as they can; “hand over fist,” to use the words of one police trainer.
July 24, 2014
People who understand high finance are of two kinds: those who have vast fortunes of their own and those who have nothing at all. To the actual millionaire a million dollars is something real and comprehensible. To the applied mathematician and the lecturer in economics (assuming both to be practically starving) a million dollars is at least as real as a thousand, they having never possessed either sum. But the world is full of people who fall between these two categories, knowing nothing of millions but well accustomed to think in thousands, and it is of these that finance committees are mostly comprised. The result is a phenomenon that has often been observed but never yet investigated. It might be termed the Law of Triviality. Briefly stated, it means that the time spent on any item of the agenda will be in inverse proportion to the sum involved.
C. Northcote Parkinson, “High Finance, Or The Point Of Vanishing Interest”, Parkinson’s Law (and other studies in administration), 1957.
June 25, 2014
… it is a mistake to use “money” and “wealth” as synonyms. Money is not wealth (though it is often a signifier of wealth). Wealth is a concept far greater, deeper, and more complex than mere money can encompass. Money is a tool; wealth is a state of being, an environment, a continuum in which we conduct our lives. When the left speaks of inequality in purely monetary terms, they are engaging in a puerile and futile kind of reductionism.
Consider a man with a wife and three teenage daughters, who lives in a house with only one bathroom. This man wouldn’t need a million dollars to feel wealthier; he’d just need a second bathroom. A chance to have a hot shower in the morning and have a clean space on the sink for his shaving gear. Wealth to this man is not the money it would take to build the extra bathroom; wealth is the time and comfort the new bathroom brings. Wealth is comfort he gains, his improved state of mind, the increased peace in his household, his improved quality of life. The marginal utility of the additional bathroom is great indeed (the utility of additional bathrooms would be less). The wealth of that additional bathroom is much greater, proportionally, than if this man and his family lived in a huge mansion with fifteen bathrooms. (In fact, the huge house might decrease his happiness due to the expense of upkeep and maintenance. Who knows?)
You don’t make a poor person wealthy by giving them money; history is full of lottery winners who ended up just as poor as when they started, and many’s the dissipated scion of a rich family who frittered away the family fortune. Wealthy people tend to have a lot of money because money is correlated with wealth (but does not cause it). Income, investments, assets — all can generate money for a wealthy person.
But wealth is more than just stuff. A loving spouse and healthy, happy children are treasures. Running a successful business can mean more than just the profits it generates; there is deep satisfaction in conducting a successful enterprise. A deep love of art or music can enhance and enrich a life. The company of good friends is truly priceless, and something that wise people learn to value more as time goes by.
Money gives access to some of those things, but all the money in the world can’t buy an appreciation of those things.
But to speak of wealth even in this broadened sense is misleading, for in America even “poor” people are wealthy beyond the dreams of people in many places in the world. And compared to people in most ages of the earth prior to the 20th century, there are no poor Americans. It’s amazing to consider how much better life for an average person is now compared to past times. We have food in amazing abundance and variety. Every house has a big-screen television, central heating and air-conditioning, and a refrigerator and range. Everybody has at least one car. Everybody has a cellular phone, and most people have a computer. Few of us work more than eight hours a day to afford all these things, leaving plenty of free time to relax. Medical technology has extended our lifespans, and made our tour upon the earth far more pleasant than in former times. We live healthier, more active, more stimulating lives than at any point in our history — wealthier lives.
Monty, “Wealth as an end and wealth as means to an end”, Ace of Spades HQ, 2014-06-24.
June 12, 2014
In The Atlantic, Conor Friedersdorf makes an argument that it’s time the United States put Martin Luther King on the $20 bill:
During the 2008 election, Thomas Chatterton Williams wrote an article for Culture11 about the significance of a Barack Obama victory. “On television screens from Bedford Stuyvesant to South Central Los Angeles, images will be broadcast of a black family — a father, a mother, and two little girls — moving into the White House,” he wrote. “Whatever you think of policy, the mere fact of electing a black man president, sending him to live in the nation’s most iconic, so far whites only house, would puncture holes through the myth of black inferiority, violating America’s racial narrative so fundamentally as to forever change the way this country thinks of blacks, and the way blacks think of this country — and themselves.”
I still think Williams had a point. Today’s six, seven, and eight-year-olds have no memory of an America with anything other than a black president. What seemed improbable to us as recently as 2007 is, for them, a reality so normal that they don’t even think about it. Yet these same kids are still growing up in a country where the faces celebrated on the paper currency are all white. I don’t want to overstate the importance of that. There is a long list of suboptimal policies that are vastly more urgent to remedy. Still, the lack of diversity in this highly symbolic realm is objectionable, and improving matters would seem to be very easy.
Martin Luther King, Jr. is a universally beloved icon who led one of the most important struggles for justice in American history. When Gallup asked what figure from the 20th Century was most admired, MLK beat out every single American, and was second overall in the rankings, placing behind only Mother Theresa. Putting him on money would not be a case of elevating a man simply for the sake of diversity. Yet it would address the fact that, but for racism, our money would’ve long been more diverse. The only loser here would be the historic figure kicked off of a bill.
MLK is the best symbol of the civil rights movement, but many preceded him in that long struggle. They ought to be featured on $20’s flip side. Perhaps it could include a timeline stretching from Harriet Tubman to Rosa Parks, putting them in the company of Susan B. Anthony and Sacajawea, the women featured on U.S. coins. I suppose Jackson might be upset at my judgment that he is less deserving of our esteem than those figures. Then again, he might well support my plan. After all, few men in American history were as adamant about their hatred of paper money.
April 12, 2014
As I’ve said before, I don’t follow US college football — which is why the pre-draft churn of names and teams in NFL coverage moves me very little — so my knowledge of how the NCAA organizes and manages team sports is pretty low. I do know that a lot of university student athletes are given scholarships with many nasty strings attached which force them into emphasizing the sport over their education. The scholarships are tied to team performance, so that what should be a great opportunity for a kid to earn a degree that otherwise would be out-of-reach effectively turns into four years of indentured servitude, followed by non-graduation. The students are also forbidden to earn money from activities related to their sport (signing autographs for a fee or selling an old game jersey can get you thrown out of school). Gregg Easterbrook regularly points out that some “powerhouse” football schools have terrible graduation rates for their students: the players are used up and discarded and nobody cares that they leave college no better off — and in many cases much worse-off — than when they started.
That’s one of the reasons I’m fascinated with the drive to introduce unions at the college level: even if the students don’t end up with a salary, they should at least be able to count on their scholarship to keep them attending class regardless of the whims of their coaches.
However, if the allegations in this story are true, the situation is even murkier than I’d been lead to believe:
The Bag Man excuses himself to make a call outside, on his “other phone,” to arrange delivery of $500 in cash to a visiting recruit. The player is rated No. 1 at his position nationally and on his way into town. We’re sitting in a popular restaurant near campus almost a week before National Signing Day, talking about how to arrange cash payments for amateur athletes.
“Nah, there’s no way we’re landing him, but you still have to do it,” he says. “It looks good. It’s good for down the road. Same reason my wife reads Yelp. These kids talk to each other. It’s a waste of money, but they’re doing the same thing to our guys right now in [rival school’s town]. Cost of business.”
Technically, this conversation never happened, because I won’t reveal this man’s name or the player’s, or even the town I visited. Accordingly, all the other conversations I had with different bag men representing different SEC programs over a two-month span surrounding National Signing Day didn’t happen either.
Even when I asked for and received proof — in this case a phone call I watched him make to a number I independently verified, then a meeting in which I witnessed cash handed to an active SEC football player — it’s just cash changing hands. When things are done correctly, there’s no proof more substantial than one man’s word over another. That allows for plausible deniability, which is good enough for the coaches, administrators, conference officials, and network executives. And the man I officially didn’t speak with was emphatic that no one really understands how often and how well it almost always works.
This is the arrangement in high-stakes college football, though of course not every player is paid for. Providing cash and benefits to players is not a scandal or a scheme, merely a function. And when you start listening to the stories, you understand the function can never be stopped.
“Last week I got a call. We’ve got this JUCO transfer that had just got here. And he’s country poor. The [graduate assistant] calls me and tells me he’s watching the AFC Championship Game alone in the lobby of the Union because he doesn’t have a TV. Says he never owned one. Now, you can buy a Walmart TV for $50. What kid in college doesn’t have a TV? So I don’t give him any money. I just go dig out in my garage and find one of those old Vizios from five years back and leave it for him at the desk. I don’t view what I do as a crime, and I don’t give a shit if someone else does, honestly.”
“If we could take a vote for these kids to make a real salary every season, I would vote for it. $40,000 or something. Goes back to mama, buys them a car, lets them go live like normal people after they work their asses off for us. But let’s be honest, that ain’t gonna stop all this. If everyone gets $40,000, someone would still be trying to give ’em 40 extra on the side.”
This is how you become a college football bag man.