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 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 …” Full Post