This week a quote attributed to the economist John Keynes has been doing the rounds. It goes: "The market can stay irrational longer than you can stay solvent." Boy does it hit home right now.
Markets everywhere are reacting – badly – to various incidents. This is the week of elections in the United Kingdom, aftermath to the recent terror attack in London, and the testimony of former FBI director, James Comey, regarding president Donald Trump’s alleged links with Russia – what is said could set the president of the US on the road to impeachment.
When you read this, you’ll have a better picture of how these various factors have played out. I’m still in the dark, but what I do know is that money is tight, and going to get tighter.
Even without the events listed above, this is screamingly obvious – and verified by an email that found its way into my inbox today. Here’s an extract:
"I would also like to advise you about Emaar’s special promotion for one day only – to waiver 4 per cent Dubai Land Department fee and give a two-year post-handover payment plan."
It’s from a real estate agent, promising to look after me (he doesn’t know me) and offering the "one day only" enticement. It’s one of many attempts to get people to part with cash in these uncertain times.
No thank you. Have you seen the state of the world? Property markets? Yet more elections?
I’m sitting tight, and waiting, while reading Nouriel Roubini’s – albeit bland – take on the world economy. Mr Roubini is a professor of economics at New York University’s Stern School of Business, but right now I’m more interested in his having served as a senior adviser to the White House council of economic advisers and the US Treasury.
This is what he says regarding the US: "Indeed, Trump has introduced such profound fiscal uncertainty that the Federal Reserve could make a mistake in its own policymaking. If it does not increase rates fast enough, inflation might balloon out of control. The Fed would then have to hike rates rapidly to catch up at the risk of triggering a recession. A related risk is that increasing rates too slowly could lead to an asset-price bubble and all the dangers – frozen credit markets, soaring unemployment, plummeting consumption, and more – implied by its inevitable deflation."
He goes on to explain how the US is affecting global markets: "Markets are also underestimating the geopolitical risks, many of which stem from Trump’s confused and risky foreign policies. Indeed, the global economy could be destabilised by any number of scenarios involving the US. A military confrontation between the US and North Korea now seems plausible. So too does a diplomatic or military conflict between the US and Iran that results in an oil supply shock; or a trade war between the US and China that escalates into a larger geopolitical conflict."
The piece overall was pretty much a case of stating the obvious. And that’s not to be sniffed at.
Here’s another bit of stating the obvious: you are working to earn, and save. Can you get your hands on your money if you need to leave the country in a hurry?
It’s at moments like this that I recall my father – who happened to be holidaying in the UK when tens of thousands of Iraqi troops lined up across the border from Kuwait. My parents and younger siblings lived there at the time. Did he transfer his money out? No. Did he – and the family – pay a huge price as a result of no access to cash? Yes. Iraq went on to invade Kuwait, and has been the scene of conflict ever since.
It doesn’t have to be a war that prevents you from getting your hands on your cash or liquidating investments. The point I’m making is: do you have a plan? Are you sure you can make it happen? It’s often the simple things that can trip us up. For example, I can’t transfer money from my bank account half the time because its online system keeps locking me out.
Someone posted a great comment in reaction to Mr Roubini’s piece. The last line says it all. Make sure that’s not something you’ll be saying.
Roubini: "The global economy can recover faster ..."
Phew.
Roubini: ... if we avoid the obvious pitfalls."
Drat.
Nima Abu Wardeh describes herself using three words: Person. Parent. Pupil. Each day she works out which one gets priority, sharing her journey on finding-nima.com
pf@thenational.ae
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