The Euro and Pargo, Childress, Kristic, and such...

[OtherRedHead]

So this http://www.reuters.com/article/marketsNews/idUSN1529748720080815 got me thinking...


Ok.  So we see a guy take what we think is a "pretty good" deal from a Russian team (like Pargo).  But these contracts aren't really comparable to NBA contracts unless we know:

1) What currency the player will be paid in?
2) Does the posted number (Pargo's 3.5 million) include taxes paid by the team?

in essence:

What would it have taken for an NBA team to sign that player (Pargo, I am guessing 5 million...)?

and

What happens to Childress if he is paid in Euro's and Europe falls into a recession?

Just food for thought...

[cordobes]

So this http://www.reuters.com/article/marketsNews/idUSN1529748720080815 got me thinking...


Ok.  So we see a guy take what we think is a "pretty good" deal from a Russian team (like Pargo).  But these contracts aren't really comparable to NBA contracts unless we know:

1) What currency the player will be paid in?
2) Does the posted number (Pargo's 3.5 million) include taxes paid by the team?

in essence:

What would it have taken for an NBA team to sign that player (Pargo, I am guessing 5 million...)?

and

What happens to Childress if he is paid in Euro's and Europe falls into a recession?

Just food for thought...

1. I don't know. Generally American basketball players in Europe are paid in dollars, but I have no idea on this particular contract. But it's easy and relatively cheap to buy leverage againt exchange rates changes and control any potential losses anyway. 

2. Taxes are not paid by the team. This issue has been presented in a very confusing way. The $3.5 million are his net salary. His gross salary is going to be $3.5 million plus income taxes plus social security taxes. Usually, in Europe salaries are quoted net, it's pretty much the only difference.


What would it have taken for an NBA team to sign that player (Pargo, I am guessing 5 million...)?

Yeah, I believe it's an accurate estimate.


What happens to Childress if he is paid in Euro's and Europe falls into a recession?

Europe is in a recession. But a) I have no idea if Childress is paid in Euros; b) the value of a currency does not depend on the state of the economy. It depends mostly on the supply of money. Basically (almost simplistically), if more money is "printed" by the central bank (nowadays they do it by purchasing government securities on the open market thus increasing available funds for private banks to loan) , that currency becomes less valuable (just like everything else, the value of money is a product of supply and demand). It will depend on the FED and European Central Bank monetary policies in the future, not so much on how the economies perform.

[goCeltics]

with ben "printing money solves everything" bernacke at the helm, i wouldn't worry about the us dollar strengthening too much. Euro to dollar chart last 5 years



currenlty the us dollar at 68/69 cents. chart is a little outdated.

[OtherRedHead]

So this http://www.reuters.com/article/marketsNews/idUSN1529748720080815 got me thinking...


Ok.  So we see a guy take what we think is a "pretty good" deal from a Russian team (like Pargo).  But these contracts aren't really comparable to NBA contracts unless we know:

1) What currency the player will be paid in?
2) Does the posted number (Pargo's 3.5 million) include taxes paid by the team?

in essence:

What would it have taken for an NBA team to sign that player (Pargo, I am guessing 5 million...)?

and

What happens to Childress if he is paid in Euro's and Europe falls into a recession?

Just food for thought...

1. I don't know. Generally American basketball players in Europe are paid in dollars, but I have no idea on this particular contract. But it's easy and relatively cheap to buy leverage againt exchange rates changes and control any potential losses anyway. 

2. Taxes are not paid by the team. This issue has been presented in a very confusing way. The $3.5 million are his net salary. His gross salary is going to be $3.5 million plus income taxes plus social security taxes. Usually, in Europe salaries are quoted net, it's pretty much the only difference.


What would it have taken for an NBA team to sign that player (Pargo, I am guessing 5 million...)?

Yeah, I believe it's an accurate estimate.


What happens to Childress if he is paid in Euro's and Europe falls into a recession?

Europe is in a recession. But a) I have no idea if Childress is paid in Euros; b) the value of a currency does not depend on the state of the economy. It depends mostly on the supply of money. Basically (almost simplistically), if more money is "printed" by the central bank (nowadays they do it by purchasing government securities on the open market thus increasing available funds for private banks to loan) , that currency becomes less valuable (just like everything else, the value of money is a product of supply and demand). It will depend on the FED and European Central Bank monetary policies in the future, not so much on how the economies perform.

Not to diverge too much from the original topic...

The value of currency is not set directly by a central bank or through monetary policy (what you are describing).  It is set on the foreign exchange market. 

So if Europe is in a recession (which I guess it isn't technically, but let's say it is) then people in Europe are going to invest in other countries.  That increases the supply of Euros flowing out of Europe onto the foreign exchange market thus decreasing their value. 

Printing money does cause inflation, but don't confuse inflation and the value of a foreign currency (we are experiencing 5%+ inflation now in the U.S., but the dollar is rising in value). 


Anyway... I would love more details on these contracts.  As you said it is VERY confusing how the taxes thing is mentioned in some article.  The players must be paid in U.S. dollars, right?

[cordobes]

The value of currency is not set directly by a central bank or through monetary policy (what you are describing).  It is set on the foreign exchange market. 

Agreed. I didn't mean to say that central banks set or decide the value of a currency or that the transaction demand for a currency - and its high correlation with economic growth or trade imbalances - is irrelevant. As I said, I was being simplistic (and using a clumsy phrasing). I think we can agree that a given currency becomes more valuable when demand for it is greater than the available supply and, in the long run, central banks are responsible for tightening or loosening the money supply. I stand for the statements on my previous post, but I'll leave it here or else I fear we'd fall into some kind of methodenstreit and a discussion on economic thought.   

p.s. yeps, no technical recession yet, but the risks are mounting. Negative GDP growth in the last quarter for a handful of countries.

Anyway... I would love more details on these contracts.  As you said it is VERY confusing how the taxes thing is mentioned in some article.  The players must be paid in U.S. dollars, right?

No, I don't think they must be paid in US dollars. In fact, the Euro is the legal tender in the Eurozone. But the contracts are generally negotiated in dollars and what happens is that, while the wages may be paid in Euros, they are hedged, with the employer taking the risk. I'm pretty sure these players, e.g. Childress, are protected against the impact of the dollar strengthening versus the euro.

On the  taxes... I suppose the only thing that may be causing some confusion is the fact that many European countries apply a Pay-As You-Earn system in their income tax structure, basically a government enforced wage-withholding system. That doesn't mean that "teams pay athletes' taxes", only that they collect an amount from the employees salary on behalf of the government. Other than that, it's pretty much the same. I guess salaries are traditionally reported net because European sports clubs don't have salary caps and income taxes vary among countries, so gross salaries are pretty meaningless.