Daily View: Dubai's debt
Dubai's debt problems have got commentators talking about why it happened and what it means for the rest of the world.
Johann Hari in the Independent reported on the cheap labour used to build Dubai earlier this year. In a piece today he calls Dubai "one of the great lies of our time", which he considers morally and ecologically bankrupt aswell:
"Yes, it has Starbucks and Dunkin' Donuts and the Gucci styles, but beneath these accoutrements, there is a dictatorship built by slaves."
The Guardian leader article says Dubai failed because it was reliant on easy money and a property boom:
"Just like Iceland, Dubai is a cautionary tale of what happens when an economy grows too fast and too lopsidedly. What outsize financial services was to Iceland, reckless property development was to Dubai."
In his Reuters blog Felix Salmon is glad that Dubai World has collapsed because he says it sets a precedent:
"Personally, I'm quite happy about this default, since it sets another very useful precedent of a state-owned company defaulting on its debt. Historically investors in state-owned companies have perceived an implicit sovereign guarantee -- there's even a German word for it, Anstaltslast. The result is a huge and unhelpful moral-hazard trade."
The Times business commentator Ian King says fears of market contagion are at the moment stalled because of holidays:
"The markets, due to the fact that Dubai is now shut for Eid and the US is more or less closed until Monday for the Thanksgiving break, have very little new information on which to trade. Expect the gulf to be filled, instead, by rumour..."
This has created a chance for financial bloggers to say they saw this coming. Claus Vistesen does just that albeit cautiously:
"On a personal note the 'Cranes of Dubai' always represented one of the clearest example of the excess and froth observed in the context of the economic boom that ended abruptly with the current financial crisis. With this in mind I am not the least surprised about this which of course is easy to state ex post, but then you choose whether to believe me or not."
Links in full
• Johann Hari | Independent | A morally bankrupt dictatorship built by slave labour
• Guardian | Dubai: Storms in the Gulf
• Felix Salmon | Reuters blog | Dubai World: A great precedent
• Ian King | Times | Dubai debt drama revives fears of contagion
• Claus Vistesen | Alpha Sources |The Great Unravelling (Dubai Edition)
• Marla Singer | Zero Hedge | What Dubai Says About Capitalism: Not Much
• Richard Barley | Wall Street Journal | Dubai's Shock May Not Be Last
• Jim Krane | Financial Times | Dubai gambles with its financial reputation