February, 24, 2010

Remember the halcyon days of August 2008, before the collapse of Lehman Brothers and the onset of the financial crisis?Although there were already rumblings of problems ahead in global credit markets, it looked as though the world financial system was facing a gentle correction, rather than the vast destruction of value that occurred between September of that year and the following February.

In the Gulf, the buzzword as I remember was “insulated”. Even as signs of the growing crisis loomed ever larger, government and central banks across the region repeated that word like a lucky charm: because of its energy revenue and financial liquidity, the Gulf would be “insulated” from the global problems.We now know that the financial hurricane that swept the world was so intense that even the Gulf’s vast pools of liquidity could not fully compensate for the devaluation of global assets.

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