The Dubai Default

Dubai Montage While Americans ate turkey and watched football, Dubai asked to postpone paying off nearly $60 billion in debt. That’s fancy talk for “Dubai defaulted.” World markets went low on that news, to say the least: it’s the biggest national debt default since Argentina went through hell in 2001.

These guys plowed in tons of borrowed money into vast construction projects so they’d have the biggest this and the hugest that ever built – and now they’re looking to possibly tip the scales and create the largest global financial cataclysm since, well, last year. While the request was for $59 billion, there’s another $20-$30 billion sloshing around that they need to aggressively refinance. The banks that lent the money are in shaky territory: if Dubai doesn’t come across, they could wind up getting paid pennies on the dollar for their loans and be wiped out. That, in turn, would do damage to the world economy and so on and so on.

So is Dubai too big to fail? Or is it too big to save? Because it’s possible to be both, with the latter taking precedence over the former. Abu Dhabi could cut a check and just buy all of Dubai, but then they’d be stuck with a lot of unfinished, unsustainable construction projects. The real message is that if Dubai’s jitters sent the markets spinning, the world as a whole may not be recovering as smartly as our governments are saying it is.

3 thoughts on “The Dubai Default

  1. David Truong

    I remember about 2 weeks or so after the Taipei 101 was finished, news stations were already talking about the Burj Dubai. It serves them right for trying to be better and top everybody else. Karma kills.

  2. chanel wan

    I have a question, by this happening doesn’t give the rest of the world the thought of oh i can just do what Dubai and have someone bail us out, creating a even bigger issue for the world’s economy?

  3. David Liou

    When Dubai started to build all this stuff, their economy and the world economy was fine, of course they would want to top everyone else.

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