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Dubai not too big to fail?

Stephanie Flanders | 15:02 UK time, Thursday, 26 November 2009

Dubai is not too big to fail. That seems to be the message of the surprise 6 month debt standstill at Dubai World, the most indebted offshoot of the UAE's most indebted emirate.

Dubai skylineInternational markets have been jarred by the news, perhaps as much by the timing as the decision itself (US investors, with markets closed for Thanksgiving, feel more vulnerable than most).

But if you have a lot of money resting on Dubai coming through their dramatic boom and bust story intact, this is indeed a major shock.

Put simply: everyone in the markets thought that, in the end, the federal government in Abu Dhabi would stand by all of Dubai's bad bets. Apparently, they won't.

As with so much in Dubai, we don't yet know the whole picture. It's possible we never will. It's even possible that the government will panic at the market reaction to yesterday's announcement, and magically discover they can service Dubai World's $22bn debt mountain after all.

But right now, the only conclusion to be reached is that Abu Dhabi is willing to let Dubai squirm.

That is not how the script was intended to go. Dubai obtained $10bn from the UAE central bank in February as part of a $20bn sovereign bond programme - in effect, a federal bailout.

When I was in Dubai two weeks ago, there was much speculation about when the next $10bn was going to arrive, but Sheikh Mohammed was personally assuring the world that everything was on track.

Just two days ago, they announced they were halfway there, with $5bn raised from strategically situated Abu Dhabi banks.

Even without the remaining $5bn, that should have been enough to continue to handle Dubai World's debts. The big bill that Dubai World had coming was the repayment of a $4bn Islamic bond for Nakheel, the worst afflicted part of the Dubai World empire. That may still be partly repaid - officials haven't confirmed one way or another.

But the standstill decision leaves investors to ponder what they are not being told - why even $15bn wasn't enough to keep the company going, and why, when push came to shove, Abu Dhabi didn't stump up the cash.

As we have learned many times over the past two years, where markets are concerned, too little knowledge is a dangerous thing.

Comments

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  • Comment number 1.

    22bn - mere accountants footnote by recent bailout standards. However I am sure I am not alone in thinking that it does not take much to knock the fledgling recovery off its perch. Worries for the Lloyds rights issue? Would you by a second round discounted share from this management?

  • Comment number 2.

    Guess which banks are invloved, yes our old friends RBS & Lloyds etc., are they still too big to fail? lets hope so.

    Mervyn have you got a moment............

  • Comment number 3.

    According to the linked article and insert by Ben Thompson The debt could be as large as 80 to 160Bn (USD I assume). Really curious that now no-one will be working due to the holiday for 10 Days!!

    Is this the first domino of financial crisis round 2? What we should be asking surely, as conscripted investors in two major UK banks is, How much is possibly NOT coming our way that we are expecting? or more simply - what is our exposure?

  • Comment number 4.

    I mentioned yesterday that i was not too daft to gamble an amount of money on a punt that would hurt me if i lost. The vulnerable who have been abused by the banks in paying excessive charges seem to be paying for management stupidity rather than free charges for others. At the very least its a bit rich for the banks to take a high and mighty view on people who spend more than they have, that they deserve what they get.
    RBS & Lloyds too big to fail?, to much of a bunch of muppets not to.

  • Comment number 5.

    3. At 3:46pm on 26 Nov 2009, ChangEngland

    Our exposure is likley everything we've got and everything we were ever going to have.

  • Comment number 6.

    Will this start the long promised correction away from risky assets?

    Safe haven currencies like the yen are up; and safe government bonds, such as German bunds, are also up.

    High dividend yield equities are holding up. In the FTSE, the share prices of water companies have increased, after the better than expected final determination by Ofwat.

  • Comment number 7.

    And the Middle East was supposed to come to the West's rescue? Dubai is just the tip of the iceberg, every GCC country has quite extraordinary plans to build, islands, hotels, complexes, all 5star. One company has even taken the first tranche of money ( sold out in one weekend) to build a town for 130 thousand people in the emirate of Ajman,and that was before making provision for basic amenities such as electricity!
    The majority of projects in the GCC are family cross-holdings,in Saudi one of the largest family concerns has gone under for billions, we have not seen the beginning of the end of their property woes. However it is good to see we have got it correct in the UK with property prices going up month on month - get in now!

  • Comment number 8.

    Anyone know how much a camel is worth?

  • Comment number 9.

    So apparently European banks are exposed to half of Dubai's $80bn debt, RBS and Barclays especially, hence their top spot on the FTSE100 losers list.

    I guess we'll see if the new system of clawing back bonuses is actually going to work sooner than we might have thought!

  • Comment number 10.

    Dubai or not Dubai that is the question !

  • Comment number 11.

    This looks like another over leveraged pack of cards beginning to collapse. No-one knew and no-one still does so let's hope this isn't the next stage of a further banking crisis.

    Mervyn King has said on so many occasions that leveraging has to come down so what are the taxpayers really propping up apart from overleveraged assets.

    It is only another example that no-one knows what is out there or what will happen next and the present banking system is in ongoing firefighting mode with so far the never ending support of taxpayers.

  • Comment number 12.

    Oh dear, annoucing re-structuring 3 weeks before you rollover your debt resulting in mis-leading the markets - I wonder where they got that sort of idea from?

    Maybe the crisis they face is because all their oil is priced in falling Dollars - maybe this is the beginning of the end for the greenback as a world reserve currency.

    This is how depressions occur - everyone gets back into the swing of things and think it's all over - and then BOOM - another shock hits the markets.

    Nice time to announce it - on Thanksgiving - am I right in thinking the US is on holiday and not trading - and nor was the FTSE for 3 hours today.

    ....it could be black Friday tomorrow - or at least a fairly red one.

  • Comment number 13.

    I reckon that whoever over here is holding Dubai debt has got a problem, if they get away with failing in their obligation to pay for six months, then why not try for eternity. Lloyds rights issue, how will it affect it I wonder?

  • Comment number 14.

    ....for Dubai, read the next sub-prime, money lent to people who without capital gain are simply unable to pay it back. Sound familiar?

  • Comment number 15.

    You have to remember that the Dubai economy is built on smoke and mirrors and as long as the expat spivs where wheeler delaering it ticked along nicely
    I fully expect that Aby Dhabi will eventually cough up the money or guarantees, but only after a shift in the power balance making Dubai even less influential in the region. Bear in mind there is little trust between the individual emeriates and the word 'United' is in its loosest sense.

  • Comment number 16.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 17.

    Walmartistan, anyone?

  • Comment number 18.

    The importance of Dubai defaulting on an islamic sukuk (bond)is a major event. Apart from the loss of face, the fallout within islamic banking will be major, in the West we should not be too smug, because what it means is another area of global finance freezing.This is not good news, especially when central bank printing presses cool and real GDP figures show themselves. Anybody who thinks this recession is over might have a bit of thinking to do.

  • Comment number 19.

    It's not just the taxpayer-indebted banks that are affected. Barclays took the middle east dollar bigtime this spring didn't they? The timing is sweet. Are they really going to carry on arguing for bulging bonuses? They're only deluding themselves now, and it's sad. The floor fell away a long time ago. A year ago. We just looked down.

  • Comment number 20.

    According to Reuters the Gulf owns a chunk of the LSE.

    "Shares in companies in which Gulf investors own big stakes, including the London Stock Exchange, UK grocer J Sainsbury and German carmakers Porsche and Daimler, also fell sharply on concerns the holdings would be cut to meet obligations at home."



    Amazingly convenient and surely just a coincedence that the LSE was down for a few hours today.


  • Comment number 21.

    Would be nice if RBS stopped the friendly local UK bank Nat West television adverts, now we know what they are doing with the money we deposit with them.

  • Comment number 22.

    But I thought Gordon had saved the world? Does the world know it, though? Seemingly not: but what do you expect from these wily foreigners! Perhaps we can club together and send a John Bull printing kit to Dubai to help them out.

    It is just this sort of thing coming from outside the expected parameters which will cause the second leg of this ongoing disaster. Perhaps us pessimists who expect a double whammy are wrong, we might be up for a treble or a quadruple.

    Funny that the plug of the LSE computer fell out of it's wall socket just as the Dubai default came through. It has to be a miracle due to the intervention of St. Onan, the patron saint of the money-markets.

  • Comment number 23.

    When banks create large sums of money from fractional reserve banking and speculate causing asset hyper-inflation. When money is lent with no checks and balances and indebtedness is raised to unheard of levels, for individuals, companies and countries. When the lack of real money, in the system, is hidden within the credit derivative trading complexities, to such an extent that no one can unravel the true trading positions of many financial houses. When the asset bubbles start to implode forcing real cash calls on non existent reserves and governments step in to guarantee these calls through ‘magic’ money, created at the touch of a button. Why does anyone think that this crisis is anywhere near sorted?

  • Comment number 24.

    My grandfather rode a camel.

    My father rode a camel.

    I drive a ferrari and leverage billions in property junk bonds.

    My son will ride a camel.

  • Comment number 25.

    As we have learned many times over the past two years, where markets are concerned, too little knowledge is a dangerous thing.

    Glad you've come out against Mervyn's secret funding schemes.

  • Comment number 26.

    It is good to read that "everyone in the markets thought that, in the end, the federal government in Abu Dhabi would stand by all of Dubai's bad bets."

    Immediately followed by "As with so much in Dubai, we don't yet know the whole picture."

    So we have no idea what we are talking about but notwithstanding that we can ramp up multi billion $ exposure on the basis of assumptions completely unchecked by reference to fact.

    Who ever could have thought that Dubai could have in anyway overextended itself? No doubt when some temporary bodge is cobbled together we can all go back to venerating the amazing recovery - until they run out of money again. Meanwhile who could possibly predict the pending disaster in Eastern Europe? No-one obviously. So why worry about it. How much better to be completely surprised when the next disaster strikes.

  • Comment number 27.

    The whole story since 2007 has been about 'confidence'--- and attempts to bolster it by the statements, the actions and the hidden actions (one being the £60Billion secret loan to Banks by the Government).

    One can see why so much effort is put into re-assurance and highlighting 'Green shoots' simply to try and bolster 'confidence'.

    But as in every walk of life, confidence is best engendered by honesty, and by taking action to rectify a bad situation---not by expending effort and brainpower on finding ways to tell people that things are not actually as bad as they may appear.

    The sense of denial in our country, and the USA,about the situation acts to undermine the attempts to bolster confidence and leaves the situation fragile---- so external shocks like this Dubai news break through the fragile consensus.

    We all know that our government should have taken tough decisions 6 months ago, but we have been stuck in a kind of frozen immobility waiting for an election----the 'tough action' taken has basically been to do nothing more than issue pretend money in the form of Quantative easing.

    Everyone knows that it isn't QE that has supported equity markets, as we are often told, but the plain fact that all other interest on deposit is so low that it's now negative----so people put their cash into equities, it's a simple as that. This isn't another bubble forming...it's the same bubble that is trying to be maintained by ever 'cheaper' money.

    Because a Dubai default will inevitably throw a light on the UK and USA's own sovereign debt (though the actual situation is very different) there will right now be now much effort going on to 'find a solution' ...ie pressurise other Arab states to pay the bills--- which isn't a solution to the problem of course---just a solution to yet another symptom.

  • Comment number 28.

    so yet more imaginary money has proved to be just that , marvelous !
    i can feel it in my bones that its only a matter of time before we are asked to bail them out as our banks are so exposed to another scheme promising only the good times and never evem admitting the bad exists.

    well it does and we the poor will pay for it through the nose again , and then be told there is no real money left to pay for lifes little luxuries. you know the sort of thing. education ,public services ,the nhs ,the armed forces and anything else you care to add to my list.

    in short . no surprise but its going to hurt

  • Comment number 29.

    24. At 5:59pm on 26 Nov 2009, tawse57 wrote:
    My grandfather rode a camel.

    My father rode a camel.

    I drive a ferrari and leverage billions in property junk bonds.

    My son will ride a camel


    vwvwvwvwvwvwvwvwvwvwvwvwvwvwvvwvwvwvwvwv.........splat

    And his son will carry an AAA's on his back .......until the sad printcess laughs and greatful King daddy marrys them so that they they live haaapilly ever aaafterr.

  • Comment number 30.

    Is it possible that the system used around the world for exchange known as 'money' is unsustainable? far fetched I know but it seems like the 'value' of money has been put into question and if money has no value then pension funds are truly worthless - perhaps I've just been reading this blog too much lately!!

  • Comment number 31.

    Babylon

  • Comment number 32.

    Gloom and doom. And double doom.

    Not only does it look like "The City" will now not decamp to the warmer climes of Abu Dhabi so freeing the UK from their grasp, but the UK will end up bailing out the lenders.

    We have been truly had. Yet again.
    What's next?

    What other group of enterprises has been busily hoisting itself up by their own bootstraps? With no real support.

    Universities?

  • Comment number 33.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 34.

    Let's see - Amongst previous various blog entries I have been warning re leverage and real estate. Dubai has been in the news for some time. This shouldn't come as a shock.

    RBS and Barclays big fallers today showing you where some of the exposure is....

    This is beginning of the next phase of the recessionary crunch. Not sure where it leads but it certainly doesn't stop with palm trees on the sandy shore several thousand miles away.

    And - yes - do you think anybody stress-tested their models in case of default......Mmm - what do you think?

    Steph's comments regarding knowledge are irrelevant - it's intelligence and correct interpretation (or lack of). Here we go again?

    As Oscar Wilde commented, first time may be unfortunate but a second time is careless......

    When the FTSE loses 170 points in the day you know its serious on one piece of news.......

    Oh and by the way if recovery in the UK is so good why is Borders going into administration?

    Two completely separate events but I suspect much more closely related in terms of the global economy and the troubles that persist?......

  • Comment number 35.

    This Dubai default, suggests that this recession is far from nearing its end.

    There is the distinct possibility that we're going to get hit again, this time picking up some of Dubai's promises to pay.

  • Comment number 36.

    I'm HAPPY I'm really H and A and PP and Y - happy!

    I was begining to think that I was crazy - well maybe I am but I'm not as stupid as all the pundits and economists were suggesting that I must be in thinking that we've actually done nothing and yet the worse of this disaster was over.

    I did think that the next implosion would come from Europe but now it appears that the Gulf States have got there first.

    Finance has gone beyond reality and as thelastmanufacturer said "Why does anyone think that this crisis is anywhere near sorted?"

  • Comment number 37.

    Does anyone get the feeling that we are playing a game of pass the global hot potato?

  • Comment number 38.

    Not taking any sides here, but why at this moment in time is the DOW up 30 points on the day and not reflecting the FTSE.

  • Comment number 39.

    Stephanie

    ''Dubai is not too big to fail''

    I think there was a similar conversation in wall street last year, you just exchange

    Dubai for 'lehman Brothers'

    lets see if the worlds global power brokers have learnt anything in the next few days shall we!!

  • Comment number 40.

  • Comment number 41.

    I was in Dubai last month and I was amazed with the number of sky scrapers and the ambitious constructions throughout Dubai. Shopping malls and roads were well planned and looked impressive than European cities. My cousin told the harsh reality which is most new buildings are not completed or new completed buildings do not have buyers and several buildings are standing empty. I feel sorry for thousands of Indian sub continent workers who are already underpaid will suffer more in the sweltering heat.

  • Comment number 42.

    24. At 5:59pm on 26 Nov 2009, tawse57 wrote:

    My grandfather rode a camel.

    My father rode a camel.

    I drive a ferrari and leverage billions in property junk bonds.

    My son will ride a camel.

    -----------------------------------------------------------------
    And my son's son will eat his camel.

  • Comment number 43.

    38. At 8:22pm on 26 Nov 2009, dudeHangingon wrote:
    Not taking any sides here, but why at this moment in time is the DOW up 30 points on the day and not reflecting the FTSE.

    ------------------------------------------------------

    Because the market was closed due to Thanks Giving. 0.30% up was yesterdays close. Expect bad things tomorrow!!

  • Comment number 44.

    Because the market was closed due to Thanks Giving. 0.30% up was yesterdays close. Expect bad things tomorrow!!

    DOH!

  • Comment number 45.

    #38.

    Hi, dudeHangingon, it is Thanksgiving day here in the US (which is a public holiday) so we aren't working but eating. We had a turkey, we called him Dubai and then we roasted him. BTW, unlike us redneck Yanks I thought you sophisticated Brits knew about foreign countries...

  • Comment number 46.

    I remember thinking last autumn that this crisis would track the major events of early 1930's USA, with the exception that it would be thousands of non-financial corporations going bust this time. Instead of the thousands of banks that crashed in the 30's.

    I run a small engineering firm that supplies capital equipment to the logistics industry, among others. I have recently spent time looking at the balance sheets of many of my high growth clients and conclude that these firms really are little more than (highly leveraged) property firms..... with lorry drivers. Just wait and see what happens to some of these companies.

    I wonder also about the extent that many supermarket firms might also be property firms..... with shelf stackers. Or how many construction firms are property companies.....with JCB's.

    The banks are safe.....but the dressed-up property firms????????

  • Comment number 47.

    Is DobuyBritain to big to fail.....well that depends on how many more...aaair miles the tooth fairies will give it for its fillinks .

  • Comment number 48.

    This is just another episode in the recession which again illustrates the smoke and mirrors that banks, countries and government leaders have subjected us to in order to hide a simple fact: that businesses and countries are spending and operating beyond their means to a vast degree with the expectation that tax can be used to bail them out.

    Consider the position of the UK, nearly 1 trillion in debt. It was not long ago (less than a decade) when we were shocked at the US having debts of a trillion. The UK is in big problems and Dubai defaulting on its debts is unlikely to be the end of it. I am sure a lot of other countires are now worried about their position and credit ratings.

  • Comment number 49.

    46. At 8:48pm on 26 Nov 2009, iceland_express
    The banks are safe.....but the dressed-up property firms????????
    -------
    I was associated with a private (non property) company that borrowed against a freehold building that they occupied in central London. When property values fell (over 18 months ago) RBS lowered the available funding and required almost immediate repayment. The owners had no option but to close the company. Building was in negative equity, RBS took posession and put the property on the market. It is still empty and has not sold.

  • Comment number 50.

    I wonder how much of the so called UK celeb backed "buy in Dubai" property investment was funded by loans from RBS & other UK banks.

    There must be many thousands of unsold flats and offices in Dubai at the moment. I wonder how many cheap holidays there will be in the next six months at virtually empty hotels as Dubai desperately seeks foreign currency?

    Iceland was so 2008, Dubai will be next years basket case.

  • Comment number 51.

    Now that China's decided to call a halt to its lending spree and recapitalise, I think that the second dip/flatline is well on its way. There's now nobody left from whom to borrow. Definitely time to cut your cloth to suit your purse - for the foreseeable future!

  • Comment number 52.

    Lets all do the big default together, right now!

    I'll be standing at the door with a pitch fork, when the repo man comes (HOW DARE HE!)

  • Comment number 53.

    Gergiev wrote:

    #38.

    Hi, dudeHangingon, it is Thanksgiving day here in the US (which is a public holiday) so we aren't working but eating. We had a turkey, we called him Dubai and then we roasted him. BTW, unlike us redneck Yanks I thought you sophisticated Brits knew about foreign countries...


    Trouble is , US is not really foreign to us is it, anyway no point in getting too curious about foreign countries because you'll only go and order us to invade them at some point or other.

  • Comment number 54.

    #53

    Nice one Dude, I just love your British wit and irony (something we dumb Yanks so lack). Just hope you never have any trouble with those pesky Germans again though because we definitely can't afford to come over and help out a third time, but then I suppose the Germans rule the UK now via that nice quiet Belgian chap that no one's ever heard of, and whom you didn't get a chance to vote for, so all that squabbling is over now. My dad was always proud of how he defended democracy in Europe; whatever happened to it? Never mind peace at last. ;-)

  • Comment number 55.

    Ho hum another day and yet another "crisis"? Perhaps it’s about time that there was some honest debate about the ability of banks, corporations and not least nations to remain solvent and if the whole damn house of cards is about to fall down. If this is the case what is to replace the current system of exchange, as cash (be it sterling $ Euros or Yen) seems to be sloshing around in billions or is it trillions (lost count run out of fingers and toes and only so many digits on my calculator)from central banks in an effort to prop up the financial system but it appears to be a bit like the boy with his finger in the dyke - as one issue is resolved (UK and US) the next emerges - the problem is the boy only has ten fingers with which to plug these holes - I just wonder how many he has left...

  • Comment number 56.

    Good post, but the real test of an economist is not just to be wise after the event.

    Stephanie, can you point me to articles during the Dubai boom when you were warning investors who were pouring money in like there was no tomorrow?

    Preston made his name by commenting on the banking fiasco - to the point where you would have thought he was predicting trouble ahead for months beforehand.- Which he wasn't.

  • Comment number 57.

    24. At 5:59pm on 26 Nov 2009, tawse57 wrote:
    My grandfather rode a camel.

    My father rode a camel.

    I drive a ferrari and leverage billions in property junk bonds.

    My son will ride a camel.

    --------------------------

    So what makes you think your son's going to be so lucky?

  • Comment number 58.

    Dobuy will change its name to Duraaa's[h]ell and charge the upwardly mobile sim pole sighmoans[with ring tunes] , that'll bring the hhhhhhhhot diddle do do money flapping and leaping onto their latest towers of bAAAble[seetherough errections]

  • Comment number 59.

    Post 54 the Germans aren't that stupid. They leave the fighting and dieing in places like Iraq and Afghanistan to us. They are too busy building all those BMW's; Porsches and Mercedes that we both seem to like.

    The British car industry is dead and with Chrysler and GM going to the wall why bother fighting with some of your most important customers!

    As an aside just how many of the biggest US ports and other properties are up the "swanee" with Dubai World's debt problems allied to their US partners small local financial difficulties.

    http://news.bbc.co.uk/1/hi/business/7101541.stm

    Dubai World and AIG you really couldn't make it up!

  • Comment number 60.

    So are we looking at a second phase of UK bank bail outs by the taxpayer? Even though, since the last rescue, the bankers have continued to pay themselves million pound salaries and mega bonuses "because they're worth it".

    Please, someone, tell me I have got this hopelessly wrong?

  • Comment number 61.


    56. At 9:28pm on 26 Nov 2009, Joe King wrote:
    Good post, but the real test of an economist is not just to be wise after the event.

    Stephanie, can you point me to articles during the Dubai boom when you were warning investors who were pouring money in like there was no tomorrow?

    Preston made his name by commenting on the banking fiasco - to the point where you would have thought he was predicting trouble ahead for months beforehand.- Which he wasn't.

    bzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzt

    Seek and ye shall find ask and it shall be given


    http://www.dailyreckoning.com.au/dubai-bubble/2008/08/28/

  • Comment number 62.

    #59

    Cogent: no need to invade what you already effectively own.

    #60

    I wish I could, and of course since there is the distinct possibility that this Dubai deferral (default) is just the beginning of a new unravelling, I wonder if the apparently surprising timing of the announcement was in fact a way of leaving a long weekend before US markets open so as to facilitate some sort of deal being cobbled together before Monday a la Bear Stearns...

  • Comment number 63.

    With my comment earlier (see 34) I think the real impact of this (quite apart from the domino effect) is the DEBT RATINGS.

    I reckon this is quite catastrophic for the bond market et al.

    UPSHOT is that debt probably just got a whole lot dearer including national debt like ours - this is of course where our national leverage becomes very, very dangerous and something which Steph overlooked in her recent blog comments yesterday regarding national debt.

    When default of this magnitude hits it has ramifications. Let's see what do you think Dubai's credit rating was before yesterday - AAA? Probably - rather like those sub-prime assets that scorched the financial market last year.

    Expect major fall out as the news sinks in.......get those debt stress-testing models out again.....(there can't be dust on them this time, surely?)

  • Comment number 64.

    I agree with Joe King.

    Come on Steph, be brave, make a prediction. On anything. Like the weather. Or even how long China will keep underwriting the US budget deficit, and what would happen if they stopped.

  • Comment number 65.

    #54

    Fair point, well made, but hey, what threat could he be , he's Belgian right

  • Comment number 66.

    #65

    Remember your history Dude, when moving west the Germans always go through Belgium ;-)

  • Comment number 67.

    65. At 10:02pm on 26 Nov 2009, dudeHangingon wrote:
    #54

    Fair point, well made, but hey, what threat could he be , he's Belgian right

    -------
    I think you will find that Belgium was the cause of us (UK, not US) entering the first world war. Not by doing anything I hasten to add, just by being Belgium.

  • Comment number 68.

    64. At 10:00pm on 26 Nov 2009, Matt Durbin wrote:
    .........
    Come on Steph, be brave, make a prediction. On anything. Like the weather. Or even how long China will keep underwriting the US budget deficit, and what would happen if they stopped.

    -----------------------

    Well, it's a good job GW Bush is no longer around. Will Obama just take the sucker punch on the chin? We'll see.............

  • Comment number 69.

    #64 and others

    Don't gang up on poor Steph, she's just journalist not an economist. Economists make predictions and get them wrong while journalist like Steph and Mr Peston comment with hindsight. Nice work if you can get it!

  • Comment number 70.

    24. At 5:59pm on 26 Nov 2009, tawse57 wrote:

    My grandfather rode a camel.

    My father rode a camel.

    I drive a ferrari and leverage billions in property junk bonds.

    My son will ride a camel.


    gggggggggggggggggggggggggggggggggggggggggggggggggggggggggggg

    And his son will walk the walk to the next mirraaage...the camel scrappage scheme will see to that

  • Comment number 71.

    Anyone wonder just how much the following might make in a closing down administration sale?

    1) The Emirates airline.

    2) Godolphin's horse race stables and stud.

    3) Any number of luxury hotels and golf courses in a desert.

  • Comment number 72.

    What's the difference between Bernie Madoff's investment fund and (select any from the following) US Govt (Bonds or Currency), UK Govt (same), Japan (etc etc), Dubai World, UK, US, UAE property and other numerous examples? Answer - Nothing, they are all ponzi schemes.

    Paper money is built on trust, and that trust has a finite lifespan - one that is rapidly being shortened by the shenanigans of Bernanke and Brown. People are beginning to realise this, hence the creeping price rise of precious metals (you can't print gold and silver!)

    The history buffs among you will know that every fiat currency since the Romans began the practice has ended in devaluation and eventual collapse (and the economy that housed them). It does beg the question - trust Brown / Bernanke to borrow their way out of this mess or buy gold? History tends to give us the answers.

  • Comment number 73.

    #67 DevilsAdvocate

    "I think you will find that Belgium was the cause of us (UK, not US) entering the first world war. Not by doing anything I hasten to add, just by being Belgium."


    But you forget that Belgium only existed because of UK interference in European politics.

  • Comment number 74.

    #71 you forgot, the one natural resource Dubai does have:

    4) Motley collection of date palms

    Yup, that's just about what Dubai boils down to. The one thing it can do is date palms. No oil, no fresh water (it's all tanked in or desalinated sea water - very expensive to produce). Everything you use or consume in Dubai (apart from a few dates) has been imported into the country. No surprise then that when the financial and property markets stutter, Dubai collapses.

    Anyone want any sand...or dates? Going cheap....

  • Comment number 75.

    #6 Mr Tweedy

    I know we had a falling out...but I regret it.

    Central EU traders continue to short gilts. This I know.

  • Comment number 76.

    #73

    Your view of Belgian independence is somewhat simplistic.

    Maybe if the Dutch had been a bit more understanding of Belgian grievances and made concessions after the Belgian uprising in 1830 instead of trying to suppress it (brutally and unsuccessfully), then the Belgians wouldn't have demanded independence and the great powers would not have got involved. Then Germany could have invaded France in 1914 through what would still have been Southern Netherlands without breaching any neutrality pact to which Great Britain was by then a signatory.

    Sorry to be so off topic.

    :-)


  • Comment number 77.

    73. At 10:51pm on 26 Nov 2009, foredeckdave wrote:
    #67 DevilsAdvocate

    "I think you will find that Belgium was the cause of us (UK, not US) entering the first world war. Not by doing anything I hasten to add, just by being Belgium."


    But you forget that Belgium only existed because of UK interference in European politics.

    --------------
    You mean we had to liberate it twice?

  • Comment number 78.

    76. At 11:34pm on 26 Nov 2009, Gergiev wrote:
    #73

    Your view of Belgian independence is somewhat simplistic.

    Maybe if the Dutch had been a bit more understanding of Belgian grievances and made concessions after the Belgian uprising in 1830 instead of trying to suppress it (brutally and unsuccessfully), then the Belgians wouldn't have demanded independence and the great powers would not have got involved. Then Germany could have invaded France in 1914 through what would still have been Southern Netherlands without breaching any neutrality pact to which Great Britain was by then a signatory.


    --------
    I give in, great minds think alike, I'll leave defending Belgium to you Yanks ;-)

  • Comment number 79.

    Always a pleasure ;-)

  • Comment number 80.

    I am in the fortunate position of having enough GBP to buy 50% of a family sized house. Rent is currently 150% of half a mortgage, gold is going up relative to GBP. Question is, will GBP go down faster than the value of a family house - if so buy house now or if not wait - OR do I buy gold and continue to rent? This is the sort of economic forecasting real people have to do and the decisions will have an effect on personal futures. I bet I put more thought into this one than some of the spiv bankers betting with my pension.

  • Comment number 81.

    #78 Gergiev,

    If we must go back to Belgian history!

    It is perhaps typical of British foreign policy that we put 2 peoples together who cannot stand each other and impose upon them a King who once installed decides that he would rather be friends with the Germans!

    But then a lot of British blood has been spilled in the defence of Belgium. It is sobering to visit the mark by the side of the road indicating the first British/German engagement in WW1 and then walk less than a mile up the road to another plaque which marks the last British/Geman engagement in the same war. Too much blood, too much pain. Let us hope that this mess can be resolved without having to resort to the military option again.

  • Comment number 82.

    The Danish poet Hans Christian Andersen predicted the Dubai bubble burst nearly 180 years ago, and wrote a childrens book about it. It's called 'The Emperor's New Cothes'

    http://en.wikipedia.org/wiki/The_Emperor%27s_New_Clothes

    Somebody however found out the Dubai secret. It was all just sand and fantasy, and it soon will again.

    Huge profits were made. Now let losses commence. Nature is restoring world order.

  • Comment number 83.

    Here comes the catalyst for the double dip, only the defences of Governments printing money are completely ineffective now. There is no escape.

  • Comment number 84.

    Stephanie,
    have I understood this correctly, some mukki-muck in Dubai needs to service a $22bn debt(£13bn),having already found 75% of the money and the markets go haywire?
    The UK taxpayer lent £62bn to RBS and Hbos to tide them over and nothing happened to the markets.
    RBS and Barclays have been hit hard in trading today.
    Is the world economy so fragile that they worry about this trifling amount?
    What am I missing about the import of this story here?

  • Comment number 85.

    My grandfather rode a camel.

    My father rode a donkey.

    I drive a ferrari and leverage billions in property junk bonds.

    My son will ride a camel.

    -----------------------------------------------------------------
    And my son's son will eat his camel.

    Because my son's son is a donkey.

    Now his son will not have a ferrari ;(

  • Comment number 86.

    I'm sure one of the several GCCs would have an oilfield they can sell to the bankers on the cheap to finance the 22bn debt. The black stuff in the ground is still worth at least 70bucks a barrel, last I checked.

  • Comment number 87.

    Just a question, those super-talents that were supposed to flee abroad if they were paid a decent salary, where were they supposed to flee? Dubai?

  • Comment number 88.

    #6 "Will this start the long promised correction away from risky assets?"

    I hope so, MrTweedy, I hope so !! But I may hope in vain !! At any rate, I'm so *NOT* betting on the "WISDOM" of these banks and/or their bankers !!

    It was obvious to all except those who *INTENTIONALLY WILL NOT SEE* that the Dubai World project's business model was a castle built on quicksand; and I don't mean their reclaimed land, either !!

    They were trying to create a new Monte Carlo crossed with Las Vegas, only bigger, "better" and much more GARISH !! The kind that will appeal to the Nouveau Riche and the tasteless !! This kind of project is a salesman's dream !! Flog 'em, grab the commission and *RUN* !! Unfortunately, the economic crises caught them in mid-flight !!

    Now that the emperor is seen to be naked, the banks will be hard pressed to recover most, never mind all, of their money !!

    Mind you, I love Dubai, especially its airport, which I use several times a year, but this is *that* "Island Too Far" !! (Sincere apologies to Cornelius Ryan and his book entitled "A Bridge Too Far")

  • Comment number 89.

    I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

  • Comment number 90.

    #7 "And the Middle East was supposed to come to the West's rescue?"

    This is like saying "All Arabs ride camels" !! A great many of them ride Rolls-Royces and Mercedes most of the time !!

    Their neighbour, Abu Dhabi mentioned above, has a lot of money stashed away *AND* they spent a small part of that buying up a significant chunk of Barclays. They definitely know a good thing when they see one. It seems they also know a bad thing when they see one !!

  • Comment number 91.

    #8 "Anyone know how much a camel is worth?"

    Do you mean a highly prized racing camel or a diseased one( as in "son of a...") ?? :-)

  • Comment number 92.

    #10 "Dubai or not Dubai that is the question !"

    'Groan' !!

  • Comment number 93.

    #15 "Bear in mind there is little trust between the individual emeriates and the word 'United' is in its loosest sense."

    Trust ?? They spent a couple of centuries attacking the other, when they were not busy assassinating each other !! It was the Brits who "united" them for the Empire's administrative convenience !!

  • Comment number 94.

    #19 errorist - "Barclays took the middle east dollar bigtime this spring didn't they?"

    Truly you are well named !! Barclays took *Abu Dhabi* dollars !! Not *Dubai* dollars !!

  • Comment number 95.

    #26 RagnarokBlat - "Who ever could have thought that Dubai could have in anyway overextended itself?"

    It's not *Dubai* that has over-extended; it's *Dubai World*, a company that speculates on the garish for the over-moneyed unwary !! Talk about over-priced tat !!

  • Comment number 96.

    #34 "RBS and Barclays big fallers today showing you where some of the exposure is...."

    Could this be why Barclays was busily seeking more capital a couple of weeks ago ?? Perhaps, they knew something we didn't then !! At least, they have the backing of the Abu Dhabi sheikdom and the Singapore government.

    "Oh and by the way if recovery in the UK is so good why is Borders going into administration?"

    Could it be that the former owners, Risk Capital, does not truly understand the book trade ?? I don't see Waterstone's or WH Smith or even, Forbidden Planet, going funny !! Foyles is still going strong after more than 100 years (1903 to present)!!

  • Comment number 97.

    #38 " Not taking any sides here, but why at this moment in time is the DOW up 30 points on the day and not reflecting the FTSE."

    Could it be the hot money fleeing London for New York ??

  • Comment number 98.

    #46 "I have recently spent time looking at the balance sheets of many of my high growth clients and conclude that these firms really are little more than (highly leveraged) property firms..... with lorry drivers. Just wait and see what happens to some of these companies."

    Strange you should say this !! In the run up to the 1997 Asian Currency Crisis, many businesses in East and South-east Asia were property companies with "ancillary" staff !! They have since learnt better. It looks like that many others have not profited from their (the Asians') mistakes !!

    He, who does not learn from history, is doomed to repeat its failures !!

    "Or how many construction firms are property companies.....with JCB's."

    Nope !! The JCBs, etc. are, very likely leases from the heavy plant companies who probably make more money on the land that their plants are parked on than the leasing of their plants !! Think about how much space a mobile heavy-lift crane takes up !!

  • Comment number 99.

    Well I never

    There is concern about Dubai being able to pay off their debts and so all world wide stocks decline.

    What utter madness .

    Could somebody please explain why companies and banks employ very highly paid analysts and economists when every time there is a troublesome rumour all companies just act like lemmings and blindly sell all stocks?

    Obviously if Dubai is having problems then it would affect Cadbury and BT shares etc!!!!!!

    If companies cannot look at stocks and take reasonable decisions themselves then why bother employing these overpaid people that they obviously do not take any notice of!!

  • Comment number 100.

    Ishkandar

    It was a US holiday yesterday! You are obviously not working in the financial industry!

 

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