Disappointed, discouraged – but American optimism will soon start to return
Philadelphia
‘We should always love America, not for its leaders — who generally turn out as disappointing as our own — but for its vitality, its collective belief in the possibility of renewal.’ That’s what I wrote from Los Angeles, exactly two years ago, having flown into the blissed-out Californian version of post-election Obama-mania, which all too briefly vanquished the clouds of financial crisis. Crossing the pond again, this time to Atlanta and Philadelphia, I find the clouds have closed in and the economic mood is, by American standards, strikingly downbeat.
Even a good-news item that forecasters had feared would be bad — 151,000 new jobs created in October — is marred by shadows. The headline number represents one new job for every hundred unemployed, and that doesn’t take account of 1.2 million people who are officially ‘discouraged’, meaning they’ve stopped looking for work because they don’t believe they will find any. In black America, the community that invested so much hope in the first black president, the jobless rate is stuck at almost 16 per cent. For many here, the possibility of renewal must feel stubbornly out of reach.
And given the political gridlock after the mid-term elections, the only available policy lever — the Federal Reserve’s decision to pump $600 billion into the economy through quantitative easing — is one whose impact on US growth is uncertain, while its potential to stoke asset bubbles and inflation elsewhere in the world is all too real.
Nevertheless, data and anecdote combine to suggest to me that recovery has begun to take root here as it has in the UK, and rebounding stock markets seem to have sensed that too. Even the disgraced and broken banking sector shows signs of heading back to something like normality: the total stock of lending to US businesses contracted dramatically between October 2008 and mid-2010, but is starting, slowly, to perk up again. The next indicator to watch for is an uptick in America’s natural optimism.
Two-way opportunities
As David Cameron leads a delegation of business leaders to China and holds forth about the vital importance of Sino-British trade, Barack Obama has been doing something similar in India — but with less conviction, and a lot less support for the idea that a leader with so many problems at home should take time out to travel abroad. America’s right-wing media labelled Obama’s trip a $200 million-a-day vacation, while one columnist suggested he should ‘visit one of the Indian call centres policing Americans’ credit-card debts to feel our pain’.
The truth is that for a mercantile nation like Britain, abroad is always a two-way opportunity: Diageo’s potential £700 million acquisition of Shui Jing Fang, the Chinese drinks producer in which it holds a minority stake, is of a piece with the ownership of the Whyte & Mackay whisky distillery in Glasgow by United Breweries of Bangalore. That’s what makes the world go round, and however faded our industrial clout, we generally manage to surf the waves of global trade. Chinese factories may have put hundreds of British factories out of business but, some day soon, Chinese companies will build new factories on Teesside the way Koreans and Japanese did a generation ago. For a protectionist nation such as America, by contrast, abroad is always either a threat or an extension of American hegemony, with little in between, and it’s no coincidence that when the president embarks on a trade mission, he takes an aircraft carrier with him.
More than somewhat
Meanwhile in New York, the British financier Guy Hands, whose decline from City stardom I chronicled last month, lost his court case against Citigroup, the US bank he had accused of giving fraudulent advice to his private-equity business Terra Firma during its 2007 bid for the music group EMI, which is now worth at best half the £4.2 billion Terra Firma paid for it. The aftermath of that deal has turned into a high-stakes poker game worthy of the pen of the great New York chronicler of wheeler-dealering, Damon Runyon. Since Hands failed to win the £4 billion damages he was claiming from Citi, he now has to find a way to service or refinance the £2.6 billion EMI owes Citi — and if he cannot, the likeliest outcome is that Citi will take ownership of EMI through a debt-for-equity swap, and will swiftly sell such parts of it as are still worth owning (chiefly its catalogue of rights, including those of the Beatles) to rivals in the music industry. In court, Citi’s lawyers accused Hands of being motivated by a distinctly Runyonesque sentiment, ‘buyer’s remorse’, which drove him to blame Citi for his own disastrous decision to pay top dollar for EMI only weeks before the onset of the credit crunch. But having thereby destroyed his relationship with the bank to which he owes so much money, he may find in his own case that the odds are now somewhat worse than Runyon’s estimation that ‘all life is 6 to 5 against’. Indeed, in the world of high finance, he may even reincarnate one of the author’s best-known characters, the Seldom Seen Kid.
Dead Nuts at the White Dog
Two years ago on Sunday, I had a long lunch with three friends — English, Irish, Californian — at the Boa Steakhouse on Santa Monica Boulevard, alongside a table of a dozen honey-tanned models from a ‘golf event hostess agency’. This Sunday the four of us got together again in the White Dog Café on Sansom Street in Philadelphia, with rather less to distract us. We drank copious quantities of a zinfandel from Paso Robles in California called (I’d love to know why) Dead Nuts, from 2008 — which means the grapes must have been pressed at the very zenith of Obama-mania. But the wine had not soured, and neither had our spirits. We discussed lessons learned since we last met, and new projects for 2011 and beyond. American optimism, even if temporarily subdued, gets into the blood.
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