Is a chaotic history repeating itself?

Financial Fallout: The National plots the financial chaos in markets and commodities around the world - with graphics.

There is global concern over the status of the dollar as the world's reserve currency. REUTERS/Jo Yong-Hak

Three years ago the world crashed into financial chaos and the deepest recession since the Great Depression. Now in 2011 markets are beginning to look worryingly similar. The National plots key markets and commodities and asks 'is history repeating itself?'

Gold: The investor's last refuge

Gold is widely viewed as the world’s last refuge, and its price often increases when investors get worried and want to flee other riskier assets.

The yellow metal’s value did not spike much, however, when the crisis set in three years ago.

Except for one spike in March 2008, it stayed below the US$1,000 per ounce level for all of that year and most of 2009. But in late 2009, it began a steady climb that has only quickened in recent weeks, sending gold to a record. It reached a high of almost $1,815 yesterday.

Oil: Price has declined

Oil has fallen by about 10 per cent in the past month amid rising fear a global slowdown would sting demand.

The commodity, which tends to decline when the world’s economic fortunes are in jeopardy, took a much larger dive near the middle of 2008 after it had reached a historic high of US$146 per barrel. Brent crude fell to a low of $36.61 on December 24 that year.

Leading up to the recent fall, oil had been averaging well above $100 per barell, bolstering revenues for the world’s oil producers but putting a strain on western consumers.

2-year treasury note yield: Poor yield

Investors piled into US government debt as a haven from tumultuous stock markets even after Standard & Poor’s downgraded the country. That pushed down yields, which move inversely to prices.

Yields have been low in the past three years both because of skittishness among investors and the US Federal Reserve’s policy of keeping benchmark interest rates near zero, which it hatched in response to the financial crisis.

With its low rates, the US central bank wants to encourage lenders to borrow at almost no cost and then lend the money to people and businesses, thus stimulating investment and economic activity. That tactic has not been fully successful, however, because of banks’ reluctance to lend even when money is almost free.

The Fed has tried other tactics to resuscitate the US economy and help create jobs to tackle an unemployment rate above 9 per cent. It has twice used so-called quantitative easing, where the central bank essentially prints money to help boost confidence in the economy. The markets’ response to those moves has been mixed.

Investors have used the extra money to bid up stock prices and buy into riskier assets, but markets have also yoyoed repeatedly in the past three years, and some economists have questioned the wisdom of such actions.The Fed announced this week it would keep interest rates at historic lows until at least mid-2013.

13-week US treasury bill yield: Low yields

Market Volatility: On the increase

The Vix, a widely tracked market volatility index, has shot up in recent days as stock markets vacillated from major losses to major gains.

Investors appear in the throes of a major bout of uncertainty, with the Dow Jones Industrial Average – a crucial measure of large US stocks – rising 4 per cent on Tuesday before once again falling back 4.6 per cent on Wednesday.  Woozy bounces have been the theme dominating other global markets over the past two weeks.

A similar bout of volatility was visible in 2008 and early 2009, when uncertain investors sold off trillions of dollars worth of stocks.

Dubai Financial Markets: Pulled down by global economic crisis

When the crisis hit three years ago, many analysts and economists thought the Gulf’s markets would be well protected from the financial tremors spreading across the US and around the rest of the developed world.

Unfortunately for the Gulf, those predictions turned out to be totally wrong, and the region’s tight links to the rest of the world exposed it to all kinds of financial ills.

When global banks and investors grew warier about extending financing to emerging markets, for one thing, a key source of funding for massive development projects in the region ran dry.

Dubai, which had swarmed with construction and cranes during the boom in global credit markets, felt the slowdown severely. Dubai World, one of the emirate’s biggest business conglomerates, was forced to restructure its debts in late 2009, and just this year completed the deal.

Markets tumbled, too.

Dubai’s bourse quickly became labelled as one of the world’s worst-performing.

It fell by 77 per cent between the beginning of 2008 and the beginning of the following year.

Both Abu Dhabi and Dubai’s markets have fallen in the most recent regional market meltdown, but not by nearly as much as the S&P 500 or European indexes.

The Dubai index is off by 5 per cent since August 4, while Abu Dhabi’s stock index is down 3 per cent during the same period.

Abu Dhabi Securities Exchange: Impact of the global economic crisis