First there was the news of passengers rescued from lifeboats in Antarctica as their cruise ship went down after hitting an iceberg. Then Tim Price, our guest Investment columnist this week, reminded me of ex-Citigroup chief Chuck Prince’s observation about dancing as long as the music keeps playing. Then at a wedding on Saturday, a Welsh male voice choir sang the Celine Dion hit My Heart Will Go On: a charming sentiment, I agree, but also the theme song from a certain epic disaster film — and you must have guessed by now which way my thoughts have been moving. As I stagger from one glittering pre-Christmas social event to the next, I can’t help wondering whether we’re all now dancing in the first-class saloon of the Titanic.
The lookouts can hear the ice floes fracturing — but they can’t yet tell how close is the danger. The Council of Mortgage Lenders says repossessions will rise by 50 per cent next year to a level not seen since the mid-Nineties; a business survey says 35 per cent of companies expect to experience tougher credit conditions some time soon. Disaster looms in the dark, yet on every deck the party goes on. You want a leather sofa on four years’ ‘interest-free’ credit? It’s yours today. You want a used car with ‘Nothing to Pay in 2008’? Drive it away. You want a magnum of Bollinger — on your credit card, of course? Well, you can’t have one, because according to Berry Bros & Rudd, the St James’s vintners, demand for champagne is so outstripping supply, particularly in ostentatious larger bottles, that ‘rationing’ may have to be introduced.
It was at the most ostentatious of my own recent outings — a fundraiser in the staterooms of that nice little palace just down the road from Berry Bros — that a captain of industry offered me the following theory. Champagne sales, he said, will go on booming until the last possible moment when, as it were, the lights go out and the stern rises into the frozen night for the final plunge to the depths. But the real leading indicator of economic downturn is beer sales in pubs, which his peers in the brewing sector tell him look worryingly weak this winter.
I tried to stand up both sides of this theory with contacts in the trade. Nick James of Pol Roger told me the champagne market is ‘incredibly buoyant’, with tremendous demand for expensive ‘prestige cuvées’. City boys have indeed got into the habit of ‘cracking open a jeroboam’ (or even better, the one none of them ever pronounces correctly, the nine-litre salmanazar) every time they do a deal — win or lose. Often, he said, people drink champagne as a ‘reassurance factor’, an act of bravado when things start to look bad — rather as John Jacob Astor, the Titanic’s richest passenger, is supposed to have quipped, ‘I asked for ice, but this is ridiculous.’
As for beer sales, you can see how the indicator might work in old-fashioned communities where women who can sense trouble ahead for the household budget also control how much their menfolk spend in the pub. But those days have surely gone. Neil Griffiths of the British Beer & Pub Association says his members are seeing the lowest volumes of beer sales since the Great Depression, but it’s impossible to say how much of the decline is due to economic fears, how much to changes in drinking habits, and how much to tax — duty on beer has risen by 27 per cent since Labour came to power. Much more research is needed, I feel, in quiet Yorkshire pubs with a pint of Black Sheep to hand; it’ll make a pleasant change from swilling champagne.
Wrong kind of disaster
Speaking of high living, I think I would richly deserve the title of Lord Eatwell had it not already been bagged by Neil Kinnock’s former economic adviser John Eatwell, who is president of Queens’ College, Cambridge, and professor of financial policy there. I have been reading a remarkably prescient lecture he gave in November 2006 called ‘Financial Services Regulation: Lessons from Recent British Experience’. It’s a great pity that Gordon Brown and Alastair Darling were not in his audience taking copious notes. In it he observed the difference between ‘systemic risk’ in the form of a bank run — which had not been seen for many years — and systemic risk in the form of ‘market gridlock’, which is what modern policy-makers feared most. A strong Bank of England was always the best guard against a bank run, while the Financial Services Authority was designed to deal with newfangled market crises. But the FSA, in Eatwell’s view, was not as good at its job as it should have been; and the tripartite treaty between the Bank, the FSA and Brown’s Treasury left ‘considerable ambiguity’ in the division of their roles, while clearly diluting the power of the Bank. Then along came the run on Northern Rock. In short, it was the wrong kind of disaster, met by the wrong kind of regulatory structure. And that structure had Gordon Brown’s fingerprints all over it.
Not so old cobblers
If I sidled up to you in St James’s Park and whispered, ‘The dog is a friend of the cobbler’, you might assume I was a character from an early John le Carré novel who had mistaken you for his contact in the East German trade delegation. But that wasn’t how this arresting phrase came into my consciousness. I had telephoned Shipton & Heneage, the upmarket mail-order shoe retailer of which I am a longstanding customer, to order a new pair of ‘Hendon’ rubber-soled suede loafers. Why they should be named after a stop on the Northern Line I have no idea, but believe me, these babies are the ideal footwear for every occasion not involving black tie, tap-dancing or transvestism. So I was distressed to be told the Hendon had been discontinued. ‘It was certainly a shoe which had its own following,’ said a voice so unctuous I imagined it to be that of an apron-clad, fifth-generation Mr Shipton or Mr Heneage — even though the business, now rapidly expanding in the US as well as at home, is only 17 years old and is run by a former estate agent called Alastair Baxter. ‘But happily, sir, we have one pair still in stock in your size.’ ‘That’s a relief,’ I said. ‘The retriever puppy has just eaten the last pair.’ ‘Ah yes, sir. The dog is indeed a friend of the cobbler.’