Dubai World – A Well Deserved Crash and Burn
If you read the big picture financial news this week, you know that the investment arm of the emirate of Dubai has suspended interest payments to its creditors for six months. What a shame for everyone involved. Not.
Dubai’s creditors are holding a large bag of unpaid debt – as in $26 billion large. So what did Dubai’s finance minister say about this debt? Well, since the debt is owed by the emirate’s investment/real estate/funny money entities, the government itself has no obligation to repay it.
As you can imagine, that kind of attitude is not a confidence builder in world lending circles. Some experts think it will lead to further tightening of lending around the world.
Meanwhile, Dubai itself could end up looking like a gigantic resort and amusement park with no customers – a desert within a desert if you will.
No sympathy from Mr. ToughMoneyLove. Irrational behavior must be punished to discourage a recurrence. Dubai is taking one for the irrational borrowing team. Hopefully some of the involved lenders will learn a lesson as well.