Looming world recession likely to hit by next year, Nobel Prize Laureate warns

Economist Paul Krugman says recession likely by next year at the latest. (AFP/File)
Updated 12 February 2019

Looming world recession likely to hit by next year, Nobel Prize Laureate warns

  • Krugman says there is a major backlash against globalization
  • Policy makers seem unaware of the concerns voiced by people, Krugman warns

DUBAI: The world will likely enter a recession by next year as the backlash against globalization continues to grow, economist Paul Krugman predicted on Monday.

Speaking at the World Government Summit in Dubai, Krugman warned that world was witnessing a landscape of stagnant wages, growing inequalities, and a loss of confidence in the world’s business leaders which in turn led to a populist backlash against globalization.

“The result is clear: forward motion on globalization has stopped, but it was slowing anyway,” Krugman said.

And he said there is “quite a good chance that we will have a recession late this year or next year.”

He said there was a general lack of preparedness among economic policymakers.

“The main concern has always been that we don’t have an effective response if things slow down…we don’t seem to have a safety net.”

Krugman said central banks lacked the tools required to protect against market turmoil, and planning for risk has been minimal.

Instead, trade wars and growing protectionism continue to dominate policy agendas, deferring attention and resources from what should be the real priorities.

“I don’t see the iceberg out there, but if we do hit one, I know for sure this liner is not unsinkable,” Krugman said, comparing the global economy to the Titanic.

He said people felt short changed by the previous generation of economic growth, but he said those discussing a solution seemed not to be touching on the issue.

“The question is what they want as the solution…turns out that’s not as clear,” Krugman said, highlighting what he called the gap leaders needed to fill in order to avert another “Great Depression.”

On what many are calling the Fourth Industrial Revolution, Krugman warned that, contrary to popular belief “technological change is actually relatively sluggish right now.”

And he said he doubted the claims that technology was so advanced it would soon change the way we work and live, adding “this is not a transformative revolutionary era.”

Krugman concluded that despite the technological advancements of the last 25 years, the way we work “had not changed all that much.”


UBS fined $51 million by Hong Kong regulator for overcharging clients

Updated 11 November 2019

UBS fined $51 million by Hong Kong regulator for overcharging clients

  • Hong Kong regulator’s investigation exposed ‘serious systemic internal control failures’ at the bank
  • In March, the Securities and Futures Commission banned UBS from leading initial public offerings in Hong Kong for a year

HONG KONG: Swiss bank UBS was fined HK$400 million ($51.09 million) by Hong Kong’s securities regulator for overcharging up to 5,000 clients for nearly a decade, the watchdog said on Monday.
The Hong Kong Securities and Futures Commission (SFC) said in a statement that an investigation found UBS had overcharged clients on ‘post-trade spread increases’ and charges in excess of standard disclosures and rates between 2008 and 2017.
THE SFC said the investigation exposed ‘serious systemic internal control failures’ at the bank. UBS had failed to disclose conflicts of interests and had overcharged some clients in ‘opaque’ trades, it said.
The overcharging affected 5000 Hong Kong managed client accounts in about 28,700 transactions, it said.
UBS has also agreed to repay the clients HK$200 million, the SFC said.
The regulator said the over-charging occurred in the bank’s wealth management division on bond and structured notes transactions.
UBS was found to have increased the spread charged after the execution of a trade without the clients’ knowledge, it said.
In the statement, the SFC said UBS was also found to have falsified some account statements which were issued to financial intermediaries who were authorized to trade for the clients to “conceal the overcharges.”
UBS said the issues were ‘self-reported’ to the SFC and the results found were against the bank’s standard practice.
“The relevant conduct predominantly relates to limit orders of certain debt securities and structured note transactions, which account for a very small percentage of the bank’s order processing system,” the bank said in a statement.
SFC chief executive Ashley Alder said while each “overcharge represented a fraction of each trade” the bank’s “misconduct involved decisions and a pervasive abuse of trust resulting in significant additional revenue for UBS to which it was not entitled.”
In March, the SFC banned UBS from leading initial public offerings in Hong Kong for a year after it found the bank, and some of its rivals, had failed to carry out sufficient due diligence on a number of deals.
UBS was fined HK$375 million while Morgan Stanley was fined HK$224 million, Merrill Lynch HK$128 million and Standard Chartered (StanChart) HK$59.7 million, all for failures when sponsoring, or leading, public market floats.