As Mineweb warned eight months
ago, a financial crisis triggered
from Dubai has decimated markets
as banks are vulnerable to
huge debts yet again and gold price
has fallen as they struggle
to cover potential bad debt positions.
Author: Lawrence WilliamsLONDON -
Don't say Mineweb didn't warn you!
Writing back in April in an article
entitled Unwarranted post
we said - "What was described
to me today as the
world's biggest Ponzi scheme,
which makes Bernie Madoff's
activities just appear
as small change, has yet
to implode, although it looks
as though it may be
beginning to do so.
In one word that is
Dubai where feverish attempts
are apparently being made
by the sheiks to ward off
total economic collapse.
Expatriates are deserting
the Gulf state almost as
quickly as they can find
seats on airplanes out.
Huge swathes of apartment
blocks lie empty and,
my source tells me that
those wanting to sell out
are being pushed into
time-controlled sales,
supported by the government,
not that there are any buyers,
as too much coming on
the market at once would
lead to the equivalent of
a run on a bank.
And given the trillions of dollars
in investment that have
gone into the state a run
on Dubai would be disastrous
for the global economy and
the banks that are involved. "
Well it's taken a little longer
to come about than we feared
at the time, but a potential
collapse of Dubai government
backed organizations which
are struggling to reschedule
debt of billions of dollars
has precipitated a fall in
the markets reminiscent of
what happened with
the subprime crisis of
a little over a year ago.
Banks globally have
huge exposure to Dubai debt
and may now need yet more
bailing out by
shellshocked governments - and
some may well collapse.
What this has done to
nervous markets has led
to yet another sharp sell-off
potentially undoing much of
the recovery which has
been seen over the past year.
And, as with the subprime crisis,
anything liquid has come under
the hammer - even gold which
has dived this morning.
What is the prognosis?
For the markets in general it
doesn't look good.
For gold maybe once things
settle down there will be
a recovery which may take it
to yet higher levels as
'safe haven' buying returns.
Financial uncertainty tends
to be good for the gold price.
The dollar could be helped,
at least temporarily,
at least vis-a-vis European and
Asian currencies as perhaps
U.S. banks are not as exposed
to Dubai as their European
and Asian counterparts.
But loner term the outlook
for the dollar has to remain bleak.
Maybe China and India will
continue buying gold on
the dips which will stabilize
this sector - after all China
in particular has been
pushing its populace into
buying gold - another story
which may not have been
actually broken by Mineweb
but one which we were
instrumental in bringing to
the attention of the investment
public - see China pushes
to the masses which we
published in September.
China has the financial muscle
to control a fall in the gold price
and perhaps can't afford
to let it collapse.
Watch this space.
MINEWEB is an interactive
publication, with rolling
deadlines through each day,
commencing in the
Sydney morning, and
concluding, 24 hours later,
in the Vancouver evening.
If you believe your side of
an issue deserves inclusion,
but has failed to meet one
of our deadlines, you are
invited to notify the Editor in
Chief in Johannesburg, and
we will include you in
our editing and expanding
on our stories. Email him
--
J-L K
Sent from Kigali, Rwanda
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