1961 Magazine Fall 2016

BUSINESS & FINANCE
buying the loans were sucking the opportunities up
at record pace.
Fast-forward to July of 2007 and the second major
institution falls victim. Investment bank Bear Sterns
notifies its investors they won’t be getting any of their
money they invested. Surely it wasn’t put in those exact
words but any investor with savvy would have been
thinking it. The investments in trouble were hedge
funds and Bear Sterns, despite considerable efforts, was
not able to convince rival banks to help bail them out.
To put it bluntly the system was beginning to collapse.
The S**t Hits the Fan:
9TH AUGUST 2007
BNP Paribas won’t allow investors to take their money
out due to, “complete evaporation of liquidity”. The
European Central Bank decides to pump 96 billion
Euros into the market to improve liquidity and adds
an additional 108.7 billion over the next few days,
that should do…..right? Wrong! Even the US Federal
Reserve interfered followed by Bank of Canada and
Japan. Mmmmm, something’s brewing? All this led to
the Federal Reserve cutting interest rates in the US
by a half percent on the 17th of August, 2007 which
results in Banks beginning to lend to each other at a
staggering rate.
On the 13th of September reports began to circulate
that Northern Rock had asked for and been granted
emergency financial help from the Bank of England.
The US Federal Reserve then cut its interest rates by
an additional half percent on the 18th of September.
While top notch banks around the world began to
report major losses due to sub-prime investments. USB
report a 3.4 billion loss, Citigroup reveals 3.1 billion in
losses, Merrill Lynch reports 7.9 billion in losses and
the list goes on.
Many people at the time didn’t fully understand
that the list of countries in trouble was increasing
as a result of the situation, but their leaders did. On
December 6th George W. Bush revealed a plan to help
more than a million people facing troubles with their
homes in the US while the Bank of England began
conservatively cutting interest rates by a quarter of a
percent. December 13th saw the US Federal Reserve
make plans with 5 major central banks around the world
to offer billions in loans to banks in an effort to shore
up the situation. Many banks began offering auctions,
the US for 20 billion followed by the European Central
Bank to the tune of 500 billion which was designed
to help commercial banks over the Christmas Period.
Then credit ratings of monoline insurers began to be
downgraded, while a huge slowdown in economic
growth globally began to take hold. Stock markets
started falling around the world, the US Federal Reserve
cut their interest rates to 3.5%, the G7 estimated that
the global loss due to the collapse of the US subprime
market reached 400 billion, followed by the
International Monetary Fund announcing that losses
could reach one trillion or higher. Housing prices
began to fall rapidly, banks continued to collapse or
be purchased by larger conglomerates at unbelievable
prices. Reports of record bail-outs began to emerge into
the media. While huge job cuts were being reported
by major companies around the globe. The world was
on the brink of financial collapse.
Ok stop! Stop! STOP! You may think this seems pretty
doom and gloom, however from the ashes a Phoenix
would rise and these events set the stage for a man
with great vision who would inspire people beyond his
borders. On the 28th of June 2009 Sheikh Mohammed
Bin Rashid Al Maktoum (the Vice President and Prime
Minister of the United Arab Emirates, and ruler of
Dubai) announced the launch of Dubai 2020. It was an
effort whose main responsibility was to examine the
possibility of Dubai hosting either the World Expo or
the Olympics and the Para Olympics in 2020. At the
time this may have seemed like a very small step to
fixing the financial downturn situation affecting Dubai,
but while the rest of the world was in panic Sheikh
Mohamed pointed to a direction forward.
Dubai’s economy had come to a screeching halt during
the crises with many construction projects in progress
in 2008. During this time contractors attempted to
focus on completing projects faster, which used up
available funds, as payments from investors began to
slow down. In the end construction companies began
to close leaving large projects on hold in different
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1961 Magazine Fall 2016