Dubai Default Throws World Markets into Disarray
by The New LedgerNews from Dubai is rocking and rolling world markets today, as an $80 billion default could spawn a broad wave of activity and expose the tenuous status of the banking system. We’re talking global markets on the Black Friday edition of Coffee and Markets, a daily podcast from The New Ledger on politics, policy and the marketplace with Francis Cianfrocca, brought to you by BigGovernment.com.
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Related Links:
FT: Global Markets on Selling Spree Thanks to Dubai Default
Bloomberg: RBS Led Dubai World Lenders, HSBC May Have Most at Stake in UAE
Business Insider: Stop Freaking Out, the UAE Can Easily Save Dubai
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21 Comments
[...] This post was mentioned on Twitter by Big Government and DNC Fail!, Patrick Henry. Patrick Henry said: Dubai Default Throws World Markets into Disarray: News from Dubai is rocking and rolling world markets today, a.. http://bit.ly/7FlGkz [...]
I don't understand how the US market is not reacting with but a hiccup. Is it being artifically propped up?
I guess they took a trick from the WH playbook. Dump bad news before the weekend or on a holiday.
Does this mean property prices are going to fall there? It looks like a great place for a vacation home.
deb,
Yes, the PPT has jumped into the markets here. Unfamiliar with that term? "Plunge Protection Team".
Most folks are unaware of it, brought to courtest of Unkle Sam and Wall Street.
Does this mean the price of sand will be going down?
Dubai has a ton of oil. They have assets to settle the debt, if necessary. The real reaction will be next week after hedge funds have checked their exposure, methinks.
This is the Dubai that was trumpeted by several MSM pieces as transforming itself into a paradise complete with massive artificial islands and soaring development, when the oil prices went sky high. They were praised though for preparing for when their oil revenues would decline when the reserves would dwindle by setting themselves up as such a powerhouse.
Okay, who can honestly say they shouldn't have seen this coming when the markets crashed? Now, are you the same people who never saw the sub-prime mortgage mess as well? And how long have you been on Wall Street and/or in elected office?
Good Lord man, haven't you considered your carbon footprint to jet over there? For shame!
But they were spending lots of their oil wealth to transform into… something else… other than an oil supplier. Which makes one wonder how much recoverable oil is there for what amount of profit. If all the bills were settled under current market conditions, or worse, would they be right back to where they were before they ever exported oil, except with plenty of fancy empty buildings?
[...] Read the original post: Big Government » Blog Archive » Dubai Default Throws World Markets … [...]
Yep. Rather like Las Vegas after the bust of the housing bubble.
Then thousands of years after The Big Crash, people will come upon these mammoth forgotten structures, and wonder what gods and kings they were built to honor…
A fool (read oil sheik) and his unearned oil money are soon parted. The entire concept of Dubai is dubious.
Why would anyone want to go to a city in the middle of a desert? What is there to see or do? When the oil runs out, there will be no business to conduct. The oil shieks will go back to racing camels.
Business Insider reported that the exposure to other banks appears to be minimal. In addition, UAE can easily handle a bailout. Europe rebounded nicely last night, hopefully Asia will rebound some today as well. Hopefully.
like most excess, you reap what you sow…
Dubai has No oil, not a drop. They were presumed backed by Abu Dhabi-which has oil. Turns out the speculation revolves around the possibility of AD NOT backing the debt.
Also, Dubai has always operated a oil services & post oil business plan. The country has always been an open trade economy, much more open than typical muslim countries. The intent was to create world class destination, for business and recreation.
Thanks to all for listening and commenting. A few points:
Dubai has no oil of its own. It's the second-largest of the seven mini-states that make up the United Arab Emirates. Abu Dhabi, which is FULL of oil, is the largest of the seven.
Dubai World is the entity which notified its lenders (including HSBC, RBS, Sumitomo, Mizuho, quite a few others with smaller exposures) that it would seek to omit some upcoming debt payments. DW was originally funded with money from Abu Dhabi, and was intended as the vehicle that would build Dubai into a world-class financial center.
Real estate crashed 50% in Dubai at the beginning of the crisis, so it's not like something like this wasn't coming. The thing is that DW is essentially a sovereign, and the surprise is that Abu Dhabi appears willing to allow it to default. A sovereign default always roils the banking system more than a business default, partly because investors tend to reserve less against them. The reputational damage to a sovereign default, both for the borrower and the lender, is also huge.
I talked to some senior investment people yesterday about the situation, and the general sense is that the fallout won't be too bad, so long as it doesn't spread. Dubai isn't the only sovereign that's stretched pretty thin these days, and no, I'm not talking about a possible US default. Think a little farther south.
can they get the pirates to give them a loan?
Dubai is loosing investor confidence across the Persian Gulf.
Due to financial crisis , Dubai could default on its debt gripped investors.
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