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Dubai 'canary in coal mine' as depression deepens

dubai darkening

“The market reaction shows how vulnerable some economies are to the aftermath of the debt binge. This highlights how fragile confidence is.” Gerard Lyons, chief economist.

This just shows the disconnect that governments have with their citizens. We are not considered citizens to politicians; we are regarded as consumers. That’s what Barack Obama and Bush’s main focus has been on all these years; that is on business and all trade agreements with slave labor countries like China. Politicians are now mostly fascists representing a business controlled political structure their worldview is not of the average Canadian. In the U.S., “We the People” is now considered socialism.

This is another classical example of the “rose colored glasses” effect played by the “glass is half full ‘types in the business world. They seem to have an ability to slip into the real world with a kind of world dream where they will be rewarded with unlimited wealth. This fire we call the free market (that is not actually free of constraint as many think) is ultimately driven by the public at some level suffer a reduction in living standards in their pay and pensions.

This is the “second wave” that characterizes an economic slowdown. Business bankruptcies occur because of leverage untenable. It usually gets worse before this process of de-operator slows.

The third and final round is a wind in the area of commercial real estate, cracks, we see already in the United States and the veil that are occurring on the condominium market across major cities in the Western world. The problem with the global economy is that it is based on investment and trade. We must return to basics and make sure the economy is diversified and the right foot with manufacturing as a core component.

Dubai in deep water as ripples from debt crisis spread
November 27, 2009

Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill.

Shares plunged, weak currencies were battered and more than £14 billion was wiped from the value of British banks on fears that they would be left nursing new losses.

Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.

Although the scale of Dubai’s debts is comparatively modest at $80 billion (£48 billion), the uncertainty spooked the markets, with no one sure who its creditors are. Several banks rushed out statements to reassure investors that their exposure was small.

The FTSE 100 plunged by 171 points to 5,194 — its biggest one-day fall in eight months in one of the most jittery days in the financial markets since the depths of the banking crisis.

The Treasury, the Bank of England and the Financial Services Authority were monitoring events closely and are demanding figures from UK banks on their loan exposures to Dubai.

According to a senior government official, Dubai’s crisis is regarded as modest and manageable for Britain, but there were growing fears that Abu Dhabi, the oil-rich neighbouring emirate that has in the past given rescue loans, would leave Dubai to its fate.

Dubai is just a harbinger of things to come for sovereign debt
By Jeremy Warner

Watch out. This may be just the beginning. In the scale of things, the debt problems of Dubai are little more than a flea bite. Dubai’s sovereign debts total “just” $80bn, which counts for nothing against the trillions being raised by advanced economies to plug fiscal deficits.

Small wonder, though, that this minor tremor has sent such shock waves around the wider capital markets. The fear is that threatened default in this tiny desert kingdom is just a harginger of things to come for government debt markets as a whole. According to new estimates by Moody’s, the credit rating agency, the total stock of sovereign debt worldwide will have risen by nearly 50 per cent between 2007 and 2010 to $15.3 trillion. The great bulk of this increase comes not from irrelevant little states like Dubai, but from the big advanced economies – America, Europe, and Japan.

You can read more about this story from The Telegraph

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