Crisis in Dubai

[Crewleader]

November 30th, 2009

The Nightmare Scenario

Crisis in Dubai

By MIKE WHITNEY

The default in Dubai is not the beginning of Financial Meltdown 2. Don't look for dominoes here. Yes, it does raise serious questions about the vast debt-overhang in emerging economies--particularly East Europe. But, this is not a "sovereign default" in the strict sense, nor is there any great risk of contagion. Oil-rich Abu Dhabi is loaded with liquid assets, possibly as much as $800 billion. They could pay off Dubai World's measly $60 billion debt without batting an eye. But Abu Dhabi wants to send its wastrel younger brother a wake-up-call by forcing Dubai to restructure its debt. That means that banks, bondholders and contractors will have to take a haircut, which is not surprising given the abysmal condition of the commercial real estate market.

Dubai World owners were caught up in the same heady debt-fueled commercial construction-binge that swept across the United States. The problem can be traced back to lax lending standards and low interest rates. Now demand has fallen off a cliff and credit is getting tighter. Dubai World can't roll over its debt or meet its obligations. That's what typically happens when credit bubbles bursts.

On Thursday, Bank of America analysts issued a statement: “One cannot rule out — as a tail-risk — a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.”

This is nonsense. There will be no sovereign default. Abu Dhabi is not going to send global markets into a nosedive to save a few billion dollars. B of A is blowing smoke. Oil has already slipped $3 per barrel since the crisis began. There will probably be a tentative resolution by the time the markets open on Monday. That doesn't mean that there aren't important lessons to be learned from this latest financial calamity. There are.

http://www.counterpunch.org/whitney11302009.html

[westerebus]

1. Lesson number 1.

Never tie your camel to your Mercedes.

[TheWatcher]

2. Although this is a great article by Mike, once again it appears as though another Bailout is on

the way, and the Economic Ponzi Fascism, that most of the country seems to worship and is willing to die for (even though it's killing all but the 1%), will continue tomorrow, on schedule.

The Futures are already up +79, and there should be enough Propaganda released by noon tomorrow to give enough fuel to the fire for all the Rose-Colored, Pollyanna Ponzi Economic Apologists to burn down Rome ten times over.

So this was all much ado about nothing, and the looting, robbing, and stealing by the Predator Class can continue unabated.


ap
World markets gain as Dubai contagion fears abate

http://finance.yahoo.com/news/World-markets-gain-as-Dubai-apf-1334509803.html?x=0&sec=topStories&pos=1&asset=&ccode=



And it's such a relief, too. I mean, why would ANYONE want a functioning economic system based on real growth and fundamentals, that serves and functions for ALL of the people?

It's simply more fun and engrossing to watch dizzying Stock Market Bubbles, and to get falling down, stupid drunk over Propaganda and Recovery talk, the more outrageous and illogical the better. Delusion, distraction, and false paradigms are the ONLY thing that matter, and the only things that should rule our perception.

We need to focus on the important things, like running up as much debt as possible on cheap trinkets and bobbles, gobbling fast food, reality TV, American Idol, Playoffs, Holiday Consumerism, and whatever distractions we can hypnotize ourselves with.

And MOST IMPORTANTLY. Blind faith and worship of the Fed and "The Football Team", lest we commit blasphemy that will enable and aid the other side of the false political landscape.

We need to be RULED, not REPRESENTED.

Oh yes, I almost forgot.

:sarcasm:

One day, maybe sooner than most think, the system will simply collapse, no matter WHAT shenanigans the Casino Masters pull.

Until that happens, we will all just have to be content eating cake, and zombie walking through life, clinging to the myth of the "lagging indicator", and the Glorious False Recovery.

Oh wait, if that happens we will still go down with the ship ,and TPTB will just buy everything up for pennies on the worthless (by then) dollar, and start the whole process over again. Rinse and Repeat.

Damned if we do, Damned if we don't.

Sane historians years from now will wonder how this country wasn't simply walled in ala John Carpenter's 'Escape From New York' and abandoned by the rest of the world as an Open Air asylum.

[girl gone mad]

3. It isn't that clear cut, at all.

Dubai is http://www.ft.com/cms/s/0/b0805f64-dd7a-11de-9f8b-00144feabdc0.html?nclick_check=1">has rejected a debt guarantee of Dubai World, and there are some http://www.nytimes.com/2009/12/01/business/global/01islamic.html?_r=2&hp">very big doubts as to whether Islamic law even allows for a bondholder bailout of any kind.

[fasttense]

4. I think there is more to come about this. Well, see how it looks in 2 weeks. n/t