The UK has turned into a global laughing stock, as the country's politicians behave as though they are running one of those banana republics they used to scorn.
In August, Christopher Dembik, Saxo Bank’s head of macro analysis, said the UK was “looking like an emerging market country” and all it needed was a currency crisis to seal the deal.
Within weeks, former chancellor Kwasi Kwarteng’s disastrous mini-budget had not only sunk the pound, but also his ministerial career and that of Prime Minister Liz Truss, making her the shortest ever incumbent at only 44 days.
In the past four months, the UK has had four chancellors and three home secretaries.
Rishi Sunak will become the UK’s third prime minister in less than two months after rival Penny Mordaunt withdrew from the contest on Monday, a day after Boris Johnson also pulled out.
_____________
Watch: Liz Truss resigns
The International Monetary Fund, EU and US President Joe Biden have poured scorn on the UK, but they should resist the temptation to gloat.
While the UK has made serious mistakes, it is at the mercy of economic and political problems that threaten many other countries — and it could be their turn next.
Political instability, trade disruptions, an energy crisis and rocketing inflation are rattling the UK, but the backlash has been overdone, says Ian Lance, co-fund manager of Temple Bar Investment Trust.
“The doom-mongering has reached levels rarely seen before, but the reality is not nearly as scary. The UK has the second-lowest ratio of debt to GDP [gross domestic product] and headline inflation is below the eurozone average.”
The UK’s debt is 88 per cent of GDP, according to the IMF. In Canada, the debt-to-GDP ratio is 102 per cent, rising to 113 per cent in France, 126 per cent in the US, 151 per cent in Italy and 262 per cent in Japan.
In September, UK inflation rose to 10.1 per cent, but it is at 10.9 per cent across the EU.
The UK, the US, Europe and Japan have all spent the past 12 or so years carrying out a gigantic economic experiment, “which appears to have failed”, says Mr Lance.
“Interest rates have been kept at artificially low levels by central banks, who also printed money, stoking up bubbles in equities, bonds and housing.”
They doubled down by running massive fiscal deficits during the Covid-19 pandemic, which, combined with post-lockdown supply shortages, has driven inflation to today’s 40-year high, he says.
Central bankers are belatedly tightening, popping all the asset bubbles they had created, Mr Lance says. “Bond yields are now going up everywhere and equity markets are coming down.”
Mr Kwarteng’s mistake was to announce £43 billion ($48.9bn) of unfunded tax cuts on top of a £150bn energy support package at a time when markets were already nervous.
_________________
Cost of living crisis in the UK — in pictures
Others are keeping their heads down but the bond vigilantes may come for them soon enough.
Europe remains exposed to the war in Ukraine and an energy shock, while the euro is vulnerable.
The European Central Bank will be forced to raise interest rates aggressively to curb inflation, even though “the economic outlook is dreadful and a recession looms”, warns Jan von Gerich, chief analyst of fixed income at Nordea Markets.
Vijay Valecha, chief investment officer at Century Financial, also expects further tightening, which could put pressure on vulnerable eurozone members such as debt-ridden Italy.
“This could be a major risk factor for Italian assets as the country could fall into a recession,” Mr Valecha says. “This could impact government revenues even further, spiking its borrowing costs.”
Italy also faces huge political uncertainty after the election of far-right leader Giorgia Meloni and her coalition allies, he says.
Reflecting this risk, yields on Italian 10-year bonds are now 4.852 per cent, almost double that of Germany’s 2.474 per cent. This is notably higher than the 10-year UK gilt yield, which stands at 3.99 per cent.
Trouble is also brewing in Japan, whose “monetary policy is now a major risk factor for global markets”, Mr Valecha says.
The yen is “depreciating at an unprecedented pace”, having fallen 31.13 per cent against the US dollar so far this year. Even the pound has “only” fallen 21.34 per cent this year.
Japan is the only country in the world with a dovish monetary policy, as it battles to escape its long-running deflationary spiral, Mr Valecha says.
“Things are now getting dicey as yen depreciation is raising the price of imported goods and hitting the pockets of its senior citizens.”
If the Bank of Japan reverses policy, global yields could rise sharply since it could be forced to sell US Treasuries to defend the yen.
“That could be a major catastrophe for global risk assets since it is the last major buyer of US Treasury bonds,” Mr Valecha says.
China is also “in deep trouble” due to global central bank tightening and its zero-Covid policy, says Fawad Razaqzada, market analyst at City Index.
“It even decided to postpone, without giving a reason, the release of its third-quarter growth and industrial production figures. This does not look good and investors fear the world’s second-largest economy may have performed even poorer than expected.”
The US is protected by the double safety net of the world's reserve currency and energy self-sufficiency, but that has not stopped the S&P 500 from falling into bear market territory.
Are we approaching an important inflection point, the point where systemic central banks, like it or not, are forced to intervene to head off disaster? Markets seem to think so.
Jeremy Batstone-Carr,
European strategist at Raymond James Investment Services
The US Federal Reserve is aggravating the world's problems by increasing interest rates and shrinking its balance sheet by $95bn a month through quantitative tightening.
Economist Mohamed El Erian, chief economic adviser at Allianz, has warned the Fed will “probably break something” as it scrambles to tame sky-high inflation.
Liquidity is the “lifeblood” of the US bond market but it has dried up to levels not seen even during the Covid-19 pandemic turmoil in March 2020, warns Jeremy Batstone-Carr, European strategist at Raymond James Investment Services.
This has driven up the dollar, hit global share and bond prices, and now threatens to become a self-reinforcing spiral.
The fiscal medicine could be more dangerous than the inflationary disease, as it risks triggering a “liquidity crunch”, Mr Batstone-Carr says.
The Fed may soon have to “row back on its hawkish policy”, he says.
“Are we approaching an important inflection point, the point where systemic central banks, like it or not, are forced to intervene to head off disaster? Markets seem to think so.”
This week’s UK Chancellor, Jeremy Hunt, is battling to convince those same markets that his country’s debt and deficit are under control, warning that tax and spending measures could prove “eye-watering”.
Others also face tough decisions unless central bankers ease up on quantitative tightening, but this could also be an opportunity for brave investors, Mr Lance says.
“The best periods of investment performance come in the aftermath of uncertainty similar to that of now.”
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
Mohammed bin Zayed Majlis
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
KILLING OF QASSEM SULEIMANI
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
'Doctor Strange in the Multiverse Of Madness'
Director: Sam Raimi
Cast: Benedict Cumberbatch, Elizabeth Olsen, Chiwetel Ejiofor, Benedict Wong, Xochitl Gomez, Michael Stuhlbarg and Rachel McAdams
Rating: 3/5
Mohammed bin Zayed Majlis
More on animal trafficking
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
SPEC%20SHEET%3A%20APPLE%20M3%20MACBOOK%20AIR%20(13%22)
%3Cp%3E%3Cstrong%3EProcessor%3A%3C%2Fstrong%3E%20Apple%20M3%2C%208-core%20CPU%2C%20up%20to%2010-core%20CPU%2C%2016-core%20Neural%20Engine%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EDisplay%3A%3C%2Fstrong%3E%2013.6-inch%20Liquid%20Retina%2C%202560%20x%201664%2C%20224ppi%2C%20500%20nits%2C%20True%20Tone%2C%20wide%20colour%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMemory%3A%3C%2Fstrong%3E%208%2F16%2F24GB%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStorage%3A%3C%2Fstrong%3E%20256%2F512GB%20%2F%201%2F2TB%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EI%2FO%3A%3C%2Fstrong%3E%20Thunderbolt%203%2FUSB-4%20(2)%2C%203.5mm%20audio%2C%20Touch%20ID%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EConnectivity%3A%3C%2Fstrong%3E%20Wi-Fi%206E%2C%20Bluetooth%205.3%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBattery%3A%3C%2Fstrong%3E%2052.6Wh%20lithium-polymer%2C%20up%20to%2018%20hours%2C%20MagSafe%20charging%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ECamera%3A%3C%2Fstrong%3E%201080p%20FaceTime%20HD%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EVideo%3A%3C%2Fstrong%3E%20Support%20for%20Apple%20ProRes%2C%20HDR%20with%20Dolby%20Vision%2C%20HDR10%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EAudio%3A%3C%2Fstrong%3E%204-speaker%20system%2C%20wide%20stereo%2C%20support%20for%20Dolby%20Atmos%2C%20Spatial%20Audio%20and%20dynamic%20head%20tracking%20(with%20AirPods)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EColours%3A%3C%2Fstrong%3E%20Midnight%2C%20silver%2C%20space%20grey%2C%20starlight%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EIn%20the%20box%3A%3C%2Fstrong%3E%20MacBook%20Air%2C%2030W%2F35W%20dual-port%2F70w%20power%20adapter%2C%20USB-C-to-MagSafe%20cable%2C%202%20Apple%20stickers%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh4%2C599%3C%2Fp%3E%0A
The five pillars of Islam
Killing of Qassem Suleimani
Results:
6.30pm: Handicap | US$135,000 (Dirt) | 1,400 metres
Winner: Rodaini, Connor Beasley (jockey), Ahmad bin Harmash (trainer)
7.05pm: Handicap | $135,000 (Turf) | 1,200m
Winner: Ekhtiyaar, Jim Crowley, Doug Watson
7.40pm: Dubai Millennium Stakes | Group 3 | $200,000 (T) | 2,000m
Winner: Spotify, James Doyle, Charlie Appleby
8.15pm: UAE Oakes | Group 3 | $250,000 (D) | 1,900m
Winner: Divine Image, William Buick, Charlie Appleby
8.50pm: Zabeel Mile | Group 2 | $250,000 (T) | 1,600m
Winner: Mythical Image, William Buick, Charlie Appleby
9.20pm: Handicap | $135,000 (T) | 1,600m
Winner: Major Partnership, Kevin Stott, Saeed bin Suroor
The Birkin bag is made by Hermès.
It is named after actress and singer Jane Birkin
Noone from Hermès will go on record to say how much a new Birkin costs, how long one would have to wait to get one, and how many bags are actually made each year.
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Top 5 concerns globally:
1. Unemployment
2. Spread of infectious diseases
3. Fiscal crises
4. Cyber attacks
5. Profound social instability
Top 5 concerns in the Mena region
1. Energy price shock
2. Fiscal crises
3. Spread of infectious diseases
4. Unmanageable inflation
5. Cyber attacks
Source: World Economic Foundation
More from Neighbourhood Watch
UAE currency: the story behind the money in your pockets
Dirham Stretcher tips for having a baby in the UAE
Selma Abdelhamid, the group's moderator, offers her guide to guide the cost of having a young family:
• Buy second hand stuff
They grow so fast. Don't get a second hand car seat though, unless you 100 per cent know it's not expired and hasn't been in an accident.
• Get a health card and vaccinate your child for free at government health centres
Ms Ma says she discovered this after spending thousands on vaccinations at private clinics.
• Join mum and baby coffee mornings provided by clinics, babysitting companies or nurseries.
Before joining baby classes ask for a free trial session. This way you will know if it's for you or not. You'll be surprised how great some classes are and how bad others are.
• Once baby is ready for solids, cook at home
Take the food with you in reusable pouches or jars. You'll save a fortune and you'll know exactly what you're feeding your child.
Zayed Sustainability Prize
More on Quran memorisation:
The%20specs
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The five pillars of Islam
KILLING OF QASSEM SULEIMANI
Killing of Qassem Suleimani
Yemen's Bahais and the charges they often face
The Baha'i faith was made known in Yemen in the 19th century, first introduced by an Iranian man named Ali Muhammad Al Shirazi, considered the Herald of the Baha'i faith in 1844.
The Baha'i faith has had a growing number of followers in recent years despite persecution in Yemen and Iran.
Today, some 2,000 Baha'is reside in Yemen, according to Insaf.
"The 24 defendants represented by the House of Justice, which has intelligence outfits from the uS and the UK working to carry out an espionage scheme in Yemen under the guise of religion.. aimed to impant and found the Bahai sect on Yemeni soil by bringing foreign Bahais from abroad and homing them in Yemen," the charge sheet said.
Baha'Ullah, the founder of the Bahai faith, was exiled by the Ottoman Empire in 1868 from Iran to what is now Israel. Now, the Bahai faith's highest governing body, known as the Universal House of Justice, is based in the Israeli city of Haifa, which the Bahais turn towards during prayer.
The Houthis cite this as collective "evidence" of Bahai "links" to Israel - which the Houthis consider their enemy.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The years Ramadan fell in May
Killing of Qassem Suleimani
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Global state-owned investor ranking by size
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United States
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China
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UAE
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Japan
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5
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Norway
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Canada
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Singapore
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Australia
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Saudi Arabia
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South Korea
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The years Ramadan fell in May
Killing of Qassem Suleimani
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
more from Janine di Giovanni
Shooting Ghosts: A U.S. Marine, a Combat Photographer, and Their Journey Back from War by Thomas J. Brennan and Finbarr O’Reilly
Killing of Qassem Suleimani
Killing of Qassem Suleimani
MATCH INFO
Fulham 0
Aston Villa 3 (Grealish 4', Hourihane 15', Mings 48')
Man of the match: Jack Grealish (Aston Villa)
The specs: McLaren 600LT
Price, base: Dh914,000
Engine: 3.8-litre twin-turbo V8
Transmission: Seven-speed automatic
Power: 600hp @ 7,500rpm
Torque: 620Nm @ 5,500rpm
Fuel economy 12.2.L / 100km
The specs
Engine: 3.0-litre flat-six twin-turbocharged
Transmission: eight-speed PDK automatic
Power: 445bhp
Torque: 530Nm
Price: Dh474,600
On Sale: Now
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Zed Books
