Dubai is broke - Macleans.ca
 

Dubai is broke

Asks creditors for a stay on US$59 billion debt repayment


 

The glittering jewel in the middle of the United Arab Emirates is broke. In a development that shocked both markets and its bankers, the Dubai government announced it has asked its banks for a six-month stay on its schedule of debt repayments. The news comes in the middle of negotiations between creditors and Dubai World, the corporate arm of Dubai, which has led many of the emirate’s most ambitious real estate projects, including man-made islands shaped like the continents, an indoor ski slope, and the world’s highest building. Such grandiosity, along with the plummeting value of its assets in the past year, have left Dubai World US$59 billion in debt. (The emirate’s total debt is estimated to be around US$80 billion.) The announcement makes clear that Abu Dhabi, the oil-rich governing emirate of the UAE, will not unconditionally bail out its more profligate neighbor. It also comes just weeks before Nakheel, the developer of Dubai’s signature palm-shaped islands, which also owns Barneys of New York and the MGM Grand, was scheduled to make payment on its $3.52 billion of Islamic bonds.

New York Times


 
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Dubai is broke

  1. Not to worry folks, nothing to see here. Everyone can just keep pretending that trillions of dollars can vaporize around the world, tens of millions of middle class jobs can be carted off to 3rd world hell holes and everything will be just fine. Listen to those snakeoil salesmen who want you to put your last dime in the market…again. Listen to those real estate agents once again telling people to jump in now or forever be priced out of the housing market. Think I will just wait a little bit before I do that. Cheers.

  2. But Wayne, real estate always goes up. Everyone knows that. :)

    As for Dubai, how could it have ended any other way? A full 20% of the UAE population is "royalty", and they don't have to work. They live off the work of the other 80%. Even the gushing admirers of Dubai and the Emerati (and believe it or not, there are a few) admit that the system is nothing more than an elaborate welfare scheme for the rich.

    The entire world over the past decade has been fueled by low interest rates. That created massive asset bubbles. When they burst last year, there was hell to pay. And what do central banks and governments all over the world do? They instantly make every attempt to re-inflate the bubbles, to ward off the dreaded "deflation". Asset bubbles are a far greater threat to our economic well-being than deflation ever will be. And Dubai is probably the most conspicuous asset bubble in the history of the human race. Good job policy makers. Let's see you stimulate your way out of this one.