The "currency wars" confrontation looming in South Korea this weekend will have serious, long-term implications for the world economy.
Among them are: a possible (although unlikely) return to some form of gold standard; trade wars between the two principal protagonists, the US and China; and a negative impact on global economic growth just as the world is pulling out of the downturn.
These are the principal repercussions preoccupying policymakers if the leaders of the Group of 20 (G20) leading and emerging economies do not reach some kind of compromise this weekend, or at least in the near future, on the growing strains in world foreign exchange markets.
In the Middle East, the prospect of currency wars is once more feeding speculation that those GCC countries that are still pegged to the US dollar, of which the UAE is one, might be considering loosening that historic tie.
It is growing from a very low base, it must be admitted, because the official line from all GCC states, apart from Kuwait, which has already reduced dollar-dependency, is that the peg is here to stay. Nonetheless, the debate has kicked off again.
The pros and cons will be argued fiercely by economists and policymakers, but it is worth looking at the circumstances the last time we had the discussion. It was in late 2007 that GCC governments pondered whether to loosen the dollar tie, which has been in place for most states for some 30 years.
Then, the world's financial markets seemed to believe that a reordering of the dollar peg was on the cards, and flooded the region with capital designed to take advantage of the new regional order.
Some of this influx was speculative, aimed at making a quick buck by arbitraging the new situation, but some of it was genuine. International investors were apparently attracted to the long-term prospects of the Middle East if its currencies were more aligned with the realities of how GCC states did business in the world.
Of course, it came to nothing. Definitive denials by GCC governments in the summer of 2008 ended speculation that the peg would be rejigged, and there was a withdrawal of foreign cash on a grand scale.
That withdrawal coincided with the worsening of the global credit crunch (we had not yet begun calling it a credit crisis then) and was a significant response to the tightening financial requirements in investors' home markets.
It had the effect of pricking the "bubble" in regional asset values, especially in property and especially in Dubai, which in turn gave the emirate its own version of the financial crisis.
It's hard to say how much the collapse from September 2008 onwards in UAE financial markets was due to the withdrawal of foreign investment, and the result of the bursting of the country's very own asset bubble. Was the foreign exodus cause or effect?
The answer is probably only of interest to the policy wonks of the economics world, but here is the central point: before it all went wrong and they packed their money bags to leave, international markets rather liked the idea of de-pegged (or at least re-pegged) GCC currencies.
That's worth remembering in the very different circumstances of the currency debate this time around.
The UAE, and certainly Dubai, is going to have to work extra hard to attract foreign investment in the new post-crisis environment, and if a new currency arrangement helps it attract that overseas cash, that on its own might be a good reason to think again about the dollar.
There are other reasons, too. It's generally assumed that a rearrangement of the dollar peg would have a disinflationary effect, and the region's financial experts are again looking at the possibility of rising inflation.
This must not be overstated, and one of the leading regional economists, John Sfakianakis of Banque Saudi Fransi, reiterated the case for a sanguine view on regional inflation: the alarm bells are not ringing, he said, and no GCC country should fear double-digit inflation next year.
He also pointed out the circumstances now and in 2007-2008 are very different. The GCC and the US are on economic recovery paths, and their interests are much better synchronised than they were back then. These are sound arguments, likely to be met with nods of agreement in the GCC central banks.
But you get the feeling that this time round it might be different. We are witnessing the most radical realignment of global financial and economic power in nearly a century, since Britain lost its place as the world's financier to the US after the First World War.
Power is slipping eastwards, away from the US to the dynamic economies of Asia.
The Middle East has made much of its prime position on the "new silk road", and the facts confirm this: the UAE trades much more with four Asian countries, China, India, Japan and South Korea, than it does with the US.
It would be unwise to end up on the wrong side of a trade war between the Americans and the new Asian economies.
fkane@thenational.ae
The specS: 2018 Toyota Camry
Price: base / as tested: Dh91,000 / Dh114,000
Engine: 3.5-litre V6
Gearbox: Eight-speed automatic
Power: 298hp @ 6,600rpm
Torque: 356Nm @ 4,700rpm
Fuel economy, combined: 7.0L / 100km
Vidaamuyarchi
Director: Magizh Thirumeni
Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra
Rating: 4/5
CHATGPT%20ENTERPRISE%20FEATURES
%3Cp%3E%E2%80%A2%20Enterprise-grade%20security%20and%20privacy%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Unlimited%20higher-speed%20GPT-4%20access%20with%20no%20caps%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Longer%20context%20windows%20for%20processing%20longer%20inputs%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Advanced%20data%20analysis%20capabilities%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Customisation%20options%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Shareable%20chat%20templates%20that%20companies%20can%20use%20to%20collaborate%20and%20build%20common%20workflows%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Analytics%20dashboard%20for%20usage%20insights%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Free%20credits%20to%20use%20OpenAI%20APIs%20to%20extend%20OpenAI%20into%20a%20fully-custom%20solution%20for%20enterprises%3C%2Fp%3E%0A
UAE and Russia in numbers
UAE-Russia ties stretch back 48 years
Trade between the UAE and Russia reached Dh12.5 bn in 2018
More than 3,000 Russian companies are registered in the UAE
Around 40,000 Russians live in the UAE
The number of Russian tourists travelling to the UAE will increase to 12 percent to reach 1.6 million in 2023
Essentials
The flights
Emirates and Etihad fly direct from the UAE to Los Angeles, from Dh4,975 return, including taxes. The flight time is 16 hours. Alaska Airlines, United Airlines, Delta Air Lines, Aeromexico and Southwest all fly direct from Los Angeles to San Jose del Cabo from Dh1,243 return, including taxes. The flight time is two-and-a-half hours.
The trip
Lindblad Expeditions National Geographic’s eight-day Whales Wilderness itinerary costs from US$6,190 (Dh22,736) per person, twin share, including meals, accommodation and excursions, with departures in March and April 2018.
Empire of Enchantment: The Story of Indian Magic
John Zubrzycki, Hurst Publishers
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Killing of Qassem Suleimani
Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
German intelligence warnings
- 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
- 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
- 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
How Tesla’s price correction has hit fund managers
Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.
It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.
The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.
Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.
Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.
He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.
AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”
A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.
Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.
Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.
Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.
By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.
Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.
In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”
Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.
She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.
Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.
U19 WORLD CUP, WEST INDIES
UAE group fixtures (all in St Kitts)
Saturday 15 January: v Canada
Thursday 20 January: v England
Saturday 22 January: v Bangladesh
UAE squad
Alishan Sharafu (captain), Shival Bawa, Jash Giyanani, Sailles Jaishankar, Nilansh Keswani, Aayan Khan, Punya Mehra, Ali Naseer, Ronak Panoly, Dhruv Parashar, Vinayak Raghavan, Soorya Sathish, Aryansh Sharma, Adithya Shetty, Kai Smith