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Global Recession - 2016 (Dubai)


Hello Everyone,

I would like to start by a quote from Voltaire "It is the danger which is least expected that soonest comes to us".

My aim to start this thread is just to caution to as many as i can about the financial times ahead, with the trend at this moment it looks like a storm coming our way. Recently a friend from RAK BANK posted on facebook with a picture of his laptop closed which captions "Last day after 10 years of service". Another friend reported a job loss at FGB and another one at Finance house. It is unclear how many sectors have been affected.

Signs that show or aggravate recession -

Europe Breaking Down
The PIIGS nations (Portugal, Ireland, Italy, Greece & Spain) have been bailed out repeatedly by the European Union, with mandatory "reduction on public spendings" measure imposed. This restrain has been unpopular, which has restricted growth by reducing aggregate demand and keeping the debt burdens in these nations high.

Frustrated by this - Greece, which recently defaulted on an IMF loan has been rejecting EU bailout terms and calling for an end to the restrictions on public spendings. The concern is that if Greece leaves the European common currency, other PIIGS countries will follow and contagion will spread, putting an end to the euro zone. A collapse of the euro would have negative consequences for the world economy, perhaps bringing on multiple recessions.

Chinese Housing Market
Seen this movie "The Big Short" in cinemas? That is exactly what china is at this moment, the china housing market is extremely unstable, being based on subprime loans that are high risk and providing fewer and fewer returns. Exactly what happened in that movie. And FYI some say the Chinese and US Economy are almost the same, what happens in either countries will affect the whole world. The Chinese market is on the verge of collapse, this week it dismissed trading TWICE, so expect the seriousness.

Central Bank Downturn / Policy
The interest rates are already near-zero, with some European countries even deploying a negative interest rate policy (NIRP), now this is no longer effective for banks to use to prevent them off the next downturn. This makes the Central bank paralyzed from preventing recession. Not to mention their balance sheets have come to an unpredictable levels.

We may be on the verge of another global recession or maybe it already exists. Patterns in economic data (as of December Protected content showing signs of this coming, maybe the troubles in Europe or the bubble bursting in China might be the trigger that sends the economy over the edge. In Protected content , Central banks were able to lower interest rates and expand their balance sheets, which is not even possible now and the recovery from the recession might take longer than expected due to their Central banks monetary policy. Recessions are a normal part of life cycles that the world experiences from time to time. The last recession was already 8 years ago. Signs are showing that the next is right around the corner. For some it is a game changer and for many its a huge loss. Be wise and take your steps carefully, may God be with you all.

Irfan Ali

Dubai Forum