Three years since collapse of Lehman Brothers, danger remains
The global financial crisis is three years old today - with little end in sight to the many problems unleashed by the
troublesome toddler.
While some analysts had been predicting trouble for the world financial system prior to September 15, 2008, it was 36 months ago today that US banking giant Lehman Brothers filed for bankruptcy - revealing the scale of the dreaded 'credit crunch' that would have consequences for everywhere from Detroit to Dubai.
Three years on, and the effects of the market mayhem are still being felt.
Just yesterday, rating's agency Moody's cut the credit ratings of a pair of French banking giants - Credit Agricole and Societe Generale - citing their exposure to Greece's debt - a fresh blow to eurozone leaders struggling to restore confidence in the region.
In a sign of growing concern, both US President Barack Obama and Chinese Premier Wen Jiabao urged Europe to get a grip of a crisis spiralling out of control.
Meanwhile, in the US, the $447 billion jobs package widely seen as Obama's last chance to stabilise the world's largest economy before elections next year looks likely to be dead on arrival in the US Congress.
"What the president's proposed so far is not serious. And it's not a jobs plan," said Senate Republican leader Mitch McConnell, expected to veto the bill.
To add to the growing gloom, figures yesterday showed the unemployment rate in Britain has risen at its fastest pace in two years to reach 2.51 million.
The worst of the crisis may have taken longer to reach Dubai's shores, but new data yesterday showed that the emirate still has some way to go to recover.
A study by real estate consultants CB Richard Ellis said that rental rates in Dubai's main financial areas in the second quarter of this year were 18 per cent down year-on-year. The average rent in the Dubai International Financial Centre remains lower than five years ago - and after Lehman's collapse, few would state with certainty where they will be in five years' time.
UAE WAS UNMOVED BY CRISIS...AT FIRST
While Wall Street cowered three years ago, 11,000km away in the UAE there seemed little reason to worry. Disputes about new Salik road toll gates, talks on a regional currency, and stories about an Abu Dhabi group's purchase of Manchester City filled the newspapers on September 15.
Those aware of the brewing storm played it down - one real estate boss saying only that it "could" hit local property.
A foreign website named the UAE the nation 'least affected by the US financial crisis'. "Almost everything is good," it gasped. "The place is booming."
Of course a little over a year later, the country, and specifically Dubai, made international headlines as the effects of the global crisis made a local impact.
But local analysts can comfort themselves with the knowledge that one US expert, before Lehman's collapse, publicly forecast that problems in the US subprime market "seem likely to be contained".
The bad news? It was Federal Reserve chairman Ben Bernanke - the man still in charge of trying to trying to drive growth in the world's largest economy.
Those caught off guard by the events of three years ago can take comfort in the words of the great economist JK Galbraith, who once famously said: "The only function of economic forecasting is to make astrology look respectable."
© 7Days 2011
