UAE Dirham to Dollar Peg
Read in todays Gulf News (last weeks approved news) that the plonkers are going to stick with the US Dollar peg.
I am not a trained economist but I can argue for several reasons why this is no good for me as an expat in a nation where we make up the majority, for the UAE and this region as a whole.
1. the UAE is importing inflation.
2. the low value of the local currency is overheating an already overheated property market.
3. the GCC and the UAE are selling their oil and gas at a discounted rate and squandering their futures. I suspect the hand of the US in maintaining an artificially low price of energy so that they can continue to wage war in Iraq. The oil embargo of 1973 had a significant impact on the Americans during the closing stages of the Vietnam war.
4. the low value of the local currency is going to bite into the labour market to the point where above average wage rises will have to take place (albeit slowly). This in turn will fuel the inflation cycle/spiral upwards.
5. artificial pegs have been used effectively during the Asian financial crisis by Malaysia but in the long run they tend to hide economic inefficiencies of the nation.
thoughts anyone? or am I preaching to the converted?
Last edited by Funk; 8th Jun 2007 at 12:42.
Reason: syntax