Semi-Modern Nomadism, Dubai Crisis, Obama's War
November 29th, 2009 As a youth I was pretty nomadic. I traveled across the country hitch-hiking, driving beater cars and once even on the bus. I grew up on the remnants of a dairy farm. It had been converted to a horse stable by my mother and I was one of those people who was on a horse before I could walk as is the case in all steppe nomadic peoples. But growing up in suburban Connecticut 50 miles from Manhattan made it pretty tough to take on the cowboy values that my parents had and the alternative hunt club culture of the eastern elites did not appeal to my more libertarian instincts. I grew up on westerns. My people were the western horse riders, cattle herders and showmen ie Rodeo performers.
But I did not accept that as a model for my life. There was no future for it that I could see in Connecticut. Instead I was attracted to an urbane bohemian nomadic culture. It was the road and the vehicle of choice for the modern nomad was the car. Hitch hiking or driving, it was the gas guzzling automobile that got me from place to place. Not that I was a raider, I was more of a trader. Although an argument could be made that the traveling protester, hitching from protest to protest could be considered by the local authorities to be a modern day equivalent to the barbarian invaders, crashing the gates of the new Rome. Biker movies and tales have made that analogy more directly but back in the sixties and seventies we had a huge number of youth on the road traveling to concerts, anti war protests and simply places that had a reputation for being simply centers of hippie lifestyle.
I used my contacts on the road to do a small business in illicit substances. Transporting from the urban centers to the suburban milieu where I made a few dollars to provide me with the occasional book or fast food product and of course more substances to indulge my own version of the shamanistic venture into inner space.
I subscribed to the radical politics of my day that emanated out of the urban centers and propagated the ideologies of the urban dispossessed into the suburban hinterlands. It was somewhat comical to see a white teenager with a load of Black Panther Newspapers hawking them at an all white high school. The one black guy there became my buddy once he had decided I was not competition in his constant hunt for female companionship. I was more into ideas than sex, although I did not let opportunities pass when offered. But I often found myself treated with approbation by the parents of said females who saw me as a corrupting influence with my communist notions, long hair and drugs.
But mostly it was the freedom of the road that I liked. Seeing new places, or merely seeing how fast I could get from one point to another. 33 hours hitching from Denver to Connecticut was pretty good in 1974. It was not for the sake of the destination but for the trip. It was all about being on the road, yet it was an effort to get to a destination with speed that counted. I would base myself in Colorado and from there take trips around the country. Eventually I made it to every state except for North Dakota, Alaska and Hawaii.
As I got older I settled into a California lifestyle. I had not intended to move here. My buddy from high school enamored with Joni Mitchell saw California as a promised land. I merely saw it as another place on the map. I wanted the world. But by a fluke I went to San Francisco to visit a friend and his girlfriend a mysterious Turkish woman when I decided I did not want to be part of the New York City Underground. It was a simple matter, when I got stoned the noise of Manhattan got on my nerves. I ran a night club there for the Yippies and managed to sleep through the worst part of the morning rush hours, but I simply could not get used to the sheer volume of noise after living in Colorado for a few years.
When I got to San Francisco I was hooked on the physical beauty, the mystique of the radical culture and the walkable size of the place. It had the culture and intellectual appeal of New York and more of the laid back attitude and calm physical environment of Colorado. I spent about 6 months getting to know San Francisco before my political involvements got me chased out of town with a reward on my head from then mayor now Senator Feinstein. Enough nostalgia.
Obama is about to announce the increase in troop levels in Afghanistan. This is mostly for the sake of domestic consumption. The concern is not for the people of that nation or to chase the Al Qaeda ghost. It is really all about placating the right in America and securing the conservative electorate for the 2010 elections. The peace groups are uniting and calling for protests on December 2nd and 3rd. It was announced on KPFK. But the problem is, Obama is not likely to pay attention. Most likely he will parlay the protests as proof that he is pursuing a middle path. The ANSWER Coalition is calling for protests on December 2. The National Lawyers Guild in Los Angeles is calling for protesters to gather at the Federal Building in Westwood at 5 PM on the day the troop increases are announced.
Today on KPFK Noam Chomsky was quoted as saying that the protests against the Iraq war forced the government to moderate the violence and not use methods like saturation bombing as in Vietnam. In fact the entire policy of Rumsfeld to outsource war and minimize casualties, carried over from Clinton, are all part of the response to the anti war movement from the Vietnam era. They did not want to encourage another massive round of protests. That was one reason why the financing of the war was outsourced to China. Domestically the housing boom and loosening of credit was an attempt to get Americans to consume as if there was no war. We had a dual policy of creating a national security state, largely a propaganda device to keep consumers shopping, while on the other hand we had a war on terror that justified a perpetual war machine. But it could not be the old world war two style war machine because the American people had to be kept consuming. It was the consumption of Chinese products and the consequent Chinese policy of buying US debt that financed the war and if the people did not go along then the policy would not work. Ultimately the balancing act collapsed. But by then Bush and his crew were headed home and the Obama clean up crew would be left to deal with the mess.
Dubai has got financial problems. It has debt that is 107% of its GDP. It is a place that has been built on cheap labor from India and Pakistan. The laborers come there thinking they will make money and end up spending 3 or 4 years paying back the debt of $5000 to $10,000 that they spent to get there. They then live in slums with no sanitation in the surrounding states of the United Arab Emirates. 5% of the population are Emirates natives but most people are virtual slave laborers or westerners who are almost oblivious of the state of affairs.
The Bank of the Emirates is sending money to Dubai to try and bolster the economy and to prevent a run on the banking system. Dubai is one of the most ecologically unsustainable places in the world taking up a huge carbon footprint. It survives on oil and the myth that Dubai is a nation that is run by the rule of law.
The over-leveraged nature of the economy there may be another harbinger of the unstable foundation of modern capitalism and the oil economy in particular. Dubai is one of those unregulated pockets of the world economy where the financial crisis has its gestation.
This is the view from the Hindu Business-Line. Mumbai being a potential rival business center is not likely to be particularly upset with the problems of Dubai.
"Dubai debt crisis will have limited impact'
Mumbai, Nov. 29
Dubai's debt crisis has rattled markets across the world as the problem revived worries about the health of the global financial system. Although the exposure of Indian companies and banks to the Emirate is negligible, concerns linger about the fallout on the broader economy.
Dubai World, the investment conglomerate of the sheikdom at the centre of the crisis, has a debt of $59 billion — a major component of Dubai's total debt of $80 billion.
Authorities from Dubai to New Delhi have tried to play down concerns, but there is fear a sovereign debt default - should it happen – could have a cascading effect on the global financial markets.
Broking firm Geojit BNP Paribas has a large presence in the United Arab Emirates. Its West Asian joint venture Barjeel Geojit Securities LLC is headquartered in Dubai. Mr C.J. George, CEO of the firm, spoke to Business Line on the likely impact of Dubai World's current debt trouble on Indian markets, NRI inflows and on his own business in the Emirates. Excerpts:
Dubai World's debt crisis impacted the Indian markets on Friday. Will it continue to haunt the Indian markets?
The panic reaction we saw during the opening of the market on Friday was on account of the absence of any firm indication from Gulf markets due to Eid holidays. International investors do not perhaps worry too much about the impact on Indian markets. India has never been bracketed with GCC countries in the past and, hence, there will be more mature reaction in equity markets in the days to come.
Do you expect major selling by FIIs in the Indian market?
One of the most significant outcomes of crisis-ridden global financial markets during the last two years has been a growing recognition of India's uniqueness. FIIs have a more balanced and knowledgeable view of India today than in 2008. Hence, there is unlikely to be major FII selling. If that happens, there are others waiting to buy.
Will the crisis impact the NRI inflows?
There will be increase in inflows in the short-term since NRIs may consider India as a safe haven than domestic bank deposits in UAE and perhaps GCC. However, any protracted crisis can lead to job losses and business closures with impact in the medium term. In the long term, Dubai will continue to attract talent from India apart from unskilled workers, as the city will continue to be the centre of a booming GCC as long as oil is a precious commodity and Dubai is a tax haven with modern infrastructure.
What will be the impact on Kerala given the number of people from the State employed in Dubai and other Gulf countries?
During the last one year we have seen some amount of job losses leading to the return of many NRIs from Kerala. However, as Abu Dhabi started massive construction projects, a large number of them have shifted base from Dubai to Abu Dhabi. Today construction workers are shifting to Saudi Arabia as well where there is a real estate boom driven by real residential demand.
I am of the view that the worst is over for Kerala, as the current crisis is likely to be managed between Dubai and the federal government. The UAE and GCC cannot afford to leave this debt restructuring unsuccessful particularly with ample resources in federal hands.
Is Dubai World's trouble just a trigger? Do you think it could lead to a major crisis? Will it escalate to other Emirates?
Fortunately, the real estate bubble was limited to the Emirate of Dubai only and, hence, I am of the view that this will be the end of crisis for Dubai. The other Emirates are relatively stronger in terms of debt obligations. GCC countries are in better shape today after the recovery in oil prices and, hence, Dubai will continue to retain the position as a global centre in the region leveraging the proximity of Indian sub- continent.
India will be to Dubai what China is to Singapore, unless "one day" Mumbai claims that position. In short, this debt crisis will have only sentimental impact on other GCC countries and limited impact on other Emirates. This observation is on the strong circumstantial evidence that the federal government of UAE will have to support Dubai as the domestic banks have a state guarantee.
How do you see it impacting your business in West Asia?
Barjeel Geojit has been operating in the UAE for the last eight years and the customer segment is predominantly Indian expatriates. We see Abu Dhabi booming, while Dubai slowing down with a neutralising effect. After the global financial crisis we are seeing more Indian investors putting money in Indian assets than before. Hence, if there is any panic there will only be improvement in our business in the short-term. However, in the unlikely event of this development leading to a protracted crisis and job losses at higher levels there will be an impact on our business too.
Will it lead to a liquidity crunch in the global economy, given the fact many central banks are planning to exit from accommodative monetary policy?
If this had happened a year ago it would have been perhaps disastrous than today as the amount involved can now be managed within GCC itself with the bounceback of oil. Moreover, the real estate bubble in Dubai was recognised by global financiers sufficiently long ago when the global real estate market started to crack. There is unlikely to be a second leg of liquidity crunch emanating from this event.
What do you make out of Dubai World's move?
Dubai World's move to restructure the debt should be seen as a genuine effort to restructure both debt and business since the announcement talked about just six month's "standstill" whereas the $60 billion consists of different maturities up to even 2014.
Currently, while the media around the world and international investors are showing panic there is relative calm and confidence internally, perhaps originating from the trust that finally it is a problem of the whole country and not of Dubai alone. Dubai has been growing on the strength of its capability to attract capital and talent globally and they know for sure that Dubai has to continue attracting these scarce resources to remain a vibrant non-oil economy surrounded by oil-rich countries.
Nevertheless, when the stock exchanges open for trading on Monday in Dubai, there will be selling pressure from global investors.
What in your view led to the current crisis?
On the strength of the oil boom in the region, Dubai one among seven emirates of UAE, has been positioning itself as a global centre for finance, trade and tourism due to negligible oil resources at home. During the early years of the current decade seeing growing demand for real estate, the Government started marketing housing projects offering 99 years of residence permit. Such a residence offer for investors in housing projects was neither denied by the Government nor approved. This led to an unprecedented boom in real estate, attracting rich investors from India, Russia, Europe and other places.
Both accounted and unaccounted global money started chasing real estate leading to even "day trading" in real estate.
There were even cases of buying in the morning and selling in the evening! Finally, when the global financial system cracked, the Dubai real estate bubble also crashed. The construction-driven economy was slowing down with highly leveraged projects. Dubai World, the real estate and infrastructure arm of the ruler of Dubai, was excessively leveraged during the boom years and when the demand disappeared had to catch up with debt repayments without positive internal cash flows.
While the boom in real estate collapsed, the federal government finally came out with a clarification that the buyers of real estate can only have six months renewable VISA in place of the highly publicised perception of 99 year's VISA. This was a bolt from the blue which was the last nail.
However, while Dubai was declining, Abu Dhabi, the cash-rich Capital city Emirate started booming on investment-driven by own capital. Abu Dhabi has been a lender of last resort for Dubai with vast oil resources and global financial investments of more than a trillion dollars. Abu Dhabi came out with a landmark announcement a year ago by declaring State guarantee on all bank deposits which led to calm in banking sector.
If Dubai announces any investor-friendly revision of VISA period, it can dramatically change the fortunes of domestic real estate market."
NRI - Non-Resident Indian
FII - Foreign Institutional Investor
GCC - Gulf Cooperation Council
UAE - United Arab Emirates
Eid Holidays-Eid al Adha or Feast of Sacrifice
VISA Period - Time allowed for foreigner to stay in country that requires VISA permit.
Tags: Banking Crisis in Dubai, Nomadic Living, Obama's War in Afghanistan
Posted in History, Politics,