The Government's moves to guarantee bank deposits and interbank lending is a policy bulls-eye. Whether or not deposits were safe before the guarantee is not the issue. The issue is confidence. In this crisis as in others, authorities tend to believe that denial is the best insurance, saying that banks are safe until, whoops, they're not. Now the UAE has broken from the pack by actually beginning to shore up its banking system before it starts to slide into failure. Hopefully, this will enable the country to better weather the continuing storm. Provided oil prices provide the government with a continued surplus, it will not have to dip into reserves and assets like Adia, whose treasure chest of securities is undoubtedly declining in value fast.
The central bank governor offered on Sunday reasons for the continued health of the banking sector. They were unfortunately not very compelling. He offered assurances that most deposits belong to locals. So do most mortgage loans. If there is a correction in property prices, that concentration of deposits among the 20 per cent of UAE residents who account for over two-thirds of property transactions, will likely prove a weakness.
Perhaps the most compelling argument he made was that most of the biggest banks are already partially government-owned. This means the taint of government ownership doesn't stand in the way of further capitalization of the banks by the state. The government should begin injecting cash into the banks now in return for warrants and a requirement that they begin reducing their overall exposure to risk assets, including mortgages for uncompleted properties. Continuing the farsighted policymaking it has demonstrated so far, it should go ahead and set up a vehicle for purchasing non-performing loans and any other problem assets. With any luck, it won't have to buy anything. But its mere existence could help improve confidence in the ability of banks to handle any downdraft coming from offshore.
The risk of being a safe haven amid the storm in financial markets is a gradual return of hot money. Already, job applications are flooding in and it seems a matter of time before the deluge of foreign jobseekers and their money resumes. Inflation is likely to get worse as the money supply improves. There may, therefore, be no time like the present to re-examine the peg. For the moment, the dollar is rising, as investors flee risk and paradoxically buy the currency that is going to be printed in unprecedented volumes to finance the US bailout.
So the nationalization of the global financial system continues. Taxpayers are bailing out the banks that grease the wheels of the economy. Eventually, this will come to be seen as a tax on saving nations like China and the Gulf, payment for years of having extracted wealth from people who could no longer afford it - the West. Living standards in the West may not be the same for years to come, but the wealth being lost belongs not to the overleveraged and technically insolvent American household, but to those with positive net asset values. Fortunately for them, they have something to lose.
US officials appear to be preparing to offer new inducements for these saving nations - China, Japan and the Gulf - to invest in their troubled financial sector, including possible guarantees. Washington is reportedly offering such protection for Mitsubishi UFJ in its bid for Morgan Stanley. Officials appeared to be telegraphing this "all-clear' in their opinion piece published in today's edition of The National, written by Hamad al Suwaidi, a member of the executive council of the Government of Abu Dhabi and a director of the Abu Dhabi Investment Authority (Adia), Henry Paulson, the US Treasury secretary and Tharman Shanmugaratnam, the Singaporean finance minister.
It would be a mistake to underestimate the gravity of the situation. The world is in the midst of a systemic financial collapse that seems almost certain now to create a global recession. How long and how severe depends on the response, but the rise in joblessness is likely to create a convulsive period for world politics. Remember that the Great Depression ended only with the rise of Adolf Hitler and the start of the Second World War.
warnold@thenational.ae
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.
Read more about the coronavirus
The%20specs
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'The worst thing you can eat'
Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
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Russia's Muslim Heartlands
Dominic Rubin, Oxford
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The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
COMPANY%20PROFILE
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The specs
Engine: 2.0-litre four-cylinder turbo
Power: 178hp at 5,500rpm
Torque: 280Nm at 1,350-4,200rpm
Transmission: seven-speed dual-clutch auto
Price: from Dh209,000
On sale: now
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Company%20Profile
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FIGHT%20CARD
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COMPANY%20PROFILE
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Indoor Cricket World Cup
Venue Insportz, Dubai, September 16-23
UAE squad Saqib Nazir (captain), Aaqib Malik, Fahad Al Hashmi, Isuru Umesh, Nadir Hussain, Sachin Talwar, Nashwan Nasir, Prashath Kumara, Ramveer Rai, Sameer Nayyak, Umar Shah, Vikrant Shetty
Jawan
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COMPANY%20PROFILE
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SPECS
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%20Two-litre%20four-cylinder%20turbo%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E235hp%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E350Nm%3Cbr%3E%3Cstrong%3ETransmission%3A%3C%2Fstrong%3E%20Nine-speed%20automatic%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh167%2C500%20(%2445%2C000)%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%3C%2Fp%3E%0A
In-demand jobs and monthly salaries
- Technology expert in robotics and automation: Dh20,000 to Dh40,000
- Energy engineer: Dh25,000 to Dh30,000
- Production engineer: Dh30,000 to Dh40,000
- Data-driven supply chain management professional: Dh30,000 to Dh50,000
- HR leader: Dh40,000 to Dh60,000
- Engineering leader: Dh30,000 to Dh55,000
- Project manager: Dh55,000 to Dh65,000
- Senior reservoir engineer: Dh40,000 to Dh55,000
- Senior drilling engineer: Dh38,000 to Dh46,000
- Senior process engineer: Dh28,000 to Dh38,000
- Senior maintenance engineer: Dh22,000 to Dh34,000
- Field engineer: Dh6,500 to Dh7,500
- Field supervisor: Dh9,000 to Dh12,000
- Field operator: Dh5,000 to Dh7,000
The specs
Engine: 6.2-litre supercharged V8
Power: 712hp at 6,100rpm
Torque: 881Nm at 4,800rpm
Transmission: 8-speed auto
Fuel consumption: 19.6 l/100km
Price: Dh380,000
On sale: now