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what's in store for us here in Dubai


jhbsnoopy A lot of people are still hoping that Dubai will pick up again and be able to stand from all these crisis. Do you think its possible? Is this the one that they call balloon economy and this is the end of the balloon?
Captain Australia Dubai will pick up again. It just got smashed by the financial crisis because of the very high debt levels and hugely inflated property market. Once everything is down to a realistic level it will start going up again. That doesn't mean there wont be another bust in 10 years or so, but that's how recessions work. Speedhump
Amen to that, there's a lot of mileage left in the UAE, even after the oil runs out I'm pretty sure. ;) xdude booms n busts are the part of any economic cycle.. if you understand this and look at the larger picture then you will realize tht things will improve again... of course there will be some structural changes in the economy... but it will rise again... thts for sure.. don't get too carried by the western media painting the doomsday scenario.. just hang on n in some months / year, things will start looking up again RobbyG
You are a bit too one sided my friend about Western media.
This isn't a typical US recession. That shuold be the one in 2002/2003. But the Federal reserve was not willing to let a recession enter its way, just as they 'try' to avoid economic downturn right now.
This correction is going to be far more extreme and not a normal recession. We past that point already. Aren't you keeping up with the news and socialistic measure to preserve the standards of US living?
This is not going to be a V-recession. Currently its a U-recession and god forbids it might even be a depression.
In case you didn't notice. The subprime mortgages resets are complete (majority) but now the option ARM's mortgages are building up for default unless everybody is able to refinance in the coming three years...
Just saw the ARM charts. My god, another session of mayhem in the US housing sector is coming. And we haven't even passed the commercial property market defaults yet...
Hold on, more jobs are going to get lost. And the dollar is going down. Which makes the dirhams less valuable too. But I said that many times before, unless they get rid of the dollar peg in the near future. ;)
Dubai will do better then the US probably. :lol: Misery Called Life Dubai is going great guns. Don't listen to foreign press. When has the local press said that we're in the midst of a recession? Huh? Who told you that?Have the authorities made any statements? Don't spread propaganda dude. :lol: :lol: Just kiddin! Try reading the Financial Times Middle East. It's a good paper, and will give you some indicator of how things could pan out. They have a website as well. Try that! BlackburnRovers Dubai has been hit, not as badly as many places, but still there has been a bit of a downturn. What adds to the confusion (and negative press from outside) is that many people in Dubai have a serious tendency to deny anything until its flat in their face. From the glorious "Salik has been a tremendous success", to "There is an oversupply of taxis in Dubai" to "Dubai has not been hit by the downturn", you hear blatant denials, which increases negative speculation by foreign press....... Speedhump
I couldn't have put it better. The often blatantly whitewashed press releases here make everyone into a cynic! :) Red Chief
I admired your optimism, Captain, in time when evidences of depression is so clear. :) Anyway good luck in Australia. Speedhump I have been reading that China have been doing a great job in stimulating home demand for products, don't you feel that's relevant? One of the largest markets in the world if given the buying power, and most Chinese I guess will never be able to afford Western luxury goods. I'm thinking if they have a strong home economy (they already have been buying up raw material resources around the world, like BHP and Rio Tinto, converting their reserves into assets), then they could even dump their Dollar assets as and when they feel they want, if in the larger game it undermines the US position, and those of other large players who keep their security in Dollar backed positions?

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warren4321 economy always has it cyclical period, no one country can avoid it included Dubai. sage & onion
Very deep Captain Australia
The words recession and depression are fairly meaningless to be honest. They are really subjective terms. Australia recently avoided being called in a recession by pumping $15 billion or so into the economy by cash payments and they ended up just scraping by with positive growth, but everyone on the street knows it's a recession.
I know Dubai is in the ****, I wasn't trying to say otherwise. But I was saying that things will pick up again. Probably in another year at least.
Dubai isn't finished, it just had the slapping that it deserved. Speedhump Latvia is the first EU country to be truly in the deep stuff. It may really go bust if the IMF won't bail it out. If their currency goes south in the form of huge huge devaluation, who knows about Bulgaria, Estonia, etc. Dominoes start to fall. Captain Australia
I'm curious as to what 'going bust' actually means here. I'm not trying to be funny or anything, but what happens. Has it happened before? Government collapses, police/army disbanded? Are we talking warlords taking over like in Somalia? Speedhump Well the country owes western banks huge, just like Estonia, Latvia etc. It was fine when the economy was booming, but now, with a GDP reduction of 18 pct in a year, their housing markets are collapsing, and their economy is crashing, the country's foreign debt needs over 300 pct cash injection this year and the banks now suddenly aren't too keen. I think the IMF are the 'bank of last resort' as usual. The country could literally go bankrupt if the IMF doesn't come up with the readies. The level of inflation that would follow would be 'money in a wheelbarrow to buy a loaf of bread' time, with the population facing truly mass unemployment to boot. Governments can be brought down by this, of course. Also, no money to pay the police or army maybe as you say. You can see how it can go. I'm no economist so that's about all I can say. I'm sure others here can give you better than my paint by numbers info. ;) If other Eastern European countries catch the same cold, the western banks that were doing the bad lending will have their very own sub-prime mortgage problem, despite the western banks and governments currently saying that the Estonian debt would not sink them.... :roll: RobbyG
Well, going bust in this context means that a country can't fullful its financial obligations. Maturing loans won't be serviced. Its basically a nation in default.
Consequences are: Foreign investments are fleeing out the country, a currency thats in the tank and can end basically worthless for countries that don't have real tangible assets to rebuild on like Russia and Brazil (commodities) did in the past.
Countries that have been there before are Germany, Argentina, Russia, British Empire, Zimbabwe (economically isolated) and Brazil, Ecuador, and many more ;)
The IMF can provide help most of the times, but its pockets are just so deep. And countries that provide liquidity to the IMF have major financial dificulties for themselves now. So the IMF is near withdrawn and can only save what needs saving the most.
Argentina is already facing huge withdrawals (went 1st bankrupt in 2001). Suitcases of dollars are being taking from the country (literally) and deposited in countries like Uruguay (banking system like Switzerland, no questions asked).
And with a currency in the tank, costs of living rising exponentially, money worth nothing, you get supermarkets that are being raided, increase in theft and robberies. You name it...
This time, the lender of last resort, the IMF, is having some difficulties also... :idea: xdude
I agree with you mate that it is not the typical recession... i deal with bankers daily..n i've never seen them so scared in my life..
but i still do not agree with the western media's extremely negative outlook.. c'mmon.. by tht standard with the kind of deficits which US n UK are running, they should be equated to some of the sub saharan economies...
i completely agree that its the end of the dollar.. it is going to lose its significance as the reserve currency...
but when everything goes wrong, you start looking at the fundamentals..
n the fundamentals very clearly point towards the emerging markets.. which include china, india n some of the gulf economies n brazil..
just 'coz fed is on money printing spree, it is not going to save US economy..its very similar to GM... they poured billions of dollars in GM to keep alive artificially only to let it go bankrupt finally..
tht is what is happening to US / UK economies.. only thing is tht it wiull be a longer cycle of few years than few months as in case of GM..
but the western media is never going to accept the painful truth tht it is the end of the greenback.. i've my personal interest in having a strong dollar..but the fact is tht i 've to read the signs early n not dream abt it..
so when i say tht don't get carried by western media, i mean to say tht if dubai has to fail, it will only follow US/UK n can not precede them..
get this order of failure correct.. so this media shld be more bothered abt their own survival..
n get this right..this is not my emotional outbursts... this is based on whats happening in the financial markets.. Captain Australia
I understand what you are saying, but I think you are missing the very important fact that the debts that the US has and China owns are in US dollars. All the bankrupt countries that you could name have one very important difference, their debts are not in their own currency.
Everyone talks about China having $700 billion in US treasury bonds and all that stuff. It sounds bad, but the main point is that they own debt that is in US$, not yuan or euros, US Dollars. People talk about China calling in their debts and dropping the dollar to unprecedented levels, but what would that do? It would drop the value of their 'investment'.
China has a very vested interest in keeping the dollar where it is, because that's where their money is. Not to mention that China is strong now because of years of American consumerism. For every one business closed in the USA there would be three factories closed in China. We are in a global market now whether we like it or not.
Until you see oil trades being done in Euros then there is no point talking about the dollar being finished because everyone has a vested interest in it. All China's dept is in USD, all the Gulf States money is in USD, all the world commerce is in USD.
If we're talking about a change away from the dollar then many, many people are going to get burned and I just can't see that happening any time soon. Look at the losses the US economy took this last few quarters. What other economy could take those losses and keep on kicking? If this didn't kill them nothing will. They're going to bounce back, and possibly be smarter about it this time.
If ever there was a time to move away from the dollar it is now, but where is the initiative? It's all just speculation at the moment.
Misery Called Life Well said CA...An adage comes to mind:- When you owe the bank a small amount, the bank has the power. But when you owe the bank a huge amount, it's the other way round. This epitomizes China’s current state. Luo Ping, a director-general at the China Banking Regulatory Commission, put it nicely in an interview back in February: "Except for US Treasuries, what can you hold? US Treasuries are the safe haven. For everyone, including China, it is the only option. It's inevitable that one day we will have to move away from the greenback. But rest assured whatever the alternative to the American Dollar there’s not a single country whose currency will rise at the expense of the US dollar. In the future we may look at some kind of a globalized trading currency pegged to major trading powers and without a doubt USA will play a major role in that. RobbyG
Well, currently economists around the globe are discussing the way to diversify away from the dollar reserve currency and rest assure it will happen. The good ol' US of A is going to lose a significant amount of influence in world trade in the coming decade.
Countries with the largest reserves and thus with creditor capability will have the most influence in the new world reserve currency that is being negotiated in financial circles. Today the IMF aides showed some progress in that effort:
&sid=aUYeJEwZaQrw
The IMF already uses a basket of international currencies to determine the value of the SDR dollar assets on its account. This calculation measure will probably be the basis for a new world reserve currency standard, comprised of the most influential currencies around the world.
The capitalistic system will show to be much more secure with this more balanced approach, in my opinion. RobbyG
This is something you might wanna read Captain.
/ Captain Australia

That's it right there. If the US wanted to they could just print X trillion dollars worth of money and repay their debts in full. Not that they would of course, but that is the power of having debt in your own currency.
There is no chance of the US going bankrupt. If they do, then every one else follows them down and we're all in the s***. Global trade ceases and we all revert back to trading potatoes for carrots. No one will let that happen. RobbyG
I don't completely agree with that Captain. The US can go bankrupt for sure. With losses from everybody. Its all about confidence.
The world economy (GDP) is valued at approx. 52 trillion dollars.
70 percent of the worlds currency reserves are held in dollars. With a top 10 dollar reserve currency value totalling: 5.4 trillion dollars (seen below). Thats approx. 10 percent of global GDP.
China holds some 4 percent of its surplus in dollars, where the official statement say that about 800 billion dollars are in US treasury bonds and bills, while some argue that its double the amount.
Nonetheless if China diversifies away from the dollar currency, like e.g. they buy more physical gold (like in the last 5 years) aswell as moving out of Treasury bonds (thus out of dollars) will lower the demand and value of the bonds with a huge loss in general confidence. :idea:
There you have it again: Confidence is key.
If China sells ALL its dollar assets and buys Gold, Euro's or simply exchanges dollars into Yuan for use in domestic programmes and wealth creation, there will be a runoff from investors out of Treasuries and the US deficit cannot be funded anylonger. Indeed everybody loses as it takes time for China to unwind such huge dollar based investments. There would a worldwide sell off in US treasuries and a collapse of the dollar is imminent.
A more plausible situation is that China REDUCES its dollar denominated asset holdings and diversifies away into Euro's, Gold, Silver, agriculture, other commodities (tangible products) as well as an internal focus on domestic growth. This is what China will do for as long as their isn't a new world reserve currency like the IMF is investigating. (a basket of influential currencies, see list of countries below)
China is obviously not going to let the FED (electronically) print money (by means of quantative easing = buying back US maturing bonds) and inflate its way out of debt. China's investments will then be just as bad of an investment than to pull them out of US treasuries right now! So they will slowly diversify away from dollars. (A neat term for slowly getting the hell out, before other (smaller) investors go out first and China is left with worthless investments) ;)
Before this crisis hit, the United States was eager to tell China to let its currency float to more reasonable levels, as the Chinese were keeping their Yuan currency artificially low, to keep the export advantage and income from consumer in the USA.
All those trade surplusses that China's sectors creates are not converted into Yuan, since that strengthens the currency, but are reinvested into the dollar denominated assets like US Treasuries and other investments. You can see that if the Chinese were more willing to float its currency to more reasonable levels, that the demand of consumerism in the US would have slowed down earlier and a global recession as severe as today, could have been avoided. But logically, there is a Greenspan and a Bernanke that also loved loose credit standards, so the subprime bubble was unavoidable anyway. If it wasnt subprime, those policies would have found another asset group that would be inflated, like stocks etc.
Rank Country/Monetary Authority billion USD (end of month)
1 People's Republic of China $ 1953 (Mar 2009)
2 Japan $ 1019 (Mar 2009)
- Eurozone $ 531 (Feb 2009)
3 Russia $ 404 (May 2009)
4 Taiwan, Republic of China $ 305 (Apr 2009)
5 India $ 262 (June 2009)
6 South Korea $ 212 (Apr 2009)
7 Brazil $ 206 (Jun 2009)
8 Hong Kong $ 186 (Mar 2009)
9 Singapore $ 166 (Mar 2009)
10 Germany $ 144 (Feb 2009) Captain Australia Interesting argument, but I disagree.
First off, this hypothetical 'diversification' away from the dollar is not going to happen when China holds so much money in USD. When you are talking about the amounts of cash that exist at this level it's a zero sum game. If confidence is lost in the dollar, like if China starts selling it, then the value of what they are selling drops exponentially as they are selling it.
If they were in a better position and could exist without exports to the west then maybe this would make sense but I don't think this is the case. At the end of the day the US hold all the cards because they have the currency.
We all know that China has been keeping the yuan low for years and this has been fuelling the consumerism of the West. But the money flowing into China is USD.
China has things to sell because we are willing to buy them. The west does not need what China is selling in the same way that we need what Saudi is selling. The US just gets stuff from China because it's cheaper than Mexico, but if that (artificial) situation changes then who do you think they're going to buy from?
If America falls (not likely) then China falls and those in power realise that. Any 'plan' you talk about might be the musings of party leaders thinking 20 years down the track but it aint going to happen any time soon. Captain Australia If it's not clear, what I'm saying is that there is nothing unique about what China is offering. It's just cheap labour and cheap materials. You'd be a fool to think that South America could not provide that if China raised its prices to realistic levels. And if it came to economic blows, what you would have is a country with zero exports trying to cash in on its US debt. The US would be hurt, but who do you think would buckle first? Hell, this current recession has caused thousands of factories to close already. A blockade by the US (switching to SA) would probably cause a revolution in China due to the massive job losses and drop in standard of living. RobbyG
A small correction on your comment:
China is already diversifying away from the dollar denominated assets but not in the public media eye. A large part of its holdings are presumed to be 'state secret' and can be diversified without control.
Currently we see the yield spread growing larger in the US bond market. Thats the difference in interest yields between short term and middle /long term bonds. This indicates that someone is selling Treasuries. A recent article on Seeking Alpha showed that the long term bonds were being sold, and the FED was suprised that the yield increased while they were buying back the short term maturing bonds. (intended to lower the yields)
Clearly some party is selling US treasuries. It can be an institutional investor or a Sovereign Wealth Fund or perhaps China. In slow amounts this can be a controlled diversification, hence strenght of the Euro currency vs the Dollar.
One thing is for sure. The Euro is not appreciating economywise, so it must be the dollar that is crawling lower. This means less demand for dollars and bonds. ;) RobbyG
O I agree, its simply manufacturing work mostly.
Every factory that closes in the US, is followed by a handful in China. No doubt. I strongly believe in the Chimerica symbiotic relation :D
A way to be less dependant of that relation is to diversify, and thats what China is doing. Spread the investments and thus the risk.
Soon they get a taste of fiscal domestic stimulus and then the people of China will demand more social programmes and wealth creation. They have been painting the fence of the USA long enough. Now they want to reap some benefits from all the hard work. I'm sure of that. RobbyG
Thats what I'm saying. As soon as the Chinese population gets a taste of domestic wealth creation (fiscal stimulus, social services, health care, leisure facilities, internal market demand for goods etc) then they are also diversifying away from dollars.
As soon as they head into that direction, the populous will get more demanding towards the government, but also more competitive probably. And then the communist regime will have difficulties surviving in the long run, in my opinion. So domestic market YES, but very slowly :lol: Captain Australia Ha. Check the time on my last few posts. I must say, it's amazing I can even write a simple sentence let alone participate in a debate when I was up that late drunk off my arse. RobbyG
A debate :D
You were as stubborn as an Indian cow. :lol:
Go brush your teeth son :wink: Captain Australia
I agree with this Robby. They have the potential to be a massive and self sustaining economy but something like that takes time. They are moving towards it but it won't happen overnight. The majority of Chinese are dirt poor. Captain Australia
Ha! yes, I do tend to get overly-passionate about topics when I've had a few. :D Speedhump
Love this Robby. That's the biggest laugh on DF since I cant remember, I'm rolling.... :D :D :D Speedhump
Ummm, did I just get you two to agree, or is Cap's buzz wearing off.... :P Sharp Nothing gonna stay forever!... Dubai will hit again!.. that's what all know's!!..... jhbsnoopy I really hope that Dubai can catch up as soon as possible. :( RobbyG Russia, Brazil and China (planned) buying IMF issued SDR bonds to diversify away from US dollars and bonds. &sid=aTtE7kXVBlHk



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