May You Live in Interesting Times: Does the CityHome Represent the Architecture of Cheap Money?

One of the largely-unheralded casualties of the most recent property bubble in both the United Kingdom and the United States is a group whose relative lack of access to the corridors of power often sees it ignored by policymakers: young adults. With prices for housing – whether rented or purchased – long in parodic territory in metropolises such as London and New York, the lack of posited solutions for such an obvious problem is one of the genuine intellectual disappointments of the twenty-first century. Well-intended proposals such as microflats – tiny apartments that seem designed for large rodents rather than anything approaching a humanoid – have only served to highlight the lack of imagination evident in addressing this crisis; many young professionals have turned to internal or external migration as the only viable exit.

It was with this in mind that our CSO was struck by a novel form of housing being formulated at the Media Lab at the Massachusetts Institute of Technology (‘MIT Media Lab’). The CityHome is an 840ft² property the main room of which – via the use of robotic walls, appliances and furniture – can transform into any number of large rooms at the flick of a switch. One minute it can be a large dining room with space for up to fourteen people; the next, a home gym; the next, a large kitchen. While the project is still very much under development and its limitations for anything other than one-person occupancy are clear, the massive corporate underwriting of the MIT Media Lab means that should the construction industry find this idea a winner, CityHomes could soon be making their way into a newly-constructed apartment block near you.

As brilliant an idea as it is, however, the CityHome does not address the ultimate question of its own perceived necessity. Would there be any need for such electronic ingenuity in the event of a simple rise in interest rates which would end subsidised money and rebalance the housing market? As red ink soaks the balance sheets of financial institutions in both the great financial centres of the last century, it seems almost churlish to ask.

Shiny Happy People: The Future of Europe?

One of the most brilliantly provocative pieces that our CSO has recently come across is Financial Times doyen Simon Kuper’s Smile if you’re European (3rd May 2013). Kuper convincingly posits that while the banner headlines concerning Europe pertain almost invariably these days to crisis and decline, the continent’s ‘terrible time’ is not necessarily one that looks so bad ‘compared with probably every other continent and any time in history’. The co-author of the wonderful Soccernomics cogently points to Europe’s exceptional paucity of large-scale violence, high life expectancies, relative lack of corruption perception and economic equity as reasons why life even in dynamic emerging markets will take a long time to catch up to what is considered ordinariness in the Old Continent.

Yet as convincing as Kuper’s analysis seems, after some reflection we at Mediolana believe that he has neglected to give weight to several factors which may point to a less benign future for the land mass that did so much to define much of the nineteenth and twentieth centuries:

1. Geography. Kuper is writing from Turin, home of Juventus and Fiat, and one of the most affluent and well-run cities not just in northern Italy but the entire world. A perspective from several other football-mad European metropolises – Madrid and Lisbon, let alone Athens – is pronouncedly different; in an uncomfortable number of countries, the European dream of tidy prosperity has already been annihilated.

2. Change. As those familiar with Asian and African history will no doubt be especially aware, great societies can and do go into astonishing decline which may not be arrested within any reassuring timescale. The dispassionate observer can see traces of this in countries such as Spain, which lost 2.7 million mobile telephone subscribers in 2012 and whose digital telecoms base continues to shrink. At the same time, the last few decades has seen the near-monopoly which the developed world held on the Wonders of Modern Life – such as metro systems, higher education and world-class ice-cream and coffee – eroded.

3. Generation. As someone born in 1969, Kuper would have had access to a normal jobs market upon graduation from university in the early 1990s. To anyone facing relevant unemployment rates of c.50%+ in countries as diverse and Portugal and Bosnia, the future prospects of Europe minus the chance for reasonable remuneration and capital accumulation will look decidedly different.

Blaming Maggie: Rain Stops Play at Trafalgar Square!

Central #London #Celebration of #IronLady's demise brings out just 3,000 people to Trafalgar Square; epoch-defining protest 'not even close'—
Asad Yawar (@Mediolana) April 15, 2013

Confused response reflects economic miseducation; #wheresmysovereignwealthfund 'should be broader rallying cry' tinyurl.com/d84qx6m #OPEC—
Asad Yawar (@Mediolana) April 15, 2013

The ‘New’ Eurozone Crisis: Demographics!

https://twitter.com/Mediolana/status/321961201368182784

Growing numbers of #Germans choosing to spend their retirement years in #Spain, #Asia or Eastern #Europe as unable to afford own care homes—
Asad Yawar (@Mediolana) April 07, 2013

Full care for an elderly person in a German home costs nearly €3k, only €1.5k of which is covered by state #insurance tinyurl.com/cfk6xke—
Asad Yawar (@Mediolana) April 07, 2013

Virtual Insanity Or As Good As Gold? Bitcoin Stays North of One Hundred to the Dollar!

Virtual currency #Bitcoin stays at 1:US$140 despite '#hack attacks' on #exchange platform; 'gold for computer nerds' continues volatile life—
Asad Yawar (@Mediolana) April 04, 2013

#Bitcoin's inherent weakness – electronic manipulation – now transparently shared by major offline currencies via quantitative easing, debt—
Asad Yawar (@Mediolana) April 04, 2013

#Virtual #currencies could provide real competition to other forms of exchange if +widely accepted, +offline printing tinyurl.com/cm2tpbz—
Asad Yawar (@Mediolana) April 04, 2013

Why is Liberal Britain Dying?

Regular readers of this blog will by now be well aware that if Mediolana CSO Asad Yawar is reading anything, there’s a decent chance that it’s a copy of the Financial Times; a recent piece by political columnist Janan Ganesh demonstrated once again the power of the beige-papered publication of record to inspire. In Strange death of a more liberal Britain (25th March 2013), Ganesh notes that as well as economic growth, ‘the looseness and openness that has historically accounted for much of the UK’s success – and appeal to outsiders – is also in danger of being misplaced’. Citing (i) the recent mooting of a restrictive press law; (ii) the ever-tougher and now cross-party rhetoric on immigration; and (iii) the repeated ‘wounds’ received by the City of London from Westminster and Brussels, Ganesh laments the loss of tolerance for ‘tolerating real messiness in economic and public life’.

There is little doubt that in many basic ways the United Kingdom (as at least partially opposed to London) has become (and will probably continue to become) a much less ‘liberal’ place than it previously has been. But why is this? After some contemplation, we feel that this trend can be largely explained by the loss of the ‘three cogencies’ of liberalism in the local (and to some degree, global) context:

1. Economic Cogency. With the ongoing and epoch-defining financial collapse which began to make itself felt in 2007, (extreme) economic liberalism has begun to resemble communism: a nice theory that doesn’t necessarily work very well. Rapid-fire financialisation, self-regulation and endless credit were once synonymous with Progress. Now it has become abundantly clear that implementation of these previously unquestionable tenets of (post-)modern growth can in fact destroy economic value far faster than they create it, it is scarcely surprising that to many observers, economic liberalism has lost its appeal.

2. Social Cogency. The cold, hard statistics consistently show that non-UK nationals are a much lighter burden on the state than UK nationals; that they are more entrepreneurial and very significant sources of inward investment; and that if your economy is not attractive to immigrants, you are probably in big, big trouble. But none of this matters if large sections of the media and public taken as a whole prefer to ignore these ‘dry facts’. In a country of increasing economic insecurity and an ever-diminishing global status, the truth is often simply unpalatable for much of the population.

3. Intellectual Cogency. With Francis Fukuyama’s End of History thesis broadly accepted at face value, liberal theoreticians and practitioners alike have been busy fulfilling his ‘prophecies’ with unerring accuracy. Ever-expanding albeit rather selective social freedoms – to marry someone regardless of their gender, to purchase alcohol in a bar 24-7, to never stop shopping – have not papered over the crisis of meaning (and since 2007, sustenance) that has become all-too-apparent since the end of the Cold War. If liberalism can no longer say anything profound about the world or remedy any of its most pressing problems, we should not be surprised at its atrophying – however regrettable this may be.

Is Arjen Robben the New Hank Paulson?

And should he be cast as the former Goldman Sachs CEO in a major motion picture?

Living Off the Fat of the Land: America’s ‘Dual Society’ Comes Into Sharp Relief

#Dow #surge has created 300,000 new millionaires in the #USA, with 8.99m American households currently possessing a net worth of US$1m #NYSE—
Asad Yawar (@Mediolana) March 16, 2013

Simultaneously, 25% of #American children and 1/6.5 Americans are on food stamps tinyurl.com/d867rtd tinyurl.com/c3emx6e #dualsociety—
Asad Yawar (@Mediolana) March 16, 2013

Should Capitalism Come With An Instruction Manual?

Over a lengthy (and almost indescribably relaxed) breakfast this weekend, our CSO’s attention was diverted from his habitual rummaging through the FT Weekend magazine by a piece in the main section of the Financial Times. Voice of indignation is household name (Tobias Buck, 9th/10th March 2013) charted the rise of one Ada Colau Ballano (‘Ada Colau’), a 1992 graduate of Barcelona University’s Faculty of Philosophy who recently hit the headlines for her actions as a social activist during a briefing session on Spain’s mortgage crisis in the Cortes Generales: turning to the member of the Spanish banking association with whom she was co-briefing the parliamentarians, she labelled him a criminal worthy of treatment as such – and she has never looked back, with regular appearances in the Spanish media as a spokeswoman for the Plataforma de Afectados por la Hipoteca (‘Platform of Mortgage Victims’).

Colau’s group has collected 1.4m signatures in favour of proposed legislative changes to, amongst other things, make evictions of non-paying mortgagors much harder, and preventing banks demanding payment in full of mortgages on repossessed properties. In an era when suicides of soon-to-be evicted homeowners are an all-too-real occurrence, this would appear to be the type of step which should be contemplated; any system which evinces a lack of flexibility in the face of genuine human suffering is treading on thin ice.

Yet while compassion must ultimately reign supreme, we at Mediolana wonder whether these kinds of solutions are the correct long-term approach, because on some level they themselves enshrine a fundamental injustice: that of the debtor failing to make good on their promise to pay back money that is not theirs. Both the educational system and wider society must in the future take much more profound steps to ensure that mortgage-dominated financial crises of the type that threaten to decimate Spain are rendered much more unlikely to happen:

1. Capitalism: No One-Way Street. During the boom years to 2007 – and not just in the eurozone periphery – the idea that capitalism was perpetual no-risk feast, with everyone guaranteed a slice of Shangri-La, was perpetuated by policymakers, financial institutions and media organs – and gleefully swallowed up by the general public at large. That successful capitalism required hard work, delayed gratification, transparent (and accurate!) accounting and cutting one’s cloth accordingly (including not purchasing a house if the means to do so were not realistically sustainable) – all these and many more principles were pooh-poohed with a combination of bogus mathematical models and naive arrogance that merely fuelled the inevitable bust.

2. Capitalism: The Sum of Its Parts. Economic systems are not just abstract entities: they are constituted of people and organisations. And as much as those across the political spectrum may prefer to ignore this, the moral quality of these entities matters enormously. As the example of Silvio Berlusconi has copiously illustrated, if your country’s leader’s personal morals can be encapsulated in the phrase ‘bunga bunga’, they will probably have no compunction swindling you of your pension. On a more prosaic level, the honest negotiation and enforcement of contracts, business dealings and the like cannot proceed in a sustainable manner where the sole motivation for economic actors is that of personal enrichment.

3. Capitalism: Not the Same as Anarchy. The approach of Ms. Colau and her pressure group – while doubtless well-intentioned – in many ways betrays the impoverished understanding of capitalism that has characterised Spain in recent decades. At things stand, the Platform of Mortgage Victims are beggars pleading for clemency at the door of the Spanish government – whereas if they took a more consistent ‘zero bailouts’ moral and legal position, they would have a possibly irresistible case. In the absence of state aid for banks and population alike, the financial institutions would cease to exist – and with no counterparty to enforce the mortgage contract, eviction of indebted mortgagors would become a pretty slim possibility.

London Property Bubble Latest: Explaining the ‘Blackspots’

Last month, the Financial Times published one of the more interesting maps that our Creative Director and CSO has glimpsed in recent times, a piece of cartography illustrating the change in property prices over the past five years in the triple-dip recession-hit United Kingdom. The picture is a sobering one, with the vast majority of the country covered in one or other shade of red: since 2007, the value of the housing stock of Northern Ireland has plunged 50%;  one-bedroom flats in the Ibrox neighbourhood near central Glasgow presently retail for a measly £22,000.00.

There is one small part of the UK which has proven (at least thus far) resilient to the general reversal in the cost of property, which is London and a select few environs: indeed, the choicest central municipalities of Westminster and Kensington & Chelsea now have a combined real estate worth of more than £90bn, a higher nominal value than the entire property portfolio of Wales.

Yet within this island of house price inflation that may be the only thing standing between the nation’s banks and complete fiscal meltdown, there are some mysterious deflationary tendencies. Boroughs such as Bexley (-4%), Newham (-2%), Redbridge (-2%) and Barking & Dagenham (-11%) have all seen significant price falls in the last five years, with a number of neighbouring municipalities recording almost static growth levels. These are London’s property blackspots, places where a first-time buyer can once again purchase a three-bedroom house for between £100,000.00 and £250,000.00.

But why exactly are they blackspots at all? Why are property prices in these areas falling vis à vis other localities which are arguably at least as overvalued and not nearly as well endowed with new(ish) public transportation systems such as  the Docklands Light Railway, Tramlink and London Overground? After some quick contemplation, we came to the following, tentative conclusions:

1. Historical Perceptions. The east and south-east of the capital has long suffered from a reputation as a crime-ridden, bombed out and polluted part of the world. This may have some truth to it – but it doesn’t correlate with the eye-watering property price hikes in Hackney (33%) and Tower Hamlets (24%) over the same period that the above-mentioned municipalities have lost value.

2. Broader Economic Reasons. The eastern half of London is synonymous with comparative (and in some cases, absolute) urban deprivation. But even within this part of the conurbation there are some locations broadly recognised as aspirational – not least leafy Redbridge. And there appears to be little correlation between the ghettoes of, say, Southwark and its 28% post-2007 property spike.

3. Primeval Swamp. Many of the boroughs where the property bubble has been pricked contain are characterised by possessing an unusually high African, Asian and Eastern European population, particularly recent migrants from West Africa, the Baltic nations, the CIS, China and South-East Asia. Is London a swinging, sophisticated capital? Or a city where novelty + ‘foreignness’ negates the possibility of ‘gentrification’?