Reality for a few is a mirage for the many

The Slog looks at London as an example of the state we’re in

Lunching anywhere nice in central London towards the end of November is traditionally a nightmare. Early Christmas revellers or admen with any-excuse-will-do clients in tow together clog up every eaterie around. But not this year. As I walked from the tube to my lunch appointment, every restaurant had at most half a dozen people eating.

I was lunching at Gaylords (still there, and still terrific) in Fitzrovia with two contacts, and we were one of just four tables occupied. Afterwards, I strolled round the restaurant-packed area and spoke to some owners. Two admitted they didn’t think they’d make it through next year unless things looked up. All said their Christmas bookings were well down before around December 15th. What seemed to be depressing most of them was the total absence of any sign of improvement.

Around the West End during my two-day stay, cabs with their ‘For Hire’ lights on were to be seen everywhere. Every shop had a sale, and most were empty.

But midday quick-eat brands like Subway and Pret-a-Porter were packed. As was Zilli’s cafe where I lunched the next day – probably the only place of any merit in Soho where you can get two courses for under twenty quid.

All of this makes a nonsense of tiresome debates at the despatch box and on Newsnight about the technicalities of recession: we are financially and mentally in a depression – and heading for a slump. But one sector of London life is bucking the trend: houses and apartments above £6M. Chelsea, for example, is having a mini-boom…and there, the restaurants are heaving. My elder daughter works in upmarket sales and rentals. She tells me they’ve never been so busy – dealing with billionaire bankers, Arabs, Russians and Asian entrepreneurs desperate to buy anything that’s big, flash and relatively handy for the City, marinas and office space they all seek.

The existence of a class of people living well within their means and miles beyond ours has never been more obvious. And a member of it spake forth from the Bank of England late yesterday. This is what top Threadneedle Street policymaker David Miles said on the telly last night:

“I don’t think any of us can feel confident one way or another….the return to more normal rates of growth is something that is going to be a gradual process over the course of the next two years. There’s plenty of risks, and that might turn out to be too optimistic, that might turn out to be too pessimistic.”

There’s nothing like a bit of leadership when your back’s against the wall. In truth, this sort of flim-flam dissembling simply irritates anyone with a brain, and makes everyone else wonder which way is up. But the most glaring thing one can extrapolate from the above is that this bloke is hopelessly out of touch with what’s happening, and what’s likely to happen: we are not going to return to anything even approaching normal within two years, and it isn’t going to be growth of a healthy kind. Our financial institutions and the lucky 7% are living in a fool’s paradise that chooses to ignore the obvious.

That is, the movers and shakers choose to ignore the obvious when faced with the media. In private, they’re perfectly well aware of how bloody it’s going to get. Anyone staring down the barrel of huge debt, terrible economic output, rising welfare costs and stalled austerity cuts – and living 25 miles from an imploding funny farm – would have to be deaf, blind and mad all at the same time not to spot the signs of ghastliness to come.

Yesterday, I posted twice about the likelihood of banking collapse being the next big accelerator on the road to catastrophe. I doubt very much if this is the Curse of Slog, but you may have noticed that the cost of insuring U.S. bank debt with credit default swaps instantly jumped yesterday. To be serious for a second, it was caused by a weak German bond sale spreading fears that contagion from Europe’s debt crisis could spread. But Bank of America’s position is looking increasingly precarious. Mr Jefferson Harralson of Keefe, Bruyette & Woods in the US won understatement of the year award by remarking, “Obviously, Bank of America is the bank that stands out here”. Words like sore, bollocks, thumb and dog spring to mind, although not necessarily in that order.

London is a weird place nowadays. It has become a City State, itself a foreign place bolted on to what’s left of the United Kingdom. I wonder seriously now whether there might be a real benefit in moving government away from there, as the view of the world the people involved in it get is very cockeyed indeed. But the one thing you can see more clearly than anywhere else there is the division of Britain into four nations.

Disraeli only recognised two, but things have come a long way (first up, then down) since Dizzy’s day. The four are the New Megarich, the Middle Confortables, the Young Strugglers, and the Poor Old. These are, I’m afraid, far more important – and potentially deadly – than any imagined gender or ethnic issue facing us.

The way our economy is structured and our island populated dictate that there won’t be enough jobs for the young, there won’t be enough welfare for the old, the middle-aged will struggle to get through the tape, and the rich will – unless something changes dramatically in the way we tackle the changing geography of wealth – simply keep getting richer and richer. All of this reality was missing from what David Miles said, and most of it on the other side of the Pond from Jeff Harralson. The American middle – brought up to believe in America not just the beautiful but also the bountiful – is in for a terrible time.

Something, as they say, has got to give.