Americans are worried that the recovery is already faltering - and anti-Government sentiment is rife.
Leaving a dreary and autumnal London for New York through a strangely quiet Heathrow was meant to be a morale-boosting escape to the land of optimism and rampant entrepreneurial spirit. Instead it was a journey into a land gripped by uncertainty, denial - and a shocking level of anti-government whingeing.
Americans have been turned by the credit crunch and consequent recession from headstrong consumers into frugal bargain-hunters, driven by fear of further job losses, pay freezes and a decreased sense of wealth. A Conference Board report showed that the index of consumer confidence slipped by almost 6 points in October. Another report, based on polling ahead of the Thanksgiving holiday, showed that 74% of consumers intended to switch to buying items on sale and 54% planned to use more discount vouchers.
Reacting to this trend, Wal-mart and Sears both ran 'Black Friday' deep discount promotions on the all-important sales day after the holiday. Burger King is selling double cheeseburgers for $1, while McDonalds is to offer a dollar breakfast menu. Never has the price of obesity and a heart attack been so low.
But what of the mood in financial and professional markets in Manhattan?
This is harder to gauge, simply because it is so difficult to get past some astonishing diatribes - not just about the ‘socialist’ nature of proposed healthcare reforms, but also about the cost to tax payers. A series of meetings with top lawyers and bankers degenerated into a string of rants about the tax rises that will be needed to fund the proposals.
What matter that 45m poor Americans will finally get access to healthcare, if it might dent the considerable wealth of the highly paid elite? The problem is not so much an unwillingness to share the cost in principle, rather the timing of the whole thing. The moment when bonuses slip off the remuneration agenda and profits melt away in a blizzard of cost cutting is not the perfect point at which to ask America’s professionals to stump up a huge chunk of cash.
The other topic dominating the thinking of the financial world is the latest debacle in the US real estate sector, with an average fall of 40% in commercial property values pushing owners out of the money -, and paralyzing their lenders because there is no sensible exit strategy right now. One real estate work out specialist I met came up with a memorable phrase about the process of endlessly digesting lower valuations: 'We’re just sitting here watching the pig go through the snake'.
The bottom line is that both Wall Street and Main Street fear the tentative recovery is faltering. Comments about new price bubbles in everything from the stock market to commodities are growing. If these burst any time soon, the mood of America’s thrifty consumers and outraged professionals will darken still further. The US is not prepared psychologically for a double dip, any more than the rest of the world. Politicians, economists, bankers and private equity alike are all in denial and are in serious danger of provoking exactly what they fear most.
