As grizzly contests go, the classic match-up of Godzilla versus King Kong takes some beating. But here in New York, the city attacked by both of these fictional monsters, I have to wonder whether I might not have found a serious competitor to the classic match-up. Right now, I'm witnessing a scary fight between two economic monsters threatening so many of us: deflation versus devaluation.
I'm over in the United States talking to US publishers about the Meltdown trilogy of books, and find myself in crisp, cool temperatures of -4°C with a bracing wind of 12 knots (22.2kph) or so. In some ways I am very much the standard Brit, with a skin complexion that varies between pink and grey in the winter months. That said, I also love warm weather – though I'm not cut out for the Dubai summer; anything much above 35°C will see me retreating indoors to make sure the air-conditioning is on maximum chill.
Ah yes, cold conditions. For a Brit in most places in the world – and certainly in Manhattan at the moment – the financial chill factor is pretty high. The big negative in New York is, of course, the brutal decline of sterling against the dollar, which is has been stronger than most other currencies in recent months, with the exception of the euro.
The pound has dropped by almost exactly a third against the dollar since I was last here in July (from its year high of $2.03 to $1.35 at the time of writing).
Yet there are many consolations. On a macro-economic level, I'm old and ugly enough to remember the magnificent era that followed the departure of sterling from the policy of keeping the British currency within the European Exchange Rate Mechanism, the grid that was a pre-cursor to European monetary union, in the late 1980s. As soon as the pound was allowed to float freely – and downwards – against the European currencies, the scene was set for a glorious period of export growth, financial and economic stimulus and business prosperity.
There was plenty of stagnation and economic difficulty around in the UK during that era, of course, and unemployment initially rose. But the cheap currency meant that ultimately the economic problems and the unemployment were exported to Germany, France and the other economies with expensive currencies.
None of this long-term, high-minded theory is going to bring down the price of a restaurant bill in the short term. But I'm relieved to report, at least from a personal budgeting perspective, that the dog of devaluation is being kept at bay by the devil of deflation.
Deals and special offers abound in this city. Retailers are desperate to persuade consumers to part with their dollars, and if that means two-for-one offers, then so be it. McDonalds is aggressively promoting its one-dollar menu on television and radio, and the store fronts at the lower end of the retail market – clothing, and cheap electrical goods, are plastered with offer after offer.
So the 50 per cent reduction in purchase costs (assuming I want to buy cheap jeans and mini-speakers for my laptop, which I do) more than compensates for the loss of one third of my sterling-based purchasing power.
Of course, it is always dangerous, if convenient, to generalise from the particular. I'm staying in the electrically trendy Soho House (despite, not because of, my membership of the club) in New York's meat-packing district. Proprietor Nick Jones, who is adding club houses in Miami, Los Angeles, Istanbul and Berlin to the cluster of London and Gloucestershire venues he operates, has done a great job of making his amenities feel good – and he appears to be prospering, retail deflationary cycle or not.
This could be because of the area and the industries it represents, of course. The meat-packing district is perched just to the north and west of New York's SoHo (there is a capital H in the middle, since the name is a loose acronym for the area South of Houston Street. London's Soho is named after an ancient English hunting cry). There is still plenty of old-fashioned butchery and meat warehousing and transportation going on there, and some of the local restaurants reflect this. I'd recommend, incidentally, the Homestead Steak House, on 9th Avenue, just north of 14th Street. It claims to be New York's oldest, founded in 1868, and the steaks are juicy, tender and more than one person can possibly eat. I ordered one of the smaller ones, a 20oz (about 0.55 kilo) rib-eye, and shared it with my companion – a two-for-one deal that does not market itself as such.
The "old" economy, including excellent, yet not very trendy, eateries and mass retail, soldiers on. Yet there still seems to be a something of a boom in the media world, at least to judge from the loud meetings conducted on the sixth-floor club room here. And
the media, trendy restaurant, night-clubbing activities here seem to be moving from strength to strength. At least half a dozen new restaurants have opened up within two minutes' walk since July. The only casualty seemed to have been the Hog Pit Barbeque, an unashamedly tacky student venue (lots of TVs showing sport, Southern cooking, formica-top tables, and bar football tables). I was shocked. Normally, one would expect college students and their appetite for trivial pleasure and cheap food, etc, to be a recession-proof combination.
But further research indicates the venue has not ceased to trade so much as migrated a dozen blocks north. You don't have to be a genius to work out why this might be. The still burgeoning niche of high-end consumerism in this part of Manhattan forces certain types of businesses out. Landlords are notoriously brutal in this city, and recession or no recession, if there is a pocket of demand it is going to be exploited – and the price of the lease is going to go up. That said, as and when the times are lean here, I fear they will be very lean for the top end. If there is a long-term recession, the meat industry will stay, and the trendy restaurants will disappear. Let's hope deflation doesn't win the day.
Martin Baker is a journalist, author and commentator on international business affairs
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