Inflation, the silent assassin

Original article has been written by WesselV1 (11234483)

A while ago I started tracking inflation. Even though inflation is rarely being discussed, it is a concept that affects many teams. Especially those that want to perform at a high level for a long time, it is very important to have a good understanding of how inflation affects their plans, and how high inflation is.

Nice, but what exactly is inflation?

Inflation is a term used in the economy to monitor price changes. In a simple example: if a bread costs 2 dollars now and 2,50 dollars next year, the inflation will be (2.50 - 2.00) / 2.00 = 25%. The other way around is also possible. Suppose a bread now costs 2,50 dollars and next year 2 dollars, the inflation is (2.00 - 2.50) / 2.50 = -20%. Negative inflation is also referred to as deflation.

Inflation does not apply to most parts. Take a look at your finances. Income from ticket sales and sponsor money, or costs for salaries or maintenance costs of your stadium, are all roughly fixed. Of course, these can rise or fall, for example when you expand your stadium. However, the formulas with which the income and costs are calculated are fixed, so that these revenues and expenses remain the same in the long run.

There is one big exception to this, however, and that is the transfermarket. Players can become more expensive or cheaper. Suppose that all managers have an average of money left after their biweekly balance, then there are two options: save or spend on players. Most teams want to perform and opt for the second. Players will become more and more expensive in the long term. See here, that's how inflation plays a part in hattrick.

More precisely, inflation plays a role in two ways. Within a season you see that players are more expensive at the start of the season than at the end of the season. In itself logical. Managers are excited that the season is starting again and are hopeful that this will be the season in which they will finally reach the championship or get far in the cup. However, there is simply more money in the hat-trick economy as well. Bonuses at the end of the season have been paid out and the cup also provides a lot of money for many teams.

The other way is the long-term trend. This shows whether players have indeed become much more expensive compared to a few seasons ago. This is how we are going to focus in the rest of the article.

Hold on!. As players on the transfer market become more expensive, the players in my squad also become more expensive. Does inflation affect my team? And why then?

That's right, inflation affects both players for sale and your own players. Yet it is a bit more complicated. That is the case. In general, you can split players into two groups: players you do train generally become more valuable, and players you don't train generally become less valuable. A team that wants to play at the top for a long time must find a good balance between these two groups. If you have money left over for a long time, you can buy better players. If you run out of money for a long time, you will have to decide at a certain point to buy less good players.

Of course you want to avoid that last. A good way to do this is to track the team value in Excel. That is the transfer value of your players if you were to sell them now + what is in the club cash. Optionally, you can expand this with costs that you will incur to appoint a new trainer, for example, or brokerage costs. If you keep track of this regularly at a fixed time during the season, you can see exactly whether your team has gained more or less value. The handy thing about the team value is that your fortnightly profit is automatically included: if your team value has remained the same, then your fixed income and expenses are exactly in balance with the income and costs from transfers.

Now there is one problem with the above method, and that is inflation. To use an example from my own team, in 2016 I bought a 28-year-old goalkeeper for 3.8 million, with mythical goalkeeping, excellent defense and a lot of set pieces. Three seasons later I sold the same player for 3.8 million again without having trained him. Not a bad deal, huh? Unfortunately, the same 28-year-old keeper suddenly no longer cost 3.8 million, but a lot more. You can check for yourself what you now pay for such a keeper. Although it seemed as if the keeper was worth the same, you could suddenly buy a lot less for 3.8 million. In short, there has been significant inflation in the meantime. Although the team value remained the same, I could not buy as good players as I bought before.

Ok, and how do you measure that inflation?

First of all, you need a group of standard players that you have to follow for a longer period of time. Those players must meet a few characteristics. Players must be current, they must be players who can be of interest to normal teams. They also need to be regularly sold players so that the trades are fairly current. In addition, they must be good players, but also not extremely good players, because there are sometimes outliers. For further details about the default players, I would like to refer you to the topic about this article.

The value of these players is determined by taking the average of the average transfer value and the median transfer value in the transfer equation. With this you can dampen the effect of extreme transactions. These values ​​are slightly adjusted for the age of the players. When the sold players are on average somewhat older than the defined default player, the price is corrected slightly upwards, because older players are generally worth a little less. Conversely, the price is corrected downwards if the players in the transfer comparison are younger. Additional corrections, for example for fluctuations in TSI or specialties, could also be used, but I find that too complicated. So they are not (yet?) Incorporated here.

Beautiful. And now the results!

I measure inflation twice per season: once in week 1 and once in week 9. Inflation has been as follows in recent seasons.

Peildatum (seizoen/week)	Inflatie
74/01 - 75/01	4,5%
74/09 - 75/09	2,5%
75/01 - 76/01	4,5%
75/09 - 76/09	2,5%

Long story short: there is indeed inflation within Hattrick at the moment! Players are getting more and more expensive, so keep this in mind when saving for your next purchase.

What kind of hat trick would an optimal inflation rate be?

Economists say a little inflation is necessary for the economy. Or rather: that deflation is not good for the economy. Deflation ensures that things become cheaper in the long term. People can then wait to buy that stuff, which causes the economy to shrink. The hat trick is a bit different. That's because that choice of waiting doesn't really exist: after all, everyone needs new players every so often. Preventing deflation is therefore not an end in itself.

What is important is the balance between biweekly income and expenditure on the one hand, and transfer prices on the other. If players would be very expensive, a fortnightly loss is easily compensated by transfers. It is then no problem at all to have players who cost a lot of wages. That is therefore not desirable. Conversely, it is also not desirable for players to be very cheap. The fortnightly balance is then too important, because there is almost no way to earn money from training players.

In order to keep the financial side of the game interesting, players should not be too expensive and not too cheap. If they are too cheap, you want inflation. That's what happened, for example, Hattrick significantly increased the prize money in 2014. The (incidentally quickly withdrawn) recently announced measure that coaches would receive more pay is an example of a measure to take money out of the game, resulting in deflation. Within the margins of transfer prices, it makes little difference whether there is inflation or deflation, although it is nice that both are limited in size.

What do you think? How does inflation apply to your team? Do you think the transfer prices are too high or too low? Then leave a comment below the article or on the forum

Original article has been written by WesselV1 (11234483)

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