Important to pick right side in the currency wars



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.

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Moon Music

Artist: Coldplay

Label: Parlophone/Atlantic

Number of tracks: 10

Rating: 3/5

Results

Ashraf Ghani 50.64 per cent

Abdullah Abdullah 39.52 per cent

Gulbuddin Hekmatyar 3.85 per cent

Rahmatullah Nabil 1.8 per cent

PROFILE OF CURE.FIT

Started: July 2016

Founders: Mukesh Bansal and Ankit Nagori

Based: Bangalore, India

Sector: Health & wellness

Size: 500 employees

Investment: $250 million

Investors: Accel, Oaktree Capital (US); Chiratae Ventures, Epiq Capital, Innoven Capital, Kalaari Capital, Kotak Mahindra Bank, Piramal Group’s Anand Piramal, Pratithi Investment Trust, Ratan Tata (India); and Unilever Ventures (Unilever’s global venture capital arm)

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ADCC AFC Women’s Champions League Group A fixtures

October 3: v Wuhan Jiangda Women’s FC
October 6: v Hyundai Steel Red Angels Women’s FC
October 9: v Sabah FA

Fireball

Moscow claimed it hit the largest military fuel storage facility in Ukraine, triggering a huge fireball at the site.

A plume of black smoke rose from a fuel storage facility in the village of Kalynivka outside Kyiv on Friday after Russia said it had destroyed the military site with Kalibr cruise missiles.

"On the evening of March 24, Kalibr high-precision sea-based cruise missiles attacked a fuel base in the village of Kalynivka near Kyiv," the Russian defence ministry said in a statement.

Ukraine confirmed the strike, saying the village some 40 kilometres south-west of Kyiv was targeted.

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The Buckingham Murders

Starring: Kareena Kapoor Khan, Ash Tandon, Prabhleen Sandhu

Director: Hansal Mehta

Rating: 4 / 5

MATCH INFO

Manchester City 4 (Gundogan 8' (P), Bernardo Silva 19', Jesus 72', 75')

Fulham 0

Red cards: Tim Ream (Fulham)

Man of the Match: Gabriel Jesus (Manchester City)

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How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

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OPTA'S PREDICTED TABLE

1. Liverpool 101 points

2. Manchester City 80 

3. Leicester 67

4. Chelsea 63

5. Manchester United 61

6. Tottenham 58

7. Wolves 56

8. Arsenal 56

9. Sheffield United 55

10. Everton 50

11. Burnley 49

12. Crystal Palace 49

13. Newcastle 46

14. Southampton 44

15. West Ham 39

16. Brighton 37

17. Watford 36

18. Bournemouth 36

19. Aston Villa 32

20. Norwich City 29

 

 

 

 

 

 

History's medical milestones

1799 - First small pox vaccine administered

1846 - First public demonstration of anaesthesia in surgery

1861 - Louis Pasteur published his germ theory which proved that bacteria caused diseases

1895 - Discovery of x-rays

1923 - Heart valve surgery performed successfully for first time

1928 - Alexander Fleming discovers penicillin

1953 - Structure of DNA discovered

1952 - First organ transplant - a kidney - takes place 

1954 - Clinical trials of birth control pill

1979 - MRI, or magnetic resonance imaging, scanned used to diagnose illness and injury.

1998 - The first adult live-donor liver transplant is carried out

While you're here

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