Dubai World – A Well Deserved Crash and Burn

December 4, 2009 by  
Filed under Debt and Credit

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.

You need to check out this slideshow of the various projects completed or underway in Dubai. All I can say is that Dubai represents conspicuous Las Vegas spending (and borrowing) – on steroids.

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.


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10 Responses to “Dubai World – A Well Deserved Crash and Burn”
  1. Money Beagle says:

    I watched an episode of the Amazing Race from earlier in the year that happened to be in Dubai. I remember saying both “Wow, everything looks brand new” and “How come every place is completely empty?” Now, it all makes sense.

  2. cjbr549 says:

    Well, I have to say that I kind of admire what old Sheik what’s his doodle that ran the place was trying to do. If you have a country that is largely desert with no natural resources to speak of, what can you do to make your country wealthy? Well, Las Vegas pretty much fits the bill. It’s desert, no major resource concentration, no major transportation hub. Vegas has been hit hard in this recession, but they had the advantage of being pretty much done and populated with citizens. Dubai ran out of time. They were half done with their city and from what I have seen most of the people there were there to build the place, so when that happened they drove their cars to the airport and went home, never to come back. In all, it was a good intentioned gambl. Of course there is that old saying “The road to Hell is paved with….” I give it a good chance of never recovering and becoming a ghost town. You also have to remember that from Dubai’s point of view, they are allot like the minimum wage gardener who signed a liar loan here to buy a million dollar home. They started this with nothing to loose, so no matter how it plays out, the only thing really lost is a dream. And we know how the world loves a tasty, tasty dream.

  3. kitty says:

    The problem is that a lot of American companies and American workers will suffer from it. All of these fancy projects involved contracts with construction companies, technology companies, telecommunication companies from all over the world, including the US.

    As much as I’d love to join the laugh over the whole fiasco, I cannot help but worry about the collateral damage.

  4. MasterPo says:

    While I agree about no love loss, I have always been astouned by the complexity and imagination of the development.

    Financing issues aside, I am very saddened that such awesome engineering doesn’t happen here. In fact, it could NOT happen here. :-(

    PC-ism would prevent it.

    The cries from environmentalist, greenies, anti-capitalists etc would all attack the supposed “excesses” such construction they claim would represent here (funny they don’t say that about places like Dubai and Hong Kong!).

    So our engineers don’t get the work. Our civil engineering and construction technology doesn’t get advanced. And our construction workers don’t get the jobs.

    That’s the real tradgedy here IMO. :-(

  5. TMN says:

    Even more ironic / sad since individuals who pull this kind of thing in that country end up in debtors prison. It strikes me as particularly hypocritical.

  6. Rick Beagle says:

    “PC-ism would prevent it.

    The cries from environmentalist, greenies, anti-capitalists etc would all attack the supposed “excesses” such construction they claim would represent here (funny they don’t say that about places like Dubai and Hong Kong!).

    So our engineers don’t get the work. Our civil engineering and construction technology doesn’t get advanced. And our construction workers don’t get the jobs.”

    I have said this a number of times, but obviously you still don’t get it. Liberals have nothing against people making money as long as the effort isn’t designed to harm the planet or its inhabitants. Silly little gotcha that last one.

    But let me give you an alternate answer for why something like this doesn’t happen, decreased funding our our school systems, and the glorification of stupidity and money over intelligence and meritocracy by one of our political parties.

    Sigh.
    Beagle

  7. MasterPo says:

    “I have said this a number of times, but obviously you still don’t get it. Liberals have nothing against people making money as long as the effort isn’t designed to harm the planet or its inhabitants.”

    But that’s the point: To environmentalists, greenies et al EVERYTHING harms the planet and its inhabitants!!

    Have you seen those construction jobs over there? Those talll buildings, those HUGE pools, that man-made island with a thousand homes on it?!

    Amazing engineering!
    Expensive construction!
    Jobs and technology advancement for all!

    And I bet it would cost millions in law suits here just to file the plans for such projects.

    Ah heck! Take a look at what’s happening in CA now! Solar power production plans – a good thing greenies like, right? – is being held up for YEARS because of some stupid tortoise or cactus or something else.

    Even liberals can’t make up their minds which takes precedence! :-)

    • Rick Beagle says:

      Soooo…. do you think the liberals are keeping us from rebuilding New Orleans? Think there tortoise concerns there keeping good paying jobs from being created to recreate that city? A mighty canvas made available by the brush stroke of mother nature, and where are the amazing engineering projects?! You still want to pretend the problem is tortoises?

      Good of you to share the Fox sound bite for us, but no thanks.

      Green energy has been wholeheartedly embraced by liberals (a few decades but who is counting), but yes, there are a couple of projects that are being held up for endangered species habitat concerns. But using the exceptions in a straw man argument meant to debunk liberals’ support for green energy is just plain asinine.
      And let’s not forget the continued resistance of the conservative movement, at least with the liberals we have some movement on reducing our dependency on oil, and while it may be bumpy on occasion, we are moving forward. Can’t say the same for the Drill Baby Drill mentality of today’s conservatives.

      BTW what we are doing with green energy, high speed rails, smart grid, and some other projects is just mind boggling amazing (space elevator anyone). Liberals aren’t the ones with the heavy foot on the braking pedal of progress, that would be you and your ilk.

      Peace.

  8. MasterPo says:

    I wouldn’t be a bit surprised that the Liberal mentality is well at work in rebuilding not only New Orleans but the WTC site and most other things.

    How about you addressing my point about the solar paower company that can’t build it’s site because of tortoises and cactus?!

    • Rick Beagle says:

      I did:
      “Green energy has been wholeheartedly embraced by liberals (a few decades but who is counting), but yes, there are a couple of projects that are being held up for endangered species habitat concerns. But using the exceptions in a straw man argument meant to debunk liberals’ support for green energy is just plain asinine.”

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