We may be in the midst of history's first truly global economic crisis but our top financial capitals remain worlds apart. In fact, the stark contrast between the moods of New York and London made traveling between the two cities last week as vivid an Alice in Wonderland experience as I've ever had.
The day that I left the new New York, a neatly dressed woman approached me on the Upper East Side with a sign asking for money and explaining that she had four children to feed and had lost her job. My kids have seen people begging in the streets before, but not around the corner from the Carlyle. A year ago, Madison Avenue thrived with foreign tourists and flush locals; in recent weeks, it's been virtually deserted. What circulates instead of well-dressed crowds are whispered rumors of just how bad things really are. "I heard that one weekend in December not one sale was made on the designer floor of Bergdorf's." "One building on Park Avenue has three apartments on the market -- all Madoff victims." "I've heard that ninety percent of Bank of America's managing directors have been fired." Newspapers trumpet mounting job losses, market dives and anecdotal benchmarks. For instance, those still shopping request brown paper bags instead of ones emblazoned with store names. Friday's Wall Street Journal noted the closing of Michelin-star restaurants in New York, drastic lunch discounts at Gramercy Tavern and a prediction that fine dining sales would "plummet 12% to 15% in 2009."
All around town, from Wall Street to the upper reaches of Fifth Avenue, it has become shameful to spend, especially on luxuries. Greed got us into this mess, goes one line of thinking, and indulgences are the outward expression of those who have profited. Whether it's a reassertion of our Puritanical ways, the money culture has been radically recalibrated. This weekend, the New York Post claimed "wearing wealth on your sleeve is in bad taste. So NYC's elite... are using private clubs to revel far away from judgmental eyes." At private schools where dozens of parents have lost their jobs, even the most oblivious masters of the universe have stopped sending their drivers to pick-up -- some at their kids' request. To say that the mood in Manhattan resembles that at a funeral is not an exaggeration. Reactions range from panic and paralysis to gloom, grief and despair. In a city where only months ago hedge funders and their trophy families flaunted their excesses with pride, understatement is the new black. And that's not just for the fashion followers; it's been uniformly adopted.
What is or isn't appropriate to do, display, even discuss has so profoundly changed that arriving in central London, I felt as disoriented as Alice emerging from the rabbit hole. Glistening Bentleys and Aston-Martins idled outside of Cipriani. Ladies lunching in popular spots around Bond Street remain fur-trimmed and diamond studded in broad daylight. Scott's of Mayfair, a favorite of big bonus bankers, is fully booked for eight o'clock dinner tables a month in advance. Chatter swirls around holiday escapes, and yes, redundancies -- the English term for firings. The newspapers sound the alarm with headlines like "Sell Your Sterling," "The Pounding of the Pound" and "UK Recession is Official."
The news is bleak -- bleaker, in fact, for Britain than it is for the U.S. On Friday the British economy was officially declared to be in recession, but their real estate and credit situations are widely considered to be worse than America's. Last year, it was revealed that Britons' credit-card wielding ways had made them "the most indebted nation in the world, racking up a record 1.4 trillion pounds in debt -- more than the British GDP." According to statistics from Credit Action, the average household debt in Briton is 59,670 pounds. Adding to their woes, last week, the pound hit its lowest level against the dollar since 1985. Investor Jim Roger's dire warning, "Sell any sterling you may have. It's finished... I would not put any money in the UK," was splashed across front pages. Like the Queen of Hearts calling "Off with their heads," a columnist in the Financial Times pronounced "I cannot think of a more popular policy than shooting the bankers and nationalizing the banks."
And yet in the posh districts of Mayfair, Belgravia and Knightsbridge, exuberance fills the air as though a determination to carry on is proper etiquette. Sure, retail sales are down, but Burberry's announced, along with staff cuts, that they will continue to open more stores in 2009. Richemont reported a decline in sales, but they dropped by 28 percent in the U.S. and only 9 percent in Europe. In some of the city's most expensive restaurants, they have actually noted an increase in spending in January. One Londoner chalked it up to British breeding. "You know, Strike up the band and order more Champagne. If we are going down, let's do it in style." Another noted that few Brits still live in central London. Wealthy Russians, Indians and Arabs own homes here and with the pound in retreat, Euro citizens can bargain shop on Regent Street. Another friend laughed when I told her that going to New York to London felt like traveling from a funeral to a wedding. "Well," she said, "maybe we will be the place that the rich can still go to live opulently."
Ironically, I was in the airport when I read an article in the Daily Telegraph with the headline "English Are More Likely To Go Down with the Ship." Apparently, a new study by researchers in Australia has revealed that Englishmen on the Titanic were less likely to survive than Americans. Whether they were more polite in offering their lifeboat seats or were drinking and dancing with a stiff upper lip, it turns out that "English people were seven per cent less likely to survive the 1912 disaster than others aboard... By contrast, Americans were 8.5 percent more likely to survive the norm." Maybe the Cheshire cat knows how this adventure will turn out. But unlike, Alice, in my case, waking doesn't end our current nightmare.
Read Melissa's blog from last week Banish the Velvet Ropes: From London to L.A., Exclusivity Is Out and Community Is the New Cool.
Read Melissa's blog from October Why Being Newly Poor Cheers Britons