National Default – Are we the next Dubai!

[autorank]

Dubai was to be the next Switzerland, an enclave for anonymous banking, a play ground for the super rich, and the ultimate gated community for those with so much wealth, they felt an overriding need for protection.

Well, that’s all over now. Dubai declared a debt moratorium until May 10, 2010. While this isn’t a sovereign default (national), it might as well be.

Numerian, a stellar poster on financial matters, has an excellent post that you shouldn’t miss at http://agonist.org/numerian/20091127/dubais_fantasy_island_gamble_in_the_persian_gulf_comes_to_an_ugly_end">The Agonist Dubai defends debt payment suspension as markets fall

"What’s the difference between the United States and Dubai? The US is a playground for the wealthy just like Dubai, but at least America hasn’t declared bankruptcy – yet.

"Yesterday Dubai World, which is the investment arm of the Dubai emirate, asked its creditors to accept a six month freeze on interest due on its debt. That’s an admission Dubai is out of cash to make payments on its debt, and that it is de facto defaulting on this debt. It just isn’t using that word because it doesn’t want to trigger lots of nasty court claims from its creditors grabbing on to any collateral they can. Snip

"Sound familiar? When do you think global investors will start connecting these dots and ask: exactly what is backing the debt of the United States that has flooded the markets in the past nine years under Bush and Obama? At least Dubai had a presumed rich uncle in Abu Dhabi that would come to the rescue, even though now everyone realizes that was a very costly mistaken assumption. In the case of the US, the United States was the rich uncle everybody else looked to in order to solve global problems. Now that rich uncle has gone crazy in its own orgy of gambling, whoring, and over-indebtedness."
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[havocmom]

1. I recall pictures of people with wheelbarrows full of currency to buy bread

And as I recall, the Nazi party rose to power right afterward.

Watched a doc on Spear, and his early life, his family, history of Germany about then and thought, that war was never over. And people like the Bush family have set about creating the conditions all over again.

[autorank]

4. I agree

This time it won't work but that won't stop them from trying. Dubai was to be the "liesure world" for the extremely rich and infamous but now it's going to be nothing more than this place.

Heritage, USA

"It's kinda like Disney World without anybody here.

[anigbrowl]

8. I don't

Dubai was setting out to be primarily a financial center, not a playground. This slows it down by several years, but it'll be fine in the longer term. The biggest difference you'll see here will be worsening market in commercial real estate resulting in cheaper office and retail space as Dubaiworld offloads some of their capital assets. Actually, it benefits our economy a bit.

[arcadian]

14. The local radio "personality", shock-jock goes to Dubai every year.

Big promotional thing. They were definitely trying to promote it as a New Global Vegas. They were/are working on this very hard.

[spinbaby]

22. That inflation affected my family

My grandmother and her sister inherited some money. The sister bought a small farm. My grandmother saved her money and eventually bought a frying pan.

[Vidar]

2. K&R

[autorank]

6. Thnx!

[BeFree]

10. Admiral!!

Interesting times we live in, eh?

Dubai is the new home of your buddy Cheney, isn't it?
Think he's been giving them financial advice?

[derby378]

3. Isn't Delaware trying to become the next phantom banking nexus?

I've been hearing some interesting reports along those lines.

As for Dubai, I feel bad for its citizens, but it's not that uncommon for a boom town to go bust. Abu Dhabi awaits...

[ihavenobias]

5. Scary. n/t

[Me.]

7. They Couldn't See This Coming?

With all the excess? Really? Storied have been coming out of there for months. I wasn't surprised so why were they?

[havocmom]

9. It sorta funny to think of the possiblity that so many 'businessmen' were all hustling each other

One con artist working another con artist until the whole thing was a conga line of cons.

All those pricey cars abandoned at the airport... Seems the folks in Hardin, MT weren't the only victims of scams.

[Me.]

16. Truly

Maybe the first clue should've been when they started arresting foreigners who ran towards the gravy train full of promises that weren't kept and found themselves in financial zoodoo.

[yodoobo]

11. No. We'll -NEVER- default on our debt.

As long as that debt is denominated in us dollars.

We'll just print up more as needed.

The only question is, how much will our dollars buy, and how long the world will continue to put value in our dollars.



The reason that Dubai defaulted is because their debt is in US dollars, and they do not have the luxury of printing more.


Bush got us into a very deep debt mess and its probably going to take Obama a full 8 years to get us out of it.

[truedelphi]

12. This part was of great interest too --

Our world is more like 1930s Germany, where deflation is pressuring the general price level, and certainly wages as well. Deflation is rampaging through property markets everywhere, it is pushing salaries, wages and bonuses down (with a few exceptions), it is the scourge of the retail industry and large parts of the food industry.

To combat this, which the Fed sees and fears, interest rates are at zero percent and quantitative easing is the order of the day - the buying of debt by the Fed to inject liquidity into the economy. The Treasury at the same time is borrowing record amounts as if the US were in some dire war (well it is, against deflation). All this reflation is feeding into inflation, but not the price and wages type. It is asset inflation we are seeing - gold, silver, oil, copper, equities, high yield debt. We are getting a replay of the housing bubble and the tech bubble, only each replay gets narrower and narrower in terms of the assets which participate. Hot money is chasing after housing - there are plenty of speculators buying 50 houses at a time in auction - but the effect is muted because of the large deflationary overhang in inventory. There is no such overhang in gold and copper and oil so their prices are able to go up, in gold's case in bubble fashion.

Now we will rue the day we didn't give them that contract to watch over our ports and defend our Homeland!!

[A HERETIC I AM]

13. There is a HUGE difference between Dubai and the United States.

So this "Numerian" is a "stellar poster on financial matters", eh?

And he asks a question like this?

When do you think global investors will start connecting these dots and ask: exactly what is backing the debt of the United States that has flooded the markets in the past nine years under Bush and Obama?

If he thinks there is no difference between the debt of Dubai and the rest of the UAE and that of the United States, he's not stellar.

He's clueless.

[autorank]

15. The point

of the post is to show the total lack of foundation for the borrowing of both governments.

There's no there there.

[A HERETIC I AM]

17. Nonsense.

The point is lost on the author you linked. If you agree with everything he wrote then it is lost on you as well.

Reading the article gives me the impression he doesn't understand the difference between the debt the two countries issue and how it is supported and redeemed. There is a reason why worldwide investors flock to US Treasuries as a safe haven and not debt paper issued by the United Arab Emirates.

There is plenty of "there" in the case of the United States. The author, as I said, is clueless if he thinks the opposite is the case.

[Joe Chi Minh]

20. Any Darwin 'groupie' has to be thick as two short planks. So where is this incredible financial

strength that the US possesses. Do you think nationalisation of the two largest companies in the world by your Bush neocon Administration, of all kites and crows, in your anti-Socialist Valhalla could be viewed as 'par for the course'?

Is Greenspan the flavour of the year again? Is Milton Friedman viewed as the greatest again? Was the TARP guys a fun thing?

Don't make a big deal about technicalities. By trying to sound smart, you're just showing what a tragically limited perspective you have.

Then, you spoil even that risible pretension. Like the capitals though. Most impressive. I see another of your gurus is one, Jeremy Clarkson. Hey! Ho! On with the motley!

[Joe Chi Minh]

18. Wow, Mike! I haven't read the full article yet, but I've just realised that I,

who am a financial illiterate, am nevertheless, incredibly, in the exalted company of the United States, itself, the UK and even Dubai.... I just didn't realise I had declared a moratorium on my credit-card "liabilities"!

[AllentownJake]

19. Put your money where your mouth is

By a few Credit Default Swaps on US debt. They are extremely cheap.

The US debt ration is no-where near the debt ratio of these countries but I guess could get there in 10-20 years if we don't behave better in the next good time period.

If you are looking for something to possibly happen in the next 5 year time frame. California or Michigan are more likely to default on their debt.

[onethatcares]

21. I'm joining with Joe.

I'm gonna ask Citimortgage for a 6 month moratorium on my house debt in order to free up more liquidity in my own financial spectrum.

:hi:

After further reading, it looks like Dubai was a payday loan type of place, they are asking for a moratorium on the "Interest payments" on their debt.

That debt number is probably astronomical.

[formercia]

23. Repo Man -Dubai

OK, Hombre, Now that we repossessed the herd of Goats, what do we do with them?