There was blood all over the financial markets yesterday. It’s rarely that markets bleed so copiously, creating rivers of gloom and doom. When it happens, the default reaction is panic. Experts and analysts are racking their brains to come up with the best diagnosis and treatment.
Currencies, shares and oil crashed all over the world yesterday, from one corner of the world to the other. After dropping more than 1,000 points, or almost seven percent, the Dow Jones industrial average cut losses but was still in negative territory. Oil prices continued their fall. Latin American currencies slid to a 22-year low and stocks joined a global selloff Monday on speculation that the region’s economic contraction will deepen as Chinese growth slows down. The slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2007.
Much of the current chaos has to do with China. China has been an elephantine giant in the global economy which had its way in financial planning, and tremors are bound to happen when giants falter. After an extraordinary stock market boom, made possible by encouraging people with modest income to invest in stocks, the government panicked when it saw signs of a burst. Restrictions were imposed on sale of shares, public bodies were asked to buy shares and instead of pacifying the market, all these steps created panic. And interestingly, China realized the limitations of its own power when it has to confront the tsunami of market forces.
Whenever an economy sneezes, oil is the first commodity to catch a cold. Oil has already been suffering from cold due to oversupply, and the current crisis is making it influenza. Predictions vary about the future. Some see a continuation of the fall with lesser demand and more supply, while others see stability as the world economy is bound to improve. But the impact on economy would depend on the government reaction. The Gulf countries have ample reserves to overcome the crisis. They need to act carefully and judiciously. There is a dire need to keep the economies robust by launching new projects and by pumping more money, and economic diversification, which has seen more of talk than action, must again be brought to the top of governments’ agenda.
Expatriates in Gulf countries will benefit from a slide in their countries’ currencies, but those are short-term gains compared to the long-term impact on their future from continuing slump in oil prices. The energy sector in the Gulf has already started downsizing, which is likely to expand and spread to other related sectors if the oil prices remain depressed•
There was blood all over the financial markets yesterday. It’s rarely that markets bleed so copiously, creating rivers of gloom and doom. When it happens, the default reaction is panic. Experts and analysts are racking their brains to come up with the best diagnosis and treatment.
Currencies, shares and oil crashed all over the world yesterday, from one corner of the world to the other. After dropping more than 1,000 points, or almost seven percent, the Dow Jones industrial average cut losses but was still in negative territory. Oil prices continued their fall. Latin American currencies slid to a 22-year low and stocks joined a global selloff Monday on speculation that the region’s economic contraction will deepen as Chinese growth slows down. The slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2007.
Much of the current chaos has to do with China. China has been an elephantine giant in the global economy which had its way in financial planning, and tremors are bound to happen when giants falter. After an extraordinary stock market boom, made possible by encouraging people with modest income to invest in stocks, the government panicked when it saw signs of a burst. Restrictions were imposed on sale of shares, public bodies were asked to buy shares and instead of pacifying the market, all these steps created panic. And interestingly, China realized the limitations of its own power when it has to confront the tsunami of market forces.
Whenever an economy sneezes, oil is the first commodity to catch a cold. Oil has already been suffering from cold due to oversupply, and the current crisis is making it influenza. Predictions vary about the future. Some see a continuation of the fall with lesser demand and more supply, while others see stability as the world economy is bound to improve. But the impact on economy would depend on the government reaction. The Gulf countries have ample reserves to overcome the crisis. They need to act carefully and judiciously. There is a dire need to keep the economies robust by launching new projects and by pumping more money, and economic diversification, which has seen more of talk than action, must again be brought to the top of governments’ agenda.
Expatriates in Gulf countries will benefit from a slide in their countries’ currencies, but those are short-term gains compared to the long-term impact on their future from continuing slump in oil prices. The energy sector in the Gulf has already started downsizing, which is likely to expand and spread to other related sectors if the oil prices remain depressed•
