Best for GCC to depeg from dollar: Krugman

Abu Dhabi: The worst of the global economic crisis has "probably" passed, although a quick recovery is unlikely, American Nobel laureate Paul Krugman said at the opening of the Megatrends economic conference in Abu Dhabi on Monday.

Acknowledging his lack of knowledge of nuances of the UAE economy, Krugman stated his view that the UAE, along with its Gulf Cooperation Council (GCC) neighbours stands to benefit from a long-term upward trend in oil prices.

He also opposed regional monetary policies that continue to peg local currencies to the dollar, citing the expected decline in the value of the dollar by the end of the year and larger trading volumes with European and Asian countries.

A decline of the dollar could again increase inflation across the Gulf as was the case last year when officially the inflation rate hit a 20-year high of 12 per cent, although some independent estimates place the average figure close to 20 per cent. On the global economy, Krugman said it is likely to continue the struggle to recoup massive losses in trade volumes during the past year.

Krugman writes for Gulf News regularly through syndication.

Overall, world trade has declined 15 per cent in the past year, unprecedented since the 1930s. The losses are higher than those recorded in the first year of the Great Depression, the 2008 Nobel Prize for Econ-omics winner said.

"It's not just a severe recession," Krugman said. "It's a severe recession where the usual policy response has run out of room to operate."

Krugman said the likely long-term solution will come in the form of tougher environmental regulation in the developed world to be followed in later stages by developing economies.

In the United States, cap-and-trade legislation designed to limit industrial carbon emissions is moving swiftly through the legislative branch. If passed, it could force private sector investment to conform to the new rules.

In many developed countries, central banks have already cut interest rates to zero, an unthinkable prospect as recently as the beginning of 2008.

These banks are now looking to riskier means to encourage private sector investment including buying private sector debt and long-term government debt.

Banking regulation is also coming back with governments focusing on regulating non-conventional banking institutions such as investment banks and insurance companies.

"In general, I think we're heading to a world that is going to be a lot more boring financially than the one we've been living in for the last 10 years, and I'm looking forward to it very much."

Do you think it is a good time to de-peg from the American dollar? Are you going to save your money in dirhams or dollars?

Freedom is the name of the game! I believe it is now the time for every nation to be free at last. The global crisis is one of the rarest opportunities for a complete nation's life change in all directions. So grab the chance and move forward towards an independent and prosperous future.
Ray Ad
Tunis,Tunisia
Posted: May 26, 2009, 12:57

Yes, UAE should de-peg from dollar to a basket of currencies and GCC should come out with a common currency policy including UAE.
Joseph
Abu Dhabi,UAE
Posted: May 26, 2009, 12:31

i think it should have been done long ago. i prefere my savings in Dirhams
Taher K.
Ras Al Khaimah,UAE
Posted: May 26, 2009, 12:21

Its the right time to depeg the UAE dirham from Dollar to a basket of currency also its the time to sell of Dollar assets of UAE. The world is expecting a less valued dollar in less than a year time. I think the US is losing the status of financial power house. For maintaining the price stability in the region we have two choices a single GCC currency or depegging we can hope the best decision from our authorities.
Victo Augustine
Abu Dhabi,UAE
Posted: May 26, 2009, 11:33

It is the "the BEST" opportunity for GCC countries to depeg, to get the "real worth" of the better pre-vailing market situations, stable Islamic Banking structures and policies.
Jayant B. Rangari
Dubai,UAE
Posted: May 26, 2009, 11:24

it is very much beneficial for the GCC countries to go for a unified currency rather than depending on US Dollar. Since they are rich in oil...I think UAE should de-peg from USD.
Ali
Dubai,UAE
Posted: May 26, 2009, 10:54

It time to dog the dollar. Time to revaluate the Dihram and peg to a basket.
Griffin
LA,USA
Posted: May 26, 2009, 10:47

Its right time to depeg from the American dollar. The GCC countries should go ahead with the unified currency policy which will help them to develop a better financial status depegging American dollar. But this has to done by learning from the problems faced by EU.
Chindhu
Dubai,UAE
Posted: May 26, 2009, 10:07

yes I agree to de-peg UAE dirham from dollar. And UAE should focus on trade with Europe and Asia markets. UAE and GCC can get more benefit of increase in oil prices if the AED would be de-peged.
Mohammad Anwar
Ajman,UAE
Posted: May 26, 2009, 09:38

I am a Democrat who for the past 20 years believed global warming was caused by CO2. Now, I think the wheels are coming off the man-made global warming theory. More and more it looks like is a natural phenomenon to me.A year ago I launched a website where I try to bring common sense discussion to our country's energy policy. Since energy policy is closely tied to global warming/climate change, I set out to find the 'smoking gun' that proves global warming is driven by CO2. Instead, I found that the wellspring of man-made global warming theory, the UN's IPCC reports on climate change, are compromised by politics, and that man-made global warming theorists cherry pick facts and ignore contradictory evidence from reliable studies. In short, there is no smoking gun and man-made proponents refuse to entertain new science.Before the United States increases the cost of energy with a carbon tax or cap-and-trade, I believe it's imperative that we establish a non-political commission to review the facts and evidence surrounding global warming. The UN, a political organization, should not be determining American energy policy. The stakes are huge. If we respond to global warming incorrectly, our children and grandchildren will likely lead lives of increasing hardship and desperation.
Rmoen
Reno,USA
Posted: May 26, 2009, 01:43