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Dubai: Wholly avoidable crisis

Robert Peston | 10:18 UK time, Monday, 30 November 2009

Few, I think, would now deny that last weeks tremors in markets - prompted by Dubai World's statement that it would not be keeping up the payments on its debts - were both overdone and avoidable.

It was no secret that of all the world's property bubbles, one of the very bubbliest had been in Dubai - or that the bubble had been pricked a year ago.

Even the International Monetary Fund (in its latest report on the prospects for the global economy) noticed that the United Arab Emirates had suffered the third-worst fall in house prices during the first three months of this year of any country (a fall of nudging 40%; only Latvia and Estonia suffered worse drops).

Dubai was not an accident waiting to happen: it had already happened, locally at least.

So the financial difficulties of one of the city state's most ambitious developers, Dubai World and its Nakheel subsidiary, were a consequence of known facts.

However, there were three big things that were not known:

• whether the putative guarantee from deep-pocketed Abu Dhabi for Dubai's state-linked businesses was real or imaginary;
• the potential size of impaired loans to Dubai interests;
• the identities of those exposed to Dubai, through loans and other financial commitments.

What shook the confidence of banks and investors more-or-less everywhere last week was that neither the United Arab Emirates nor ailing Dubai felt able to answer these questions last week when Dubai World announced its debt moratorium.

So fear and rumour took hold: equity markets dropped; there was a flight to supposedly safe assets, such as US Treasuries; and the price of insuring the debt of heavily indebted nations rose sharply, just in case Dubai was the first of a series of dominoes.

Here's the pertinent point: we had a bit worse than a dry run last year of the damage that ignorance can cause.

Think about the havoc wreaked last October by the uncertainty over financial firms' exposure to Lehman when it went down.

Remember the mess caused by the lack of clarity about whether the debt of Fannie Mae and Freddie Mac, the US mortgage institutions, were really liabilities of the US federal government.

Which is why some would say that there's absolutely no excuse for the failure of the UAE and Dubai authorities to pre-empt the panic by shining a light on the magnitude of the risks being incurred by creditors to this indebted emirate, including early and unambiguous clarification of what support would be given by Abu Dhabi and the central bank.

Others might also question why the IMF was also - seemingly - caught on the back foot.

To state the obvious, we are a long way from having the kind of global early warning and prophylactic system in place that can minimise the impact of financial shocks.

DubaiAnyway, the UAE's central bank said somewhat belatedly - yesterday morning - that it will provide emergency loans to local banks and branches of overseas ones, so that none of them falls over if anxious depositors and creditors should withdraw funds.

But, inevitably, stock markets in the UAE have tumbled very sharply this morning.

This was largely catch-up, however, since they were shut on Thursday and Friday for the Eid al-Adha holiday while London, Tokyo and New York were being bashed.

Outside of the Middle East, in Asia and Europe, investors have regained a bit of their appetite for risks: share prices have risen a little; US Treasuries are falling gently.

Or to put it another way, more by accident than by design of the Dubai or global authorities, it's become clear that contagion from Dubai is likely to be fairly limited.

That said, we cannot and should not slumber soundly: we can be pretty certain there will be other financial shocks from assorted parts of the global financial economy in the weeks and months ahead.

And if the global or local authorities lack plans for evasive action on those occasions, well that would surely be scandalous (you might say).

Comments

  • Comment number 1.

    The property that is causing all the trouble in Dubai is the wrong sort of property; after this weekend's news from Iran, it is obvious that it would have been much better to have built underground nuclear shelters, rather than high rise hotels. This news will be just another straw for the camel - get ready for the crash.

  • Comment number 2.

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

  • Comment number 3.

    You can't help feeling that what is happening to Dubai is a bit of poetic justice for a country built on the playboy image, gambling and property speculators. Is that a direct contradiction to all that is preached about virtue? And the local laws that underpin that mantra?

    Even the ruler can be seen on most big race days following his vast racing empire (Godolphin) around the world. There would be nothing wrong with that (it puts money into the sport) except there are huge numbers of cranes and unfinished building sites in his country, and the migrant workers encouraged to take part in building the boom are unable to afford the fare home. It is a recipe for much more of a disaster than simply the fact that Dubai apparently might not be able to repay their debts. It will be a human disaster on a large scale.

    It is time for the rulers of Dubai to stay at home until they have sorted the mess out. If that means the desert reclaims most of the stupid monuments to excess and greed then that would preferable to following the horses to Hong Kong and wherever as if nothing had happened.

  • Comment number 4.

    Robert,

    "supposedly safe assets, such as US Treasuries" really made me smile.

    I fully agree with you about uncertainty, lack of transparency, and so on. Only trouble is that all the "greenshoots", "signs of recovery" and all positive messages that we have been fed for the past months are based on making everything even murkier - "Don't worry, we're firmly in control. The worst is behind us".
    Decades of mismanagement fixed in a few months, I'm impressed.
    The Japanese are starting a new stimulus round, after cash for clunkers it's cash for old appliances (what else? cash for old socks?), governments are pushing everywhere the message "forget we are all broke and buy".
    As long as reality (which isn't necessarily doom, just a change of perspective) isn't faced, I don't see how you can have transparency and certainty ...

  • Comment number 5.

    As usual nobody wanted to speak about the elephant in the drawing room: it was always someone else who had the responsibility of removing it.

    What is the point of all these governments, all these regulators; all these so very well rewarded highly talented people when they are incapable of noting the obvious?

    What is required is a stocktake of all these dodgy assets from around the world so it can be seen how big the debt hole is. The reason why this won't be done is nobody wants the responsibility of finding out the true size of the mess we are in.

    Until this is known or until the world's economy hits bottom we are going to keep getting these shocks, these disruptions and these continued failures to return to normality: whatever constitutes normality these days.

    So that is two things we need: a separation of retail banking from the casinos and a clear assessment as to how much debt the casinos have caused the rest of the world. Then there must be some punishment of the guilty handed out so that for the chance of a better future we can all see that there remains some justice in the world.

    Are we going to get either? Fat chance if you ask me. All the governments of the world seem to want to do is sit around like a bunch of lemons whistling like erstwhile Pinocchios in the hope that something nice turns up one day. It is being left to the people to demand justice so we must take up that call: so we must insist on it.

  • Comment number 6.

    A lot of talk about property in Dubai but what about the huge puchasing commitments for passenger aircraft ? Emirates have ordered over 50 of the new Airbus 380 representing a value of , I guess to be around $25 Billion. This is about half the total order book and was the only way this aircraft was launched. Hope it goes as planned.

  • Comment number 7.

    stanilic. DSK (IMF) recently suggested that 50% of banks' losses have not been disclosed. Maybe the number is high. But does RP now think transparency is needed to lay the foundation for a return to a semblance of confidence or continuing to hide the dirty washing? Dubai may have been 'known known' but what about the rest? As recession bites more losses accumulate, how much is from bubble debt and how much is from the subsequent fall-out? Banks surely now have a good idea... there is a case for more openess. DSK suggests we are not getting it.

  • Comment number 8.

    So Robert,just what is this country's exposure to these bad loans ???

    Is the tax payer going to provide yet more succour to overseas deals,or is perhaps the bank of England going to devalue our currency even more with another print run ???

    I tend to think more is being hidden from us ???
    Just who can be trusted in these turbulent times to give possible depositors the information they require,as to where they should place their savings and pensions, as we seem no further on in being able to get clear information about these things.

  • Comment number 9.

    you can bet(or is that hedge ?) that someone or some institution made money from the chaos last week.

    this is further evidence that the IMF, Governments, Common purpose etc etc etc , is not working has not worked and never will work, we need a revolution a a world revolution, but not the New World Order they would like us to have

    ps as much as I may disagree with some of your points and what you stand for Robert, I hope all is well on the home front

  • Comment number 10.

    Does this mean that the likes of RBS who undoubtedly have exposure to Dubai will feel no direct effect of the cost of any loss to their balance sheet because it has entering the government’s asset protection scheme?

  • Comment number 11.

    If I have got this right this crisis happened because too much money was put into property and when the bubble that resulted popped everybody got nervous cause of the lack of transparency, lack of openness by the creditors who are used to working behind closed doors.

    So, where next? Shanghai?

  • Comment number 12.

    We had no doubt that the arab countries would bail of Dubai. There was little chance of them failing since they were part of the 'family'. None of them would see there fellow colleagues (and relatives) be reduced to their last private jet and luxury yacht.
    What is questionable, though, is about the risk taken in such ventures.
    Is it possible that the glitz, glamour, and celebrity status of this dream in Dubai was too tempting for our jaded investors in the City of London. Perhaps the appeal of mixing with the jet set, super models and the 'David Beckhams' of this world was enough for them to forget commonsense and buy into the dream.
    Buying into the dream, by the way, with other people's money!

  • Comment number 13.

    Robert, as you point out the issues have been well known re Dubai for some time which in my minde begs a couple of rather obvious questions.

    1) Why were both RBS and Lloyds (no doubt another stunning HBOS investment) so exposed (if the figures bandied about are anywhere near the truth)? If both RBS and Lloyds were exposed up to their eyeballs this adds yet another example for their detractors to show that if there was ever a need for a mug punter to invest in a dodgy asset the Scotish banks were up for it.

    2) Considering their unerring ability to back the wrong horse in ever race why would anyone with half a brain want to employ any investment banker with either RBS or HBOS on their cv? Rather than offering them bonuses to stop them leaving perhaps they should be getting no bonuses and a pay cut to encourage them to leave. It also saves on the redundancy payments.

  • Comment number 14.

    Robert

    in the light of this statement

    It was no secret that of all the world's property bubbles, one of the very bubbliest had been in Dubai - or that the bubble had been pricked a year ago.

    And the massive debt we have, no one should be ignorant of the facts in this country either but I don't see anyone pointing out how close to collapse we are. House prices have been rising if you believe the market reports.

    The whole country is living in a dream world created to hide the truth until after the election.

    Then 'no one could have seen it coming' will be the phrase of the hour.

    Can you tell us what will be the magnitude of the TAX & Spending cut necessary to avoid the collapse of Sterling?

  • Comment number 15.

    Well, Robert, thank you.

    Can you help further please?

    Your ultimate paragraph; "..the global or local authorities lack plans for evasive action on those occasions, well that would surely be scandalous (you might say)."

    Scandalous or imprudent or shocking or what? And would ring fencing our tax payers' money used to shore up our banks to only apply to UK based 'investments' and loans, would be 'plans for evasive action', perhaps?

  • Comment number 16.

    Details of the Dubai Financial Market can be viewed at:
    http://www.dfm.ae/default.aspx

    Normally around 8000 or more trades are recorded per day. On 30 Nov, there was only 560.

    No share trade is allowed at 10% below the previous close. Hence all the major stocks fell 9.xx% as that was the max they could fall. Even in good times some stocks do not trade on any given day. The result is the official fall of 7.30%. Reality is much worse. Looking at the chart, if that was an osciliscope, it would indicate the patient had died.

  • Comment number 17.

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

  • Comment number 18.

    "What shook the confidence of banks and investors more-or-less everywhere last week was that neither the United Arab Emirates nor ailing Dubai felt able to answer these questions last week when Dubai World announced its debt moratorium."

    I would imagine the UAE could have very easily answered this last week, but why should they when the can make so much out of controlling the market, including buying of guilts at approx half price etc.

    Banks knew full well that Dubai was a bubble with prices rising 80% between mid 07 and mid 08, that prices had already fallen 40% in qtr 1 09 and credit swisse predicting a total of 70% falls from its peak.

    If banks are willing to invest without DEMANDING visability of risk, potential level of impared loans or guarentees supporting the debt then frankly you can't really blame the people who saw them comming.

    If governments are willing to blindly guarentee the banks without demanding and controlling restructuring to this type of risk, then do you expect anything other than the banks to milk us all.

    The blind dream that investors can have large rewards without risk has become a nightmare again.

    Nationalise the banks!


  • Comment number 19.

    Isn't the underlying problem debt which there is difficulty paying back ? ( Becuase that bedt was run up on a property bubble is just the reason it can't be repaid ).

    What the difference with other government debt that can't be repaid like in Ireland, Latvia, US, Greece and soon UK ?

  • Comment number 20.

    Getting a global early-warning system in place is the key thing.
    And that requires full disclosure as a statory requirement, along with careful monitoring (since there will always be bandits who ignore the rules).

    Also, we have to recognise that while paying peanuts will get you monkeys, the converse is not true. It is not necessary top pay massively inflated remuneration to attract "talent", what it does in fact get you is greedy political animals who can claw their way to the top. In the case of some bankers, they don't even bother to pass the banking exams.

    It may be that there is a need for legislation to ensure that there is no great disparity between the offerings of various institutions though, since shareholders have clearly failed to properly monitor this issue.

  • Comment number 21.


    #14

    We're talking about two different markets - in Dubai's case we have fundamental oversupply of property nobody wants or needs. In the uk we have cronic undersupply, historic and actual, of property everyone wants and needs....hence prices rise. Simples!

  • Comment number 22.

    Ian the chopper

    too late - I've already taken up my Lloyds rights and am having difficulty sleeping. My family are looking at me as if I should be in the corner with a dunces hat on. Particularly those who are already on my case for SKI-ing whenever we get the chance.

    So what are the numbers you have seen bandied around, and do they explain the latest fall in the ex-rights price? Of course, anything over 37p is still a profit, but it doesn't go anywhere near making up for the fall from the pre-rights figure of 91p to a post rights figure of mid 50s.

    If I don't watch out I will get on my hobby-horse (perhaps one of the ones owned by Sheikh Mohammed) about the stupidity and duplicity srrounding the Lloyds takeover of HBOS. Stand aside KKR and RJR and Barbarians at the Gate and bring on the Scottish Play.

  • Comment number 23.

    #5

    As usual spot on, but as usual we may as well not bother as the level of obsession with 'the self' that has developed in society now means that nobody will take any action until the crisis touches them in the real world, even then it will have to touch a critical mass of people before any meaningful change can result.

    In other words it is going to get an awful lot worse followed by a period of chaos followed by a new vision and a new philosophy fit for the modern world. If anybody does not believe this just read any history book on the human race and you will discover that it was ever so in terms of how we develop as a race.

    I can not see it any other way, i wish i was one of those who can not see it, to be able to see it and be powerless to stop it is the worst of all worlds.

    There is nothing you can do stallinic.

  • Comment number 24.

    I'm forever chasing bubbles...with apologies to the song, but this seems to be the mantra of the banks. There is no magic bullet. A fast buck is what they were after.

  • Comment number 25.

    rolfo 19, you are absolutely right, this is an isolated incident in the middle east which will remain that way. dubai is not the start of financial meltdown 2...that will be when the central governments stop printing money.

    at which point you may officially panic and gp long shotgun shells and dried pasta.

  • Comment number 26.

    It's odd that even people who get about a bit don't really check out some important background. Me included.

    I'd assumed - without checking the real political structure and modus operandi - that the UAE acted a bit like the UK or more probably like the US federal system, where a collection of states voluntarily adopted a collective approach. Meaning, I assumed that if one bit was developng, it was underwritten by te whole collective.

    It amazed me during a relatively few commercial trips to Dubai where all the money was coming from. Buildings shot up all over the place and you got the sense that a completely new way of development was under way. It never occurred to me that the whole concept was a single Emirate (with very limited direct oil wealth) was not backed by the collective.

    Live and learn, I guess.

    It did occur to me that the "indentured labour" - which is what was effectively building the infrastructure - seemed a rather mediaeval way of doing things. Locals seemed to swan around a lot, while some poor bugger with limited working, health, or physical protection was working long hours in baking heat.

    Maybe there will be a major issue with China - but at least the Chinese economy is producing real things, which can be sold as tangible items... And seems likely to continue to do so, because there is a massive internal market to satisfy.

    Dubaie seems to have a strategy of being a "transit point", whether for financial exchanges, airline activities or general trading. Any idea what they actually produce in the old fashioned sense?

  • Comment number 27.

    chris911t
    Whatever they might say, no bank is ever going to fully disclose unless is is the subject of a take-over, is it? Even then it would be subject to due diligence too and subject to the Companies Act to boot to ensure compliance.

    We know that the government together with the Bank of England admit to having kept information from the electorate and the rest of parliament, but don't know to what extent RBS and HBOS real situation was known and therefore whether the Companies Act was breached during the undue haste of HBOS being pushed into LloydsTSB.

    And, as far as I can see the insurance claims for default have yet to be fully assessed, adjusted, accounted and audited before the losses on those will be known sometime next year.

    I am also worried that the government does not seem able to manage anything well and apart from spending money and then not spending it well there are few real achievements so nationalising the banks might make matters considerably worse.

  • Comment number 28.

    Robert, are you suggesting that those causing this "avoidable" mini-crisis have anything to do with the handsome returns the hedge funds must have done last week?
    No?
    Neither do I.
    Nor mini-crisis number 2 in the cards. Everybody is confident that the big-brother in Abu-Dhabi is there whenever needed.

  • Comment number 29.

    Majorroadgainagain2 & Post 22, if you read pages 1 to 3 of todays FT it will scare you witless re Dubai as the house of cards seems to be falling everywhere in Dubai (see link below).

    http://www.ft.com/indepth/dubai-world

    Every newspaper has a different figure re the debt amounts though the original USD 22 billion seems to be going upwards almsot by the hour.

    Apparently Jebel Ali has a huge sukheel debt payment due today and fears are that can't be made either.

    http://www.ft.com/cms/s/0/75a8cfc2-dd32-11de-ad60-00144feabdc0.html

  • Comment number 30.

    Surely one of the problems for the market now must be that the next time there is bad news and the govt has to get involved in some way we won't know how much they are not telling us due to the secret RBS/Lloyds loans that we were not told about for fear that we could not handle the truth.

    How much more 'truth' do we not know about?

    In fact I thought directors of listed companies had obligations to the Stock Market to disclose events that may affect their share prices?

  • Comment number 31.


    UPF advisory note 10

    The following is an advisory note issued by the United Peoples Front

    To any of our members currently engaged in the business of finance, and more particularly actively financing Dubai World or is subsidiary company Nakheel Construction, by virtue of being a UK tax payer and thus having a stake in The Royal Bank of Scotland and/or Lloyds banking group.

    If having found that Dubai World or its subsidiary company Nakheel Construction are in default on a debt owed, whether such falls into the category of failing to return capital or the payment of interest, we recommend that the credit rating of these companies prior to 2007 is re-rated as AAAAA rating.

    Having undertaken the above, you can then deduct one of the A ratings for failing to pay back capital and a further A rating for failing to pay back interest. However this still leaves them with three A’s and therefore puts their debt into the same category as UK sovereign debt.

    Consequently Dubai debt and UK debt will now both be AAA rated debt. Given that both UK Sovereign debt and Dubai World debt has now got the same credit rating, the gilts now held by the Bank of England on your behalf can now be exchanged for those of Dubai World. This will both reduce Dubai World’s debt and that of the UK Government.

    Because here at the UPF we believe that both Dubai debt and UK government debt have a similar level of credibility.

  • Comment number 32.

    Hooray! Pesto's back

    Seriously though, asset prices are over-inflated across all markets. Pricing doesn't appear to reflect underlying fundamentals and if Abu Dhabi doesn't guarantee a full bail out of Dubai in the next day or two, the jitters will be reflected in asset pricing across the globe.

    Which is just as well because I've saved my cash for an imminent crash.

  • Comment number 33.

    26 fairlyopenmind

    I think the change for Dubai will be on a political end, and social mores will be less libertarian. I have never been but from what I gather it is big on tourism and Duty Free shopping. Whether the new money see this as its future remains to be seen. That said Abu Dhabi just hosted a Gran prix so they do seem to want tourism etc. For all their traditions they are looking forward to a time when the oil runs out, and I guess that not too many are prepared to go back to living in tents as Bedouin tribes in the desert.

    I am not too sure about China. I fear that they are investing in all the glitzy stuff, but neglecting the basic infrastructure such as water and sewerage treatment plants. Some cities have adequate provision but a few are time bombs ticking away - the World bank is involved in a project in Tianjin, China's third largest industrial city.

    Yes China makes things. But it is wholly reliant on the western markets to buy them. Our recession is their recession. Btw how do they get away with having nearly fixed exchange rates!!!!

  • Comment number 34.

    Message 7 racrac

    I am pleased to note they know as much as 50%.

    What seems to be escaping the authorities is that no country is going to achieve adequate economic stability to commence self-sustaining growth until the debt hole is fully defined and constrained. Until then the taxpayer is being asked to perform the equivalent of urinating into a high wind.

    Whilst one agrees that it was proper for the taxpayer to step in to support the banks, the abject failure to follow this up with any sort of practical strategy is abdication in the highest degree.

    There can be no economic recovery worth the name until the debt is sorted. There is a distinct possibility that without the global debt being defined, further debts will be incurred as regional bubbles inflate and rapidly deflate.

    There is a crying need to get a grip.

  • Comment number 35.

    Message 23 Jericoa

    I agree with most of your post except the bit in which you say we can do nothing.

    We have to do something and as it progressively dawns on the population that we are being asked to accept a state of almost permanent instability in employment with no prospects then the anger will begin to become manifest. Then it will become possible to get something done.

    At the moment for as long as the public is kept complacent by soothing words that the worst is over, recovery is just around the corner, and public spending can be maintained by printing money then I agree there is little one can do.

  • Comment number 36.

    30. At 1:50pm on 30 Nov 2009, GRIMUPNORTH77 wrote:
    How much more 'truth' do we not know about?
    -------------------------
    In my youth I always liked to wind up my friends with tall tales. After they had fallen for a "truth" for a while and then asked me how I had come across the information I would say it was a truth I had just made up.

    These "truths" can of course be worse than ignorance.

  • Comment number 37.

    36. At 2:10pm on 30 Nov 2009, KitGreen wrote:

    30. At 1:50pm on 30 Nov 2009, GRIMUPNORTH77 wrote:
    How much more 'truth' do we not know about?
    "-------------------------
    In my youth I always liked to wind up my friends with tall tales. After they had fallen for a "truth" for a while and then asked me how I had come across the information I would say it was a truth I had just made up."

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

    Kit: In your youth were you a New Labour politician?

  • Comment number 38.

    Rolfo 19

    You're correct, it's not the 'beginning of financial meltdown 2' and yes Abu Dhabi could cover the costs out of the loose change they have down the back of their sofa but that's not neccessarily the point.

    The point is that the problems are associated with a company that was apparently (according to many interpretations) implicitly backed by the state, and an enormously wealthy state at that. The point is that it is yet another large financial institution that has borrowed too much and cannot pay it back having found out that reckless lending is not a good idea. The point is that this company should have been (and was seen by many to be) in an ironice turn of phrase 'as safe as houses'. The point is that it shows that there are still a lot of large institutions out there that are perhaps fatally holed below the waterline and investors cannot neccessarily trust the words of the analysts and 'experts' who are claiming that we're all fine again.
    No this isn't 'financial meltdown part 2' as you put it. I think it's still 'financial meltdown part 1', and I think that it's not over yet.

  • Comment number 39.

    The high rollers all wanted this independent community where they were not subject to the unwashed masses of their country of residence. The impact of the financial collapse may actually take some toll on those who created it. The money-lenders will soon find another place and their foot-servants will follow them.

  • Comment number 40.

    If we could post drawings on these blogs I'd make a picture of a big fat banker sitting on a big fat pile of bubbles. Some of the little bubbles would burst, but there would be an army of working people, slaving on a tread mill of taxation and loss of services that drives a bellows of quantitaitive easing and bank subsidies that, in turn, keeps the biggest bubbles inflated and saves the big fat banker from falling on his big fat ****.

  • Comment number 41.

    Perhaps the most worrying aspect of this development is that corporate debt appears to be spilling over to sovereign debt territory.

    What is happening already is bad enough, but when countries fail (Iceland?) and not just banks, then we will really be in the soup.

  • Comment number 42.

    Thought I should share this with you all, in case you have missed it, as it is indicative of the "I am alright" attitude that seems to spread across politics and banking and now seems to have reached telecoms.

    http://news.bbc.co.uk/1/hi/england/8386224.stm

  • Comment number 43.

    Wholly Avoidable Crisis.

    I think what the article says is this crisis could have been avoided if someone (Abu Dhabi) had simply stumped up $66 BILLION ($66,000,000,000) or announced they were about to.

    Mr Peston - I think over the last 18 months you, along with many others, have forgotten just how much money that is.

    At the same time people are being refused treatments on the NHS for liver and bowel cancer which will lengthen lives because they are too expensive - the total budget for the NHS is £100 billion per year (the Dubai bail out required translates to about £40 billion so 40% of the annual NHS budget).

    What is more important - skyscrapers in Dubai or 40% of the NHS budget?

    PS Please no smart answers like it depends whether it is the 40% spent on quangos and Admin or the 60% spent on patient care!

  • Comment number 44.

    37. At 2:18pm on 30 Nov 2009, bertrambird wrote:
    Kit: In your youth were you a New Labour politician?
    -----------------------
    No. I have always thought spin = windup, that goes for politicians in general.

  • Comment number 45.

    Is anybody willing to take a punt on the exchange rate at which sterling joins the euro ?

  • Comment number 46.

    Dubai: Wholly avoidable crisis
    Robert Peston | 10:18 UK time, Monday, 30 November 2009

    If Dubai was a wholly avoidable crisis, then this be a wholly avoidable article.

  • Comment number 47.

    "It was no secret that of all the world's property bubbles, one of the very bubbliest had been in Dubai - or that the bubble had been pricked a year ago"

    ...no secret - and yet strangely not commented on by the mainstream media as to avoid panic - and possibly to ensure there wasn't a collapse as the millions of investors got itchy feet and pulled their investments.

    I'm sure I heard Governments (including our own) talking about 'recovery' and 'the long road upwards' - how irresponsible are they if it was 'no secret one of the biggest world borrowers had invested it's borrowings in an unsustainable property boom'?

    ...sounds like evidence of the Government lying (again) in order to protect us (or more to the point, allow their friends to close out while the little man remains in to take the hit)

    What about this:
    "whether the putative guarantee from deep-pocketed Abu Dhabi for Dubai's state-linked businesses was real or imaginary"

    ...so are we saying risk is being assessed these days on 'the likelyhood of your Government bailing you out'???? Is this now how I should decide if it's a good time for me to extand my mortgage?

    "So fear and rumour took hold" - no it didn't, reality hit home

    "Outside of the Middle East, in Asia and Europe, investors have regained a bit of their appetite for risks: share prices have risen a little; US Treasuries are falling gently."

    ....as investors in panic make rash decisions - assuming these are actually 'safe havens'

    "That said, we cannot and should not slumber soundly: we can be pretty certain there will be other financial shocks from assorted parts of the global financial economy in the weeks and months ahead."

    ...sense at last - but does anyone outside this blog admit this is the case - or are the politicians all still living in la la cuckoo land.

    So while we're on the subject of 'obviously unsustainable bubbles' - when do we get a story about our own FTSE 100 and it's unsustainable rise on the back of QE?

  • Comment number 48.

    'And if the global or local authorites lack plans for evasive action on those occasions, well that would surely be scandalous (you might say)'

    Well that is probably the most apt comment of all for there is no sign that the local authorities or anyone else do have plans for evasive action apart from turning on the printing presses.

    This could explain the markets complacent attitude to the obvious uncertainties out there. The taxpayer will always pick up the tab. There is now a never ending supply of money. What that will be worth in the final outcome is the great unknown.

  • Comment number 49.

    It's not dominoes falling, which conjures up images of orderly ranks falling one after the other.
    It is more like a giant net made from elastic bands, one section is pressed down and this pulls on all of the rest.

    This is just part of a long term decline, look at Frontline, the worlds largest crude carrier, revenues have halved and they are cancelling or delaying delivery on future shipping capacity, this will impact on shipbuilders followed by component suppliers and steel yards.

    Can the rest of the shipping industry take up the slack ? No, 15% of the worlds bulk container ships are anchored outside singapore harbour going nowhere.

    Across the globe trade is falling, capacity is under utilised, asset prices are falling and with that covenents are broken debts become due and defaults take place lowering asset value further.

    The unravelling will continue for a long time yet.

  • Comment number 50.

    It appears that the Dubai authorities have cut Dubai World free.

    http://news.bbc.co.uk/1/hi/business/8385164.stm

    It is difficult to see if this is merely an opening gambit in an ongoing debt renegotiation or an acceptance that Dubai is up a creek without a paddle.

    My own gut feeling is that Dubai is rather like Iceland in being a state with a low local population and in order to develop it has boomed on the back of borrowings and cheap credit.

    There seems to have been a view that Abu Dhabi and the rest of the GCC would stand behind Dubai and not let it go to the wall. This may yet still happen but initial signs do not look good.

    I haven't been tracking the government debt markets but I imagine both government debt and large company debt rates in the Middle East and developing world must be shooting up as the day goes on.

    I think creditors will be lucky to see any more than 50p in the pound on the Dubai debt when this all works its way out of the system either that or a South American style renegotiation with debt forgiveness and lengthening of loans in the vague hope that it will all be eventually paid back.

    I have one point of warning for those who think this is containable in Dubai. As well as mug UK bankers much of the debt to fund Dubai came from the Gulf area as many states and organisations were sat on huge earnings with limited places to put it.


  • Comment number 51.

    ....another day, another raft of truth manipulation by the BBC. I just extracted this from one of their pieces about European inflation:

    "Deflation is bad for an economy because consumers put off buying goods as they wait for prices to fall further - which can lead to a vicious circle of decreased spending and increased unemployment."

    ...and inflation is good because it allows you to hand out 'pay rises' to the workforce whilst actually making them 'worse off' - thereby ensuring they maintain profits and overcome the tendency for those profits to decline (although not enough it seems).

    In a country where we have just over-extended ourselves by a large margin, don't you think 'decreased spending' would actually be a good thing?

    The determination to ensure we live in an inflationary (and at risking hyperinflationary) economy is abundantly clear from the policy makers. It also seems it's an agenda the BBC is pushing as well - 'beware of the bogeyman deflation'.

    The truth is that in a deflationary environment the profit takers find it very difficult, but the consumers would rather enjoy it - I'm sure I wouldn't be crying when the price of my needs is falling back in line with my wages. Unemployment is a scary thought.....but we're going to get that through the contraction anyway, you can have unemployment and inflation - it's not tied to deflation.

    It really shows who is running this country - it's the exploiters, and they're running it for their own benefit - not yours. Just because sometimes benefits are shared it does not mean they are anything but coincidence.

    I did nearly wet myself with joy however when I saw that the worst hit by the Dubai property crisis are 'Hollywood stars' and 'premiership footballers'

    sssssssshhhhhhhhhh if you listen carefully you can hear the worlds smallest violin striking up a tune....

    Bring on the next crisis!

  • Comment number 52.

    Ian the chopper

    Many thanks for that and as Tom Hanks said in a film "it scared me s***less".

    Grim up North While I am on films, wasn't it Jack Nicholson who say "You can't handle the truth"? (your 30)

    rvaucbns your 45

    I wouldn't take a punt on sterling joining the euro at all, let alone at a price. After 12 years of Brown and Blair, who had the chance but kept us out, and a possible minimum five of the conservatives again next year I would say that sterling will be on its own for the rest of my lifetime (I am 72). I would prefer to bet on who might be the first member of the euro to decide it has had enough.

  • Comment number 53.

    I still find it slightly irritating that RBS/Nat West are running adverts as 'a friendly local bank' to UK customers and businesses, when they are using our deposits to lend for property speculation in Dubai. And then when they lose that money they come back to us as taxpayers and ask for a further sub

  • Comment number 54.

    Indoor ski slope in the desert, a palm shaped island...Dubai was just a dance around the Golden Calf, a pretentious play ground for the new-rich self entitled bankers.

    Time for a reality check.

  • Comment number 55.

    Unfortunately, we need more crisis, because we (or, at least the government and the financial institutions) haven't learnt the lesson yet.

    Unfortunately, the ones who haven't learnt don't intend to pay the cost of their errors.

    Unfortunatlely for us, they have the power to make us pay.

  • Comment number 56.

    Pardon my ignorance, but could someone explain to me how the owners of Dubai World etc differ from the ruling family of Dubai?

  • Comment number 57.

    53. At 3:58pm on 30 Nov 2009, DBB59

    ...and I wonder if HSBC's 'local knowledge' also ensured they didn't invest in castles in the sand based off the wild dreams from Arabian nights....I'm sure they would have to change their USP pretty quickly if it turns out they've booobed...

  • Comment number 58.

    The real question is not id Abu Dhabi will bail out Dubai, but what price will they extract. When Dubai set up the property boom allowing expats to buy the land on which their house stood, this was against the Emirates Councils advice as all Emirates pursue the policy that only Nationals can have ownership of the land. Do not be surprised if the price od bail out requires partaking of a bit of humble pie and asking Non Nationals to move their houses from UAE land

  • Comment number 59.

    Further to comments about Dubai World being cut loose:

    Whilst I can understand that people are worried about Abu Dhabi not picking up the pieces, consider the Chinese potision over Rover which went something like this:

    'Yes we'll buy it'
    'Of course we're still interested in buying it'
    'No we're not going to buy it'
    'Great now it's gone bankrupt we can get the pieces we want even more cheaply than before'

    Whilst Abu Dhabi are expected to help out Dubai, business is business, and I'm sure if they can shake a few prime assets loose, they will

  • Comment number 60.

    The real concern is whether the shake out will take down the club med group. What price two tier EU or the Greeks being forced out by their own citizenry when the inevitable austerity measures are FORCED upon them.
    Bulgaria and the other Balkan states where the Greeks are heavily exposed could be the final straw.
    Riots in Athens, Larissa and Thessolonika anyone?

  • Comment number 61.

    Dear Mr Peston
    Market Confidence? ever heard of it...it affects share prices. Share prices are instrumental in delivering amongst other things a feel good factor to the economy and also helping people have a good retirement.
    When are you going to stop your persistant doom and gloom mongering.
    You really seem to me and others to get pleasure from it.
    Perhaps if you put 50% of the effort you reserve for bad news into good news things maybe a little better for us all.
    Stop knocking Market confidence, the BoE didnt see fit to let you in on things because of this very reason...you dont give a balanced and informed view.

  • Comment number 62.

    Fully agree with what Robert says.

    "there's absolutely no excuse for the failure of the UAE and Dubai authorities to pre-empt the panic by shining a light on the magnitude of the risks being incurred."

    Hopefully, from now on, the competence of regimes will be more of a factor in investment decisions given the unnecessary chaos that such failures cause.

  • Comment number 63.

    Sunds like someone got used to oil at $147 a pop.

  • Comment number 64.

    Post 60 the Greeks are really worried

    http://news.bbc.co.uk/1/hi/business/8387190.stm

    I can't imagine the Italians and Spanish will be far behind and before we start acting all that smug we won't be far behind unless things change radically re our government debts.

    The poor UK mug punter has realised which way things are going and are paying off debts at a record level.

    http://news.bbc.co.uk/1/hi/business/8385899.stm

    2010 is going to be a long and hard year.

  • Comment number 65.

    post 22 - majorroadaheadagain2 - may I refer you to post 146 (mushroomhair) on Stephanomics 'Dubai just a side show' (27.11.09)and click on the link. It seems that you and I, and many thousands of nice trusting UK investors who thought that Lloyds was in safe hands now find that the new chairperson is ex citibank and invested US taxpayers money into that eco-unfriendly moonscape called Dubai. Any one who has ever been there and thought that it was sustainable or even desirable is either a banker or an idiot. As far as the rights issue is concerned you have no option, either your holdings are diluted or you risk it and hope that the board keep Mr Win in check. Did anybody manage to go to the meeting on the 19th Nov.?

  • Comment number 66.

    65 thicklady thanks for that.

    I didn't go to the meeting but by all accounts Eric Daniels sat there looking totally bemused. Why are these people (he was possibly thinking ingrates) so angry? Didn't they trust me last year when I told them it was the deal of the century? Of any century?

    I have been investing since the 60's when M&S used to give a scrip issue of 1 for 3 every two or three years. And double your money every five, even though the market moved like a snail. Like a lot of investors in LLoyds I got suckered by the 10% net dividend, and enjoyed it while it lasted. I believed Daniels when he said he had carried out sufficient and appropriate due diligence, and I didn't really think too hard about what might lurk in the HBOS books. Silly me. Still, I now sit on lots of shares at 38p and even more at 37p. I didn't buy any of the 1.73 ones which I bequethed to Mr Brown. But a few cost me up to 10 pounds in my ISAs (1 April 1999) and some at around a fiver. I dont need a huge amount to break even, but the numbers we hold now are like monopoly money.

    I blame the Government, the Board, the BoE, the FSA, the regulators (here and in Europe, who should have turned it down on monopoly grounds but were lent on), the Institutional shareholders who could have stopped it but were trying to be smart and save their HBOS bacon, but lost on both banks. Most of all I blame myself. There is no fool like an old fool, but at least I am not a sore loser. Except that I stick pins in effigies of all the above every night


    Major Major

  • Comment number 67.

    Ian

    Your last line was a real pick me up - "2010 is going to be a long and hard year"!

    So bleak you have got my Guillain Barre playing me up again. Better get the wheelchair out just to be on the safe side. Or follow the sun to our beloved Madeira...

  • Comment number 68.

    Just trying to be honest.

    There are going to have to be public sector cuts next year and tax rises.

    Those of us still in a job will probably be told we should be glad we still have a job and forget abut any decent pay rises.

    I'm not trying to get you on a downer its just that any recovery is likely to be slow and shallow.

    Also as much as people might say things are getting better we still don't know the full story re the banks.

  • Comment number 69.

    Did anyone notice that the insurer AIG was down 14% today (maybe it has to do with credit default swaps)?
    Here we go again with another package of surefire returns unravelling.

  • Comment number 70.

    A couple of years ago I watched in horror as all that sand was dumped into the ocean, then almost wept as they built houses on the resulting mudbanks. Parables about building on sand or building on rock notwithstanding, I can't help but feel a little smug now, recalling how I said to my wife at the time that such decadence and greed, (not to mention the message it sent out to its poorer arab cousins), could only end in tears. The Butlins of Insanity that is Dubai should now be washed back into the seas from where it was born and the only casualties should be the mad money men who conceived of the abomination in the first place.

  • Comment number 71.

    Ian the chopper

    Of course you are right. And the news that Dubai World is going to restructure 26bn of its debt wont help, particularly as RBS is said to be one of the big holders of that debt - RBS is us folks so any losses they incur adds to our national problems.

    All the talk on CNBC and Bloomberg this morning is tht we are going to be the last out of recession - the poor relations of Europe was one comment. Yet the Government still refuses to countenance what you are talking about which is job cuts in the public sector as part of reducing debt. They obviously hope that they can use some magic elixir to stimulate the economy and avoid cutting but that looks like pie in the sky to me.

    We have been here before as far as cuts are concerned. I was working in the MOD when they used "salami cuts". Each year they had a cut of 5 or 10% to much squealing from the defence chiefs who thought the roof was going to fall in. Yet each year it all went on as if nothing had happened, which showed me how much waste there was out there.

    I posted earlier about tax cuts being the wrong end of the spectrum. If you applied my suggestion on why we do things, how we do them and do we need to do them at all preceeding any debate about how much we need to raise in taxes you would look at fundamental things in defence like why are we in Germany - do we need to be there and what would be saved if we were not there? You would almost certainly bring them home, and in the process create some more jobs in Britain for their accommodation and training. Tough on Germany, but how many troops do they have here? A few in Wales in the 60s but not many more.

    As you say, I am sure pay rises are off the agenda and people will be reminded that they are lucky to have a job. If 5m people who could work dont have a job that is a lot of extra money going out on benefits.

    Incidentally, there was a lot of huffing and puffing about the Lloyds job losses in Brighton, bringing the total to 15,000 so far. I shudder to think how many jobs are still to go, but I saw one figure which suggested that had HBOS gone belly up it would have been between 30-40,000.

  • Comment number 72.

    I personally never understood the business logic of Dubai. They think they throw mountains of cash to build the world most this & that, then all the tourists & business people will be "automatically" flogging into the place and all the riches will buy their second home there. I hate to say that but there are places where are more compatible to visitors in terms of culture, people, politics, language, scenery, food, history and charisma. There is a saying: "nothing attract a crowd like a crowd".

    To me, it is just a desert and they are trying to turn sand into gold. They should have taken advice from some people to develop solar power & hydrogen fuel cell. So they can export to the energy hungry countries. Even if it fails, it would be a lot less than these empty buildings buried by sand.

  • Comment number 73.

    DonKuan

    The only rich people that I know of who bought second homes there (or tenth or twentieth in some cases), were the England team on their way to Japan for the World Cup. Including apparently Beckham and Owen. As you do when you stop off at Dubai for a bit of "duty free". But then if you earn enough to buy a new 1m pound home in Dubai every ten weeks or so as some footballers do then who is counting?

  • Comment number 74.

    My tuppence-worth?

    Sterling won't joint the Euro, even in panic.
    The euro is under tremendous internal stress. Basically the Germans are funding the sick and wounded -Ireland, Spain, Greece, Latvia and others are absolutely stoney broke. I don't see why the German people will stomach that for too much longer. I am sure you can get solid odds that the Eurozone could split.

    The Arabs will look after their own interests. Our stupid banks will go out and try make some fat commission on rescue deals, and the UK & US tax-payers will foot the bill. It isn't a Dubai/Abu Dhabi problem now, its a western bank problem. (Who has the assets, and who hasn't been paid the money?) The Islamic bond will be paid, but not much else.

    I would like to see Bobby and his pals out in Iceland, in the shanty-towns around Dubai, in Latvia, sticking a microphone under the locals' noses and asking them how they are doing. I don't think the BBC has done anything whatsoever to explain to the general public what a bankrupt nation looks like, and how the people are actually affected. Their savings, their pensions, their homes, their jobs, -all gone or diluted to spittle. You are a public service BBC, and you are failing in your duty to shine a torch on all this.

    (No green shoots, I'm sure you were peddling the government line 6 months ago that by Xmas we would have turned the corner, heading for 4% growth........ (?!!!)

    Regards,

  • Comment number 75.

    Ian the chopper

    As my unofficial "financial adviser" perhaps you or some other helpful person on here would be kind enough to explain how to count on the Lloyds rights issue.

    Assuming the prices at the date when they go ex rights (12 Dec?) is 55p and 18p for the np, and the issue in shares allocated was 1.34 for every 1 held, is it a straightforward question of muliplying 55 by 1.34 and adding the 18p to get to a price to equate to the pre rights price of around 94p? Which would indicate a loss of a couple of pence?

    Or is it a straightforward comparison of 1.34 x 55 which equals 73.7p, ie a loss of around twenty pence in the short time since the rights was approved (less than a week)?

    Or is it some other mathematical calculation? Any help would be much appreciated.

  • Comment number 76.

    #72 (the logic of Dubai?)

    I should be working, but I am distracted by all this, it is a big deal.

    Just like the govt. wanting to set up mega-casinos all across the country a few years ago -remember that hair-brained scheme?
    Just like the 2012 Olympics, just like Heathrow expansion, just like the 2nd Forth Bridge, just like the PFI/PPP Schools rip-off, just like quantitative easing, and just like Dubai, these things don't come about because they are essential or desperately needed. They don't come about because govt.s are imaginative and competent. They come about because the banks want to make money. The Western Banks and their lobbyists fueled this 'greed-is-good' atmosphere. They were luck to find a pair of clueless naifs like Tony & Gordo, and in the US they had Clinton and Dubya, hypnotised by the promise of wealth and glory.

    Work for 40 years and then have the promise of 25 years on full pension?
    Live in the same house and watch it double in value every 7 years?
    Have credit cards to the value of your annual salary?
    Do you think that all happened because we work hard and have cut red-tape and inefficiencies? Nope, it happened because the US investment banks wanted free rein to hoover up even more obscene amounts of money than they had historically been allowed to do. Remember when a salary of £100k sounded a lot, well apparently £10 million now isn't a big deal. In what world does that seem reasonable.

    It isn't a conspiracy theory, it is just a natural instinct to want to be wealthier, healthier, and happier. The problem is when some snake-oil salesman offers you it for 'free'
    Government and central banks are supposed to look out for this, and keep it under control.

    If you throw cheap money to anyone, they will spend it, and especially if you tell them their assets are going to increase in value forever. Whether it is a yacht, a holiday-home, a flashy car, or cosmetic surgery, the urge to spend is irresistible. Dubai is exactly the same, writ large.

    Dubai has basically never had the oil, Abu Dhabi has 90% of the reserves in the region. Remember they are not all the same country. All Dubai had was a beach and some cheap land, and plenty of time to think up ideas. The tax-free port and the airport hub (half-way from London to the far east and Australia) were great initiatives, the rest came from avaricious bankers promoting the mirage. Our pension-funds were going to share in a wee slice of the profit, and if it failed, well the tax-payer would foot the bill.

    Surprise, surprise, it has failed.

    Money IS actually the root of all evil. (that and a bit of religion)
    I am getting a bit pissed off with all this, and I don’t like the idea of a life in servitude to fund someone else's screw-up.
    (there apparently is a profanity filter, otherwise I could have maybe come up with a more descriptive phrase)
    Maybe there is someone I can vote for to hose out these Augean Stables, wouldn't that be great.

    Regards,

  • Comment number 77.

    Here's a frightening possibility for the future of Britain....

    (Bank of Japan further boosting Economy)

    http://news.bbc.co.uk/1/hi/business/8387754.stm

    My favourite line is:

    "He said the Bank of Japan could be doing more to support the economy - for example making borrowing even cheaper."

    Even cheaper? Isn't the Central bank rate 0.1% at the moment? How much cheaper could it get?

    Can't knock those politicans for trying...

    "Last month, the Cabinet Office said in a statement that Japan was in a "mild deflationary situation". "

    ....makes it sound like a touch of flu as opposed to the extension of the 'lost generation' (one up from lost decade)

  • Comment number 78.

    allmyfault

    Are those Augean Stables the same ones that go under the name of Godolphin, and race in the colours of Sheikh Mohammed? Or his wife? Or all the other sheikhs who go around the world from Ascot to the Breeders Cup in America, to Hong Kong, to Dubai Racing iself revelling in how clever they are in beating the Irish multi-millionaires? Dubai and Ireland. Now there are a couple of role models to conjure with. At least that other bankrupt state Iceland stuck to just buying West Ham and not dabbling in the Sport of Sheihks.

  • Comment number 79.

    72. At 09:02am on 01 Dec 2009, DonKuan wrote:

    "I personally never understood the business logic of Dubai."

    Las Vegas mate - 95% of Dubai's GDP is from tourism.

    "Make a spectacle of yourself and people will come to see"

    The problem with this strategy is that you need a lot of money to see you through the bad times, and you need a USP to attract - Vegas has gambling - what does Dubai have?

  • Comment number 80.

    Does the success of Dubai mean that we should also adopt this 'low taxation model'?

    If Dubai does default on it's debt - there is no public sector safety net to fall back on, no way of injecting Keynsian style demand boosts.

    What does the free market do? Well logically everyone will leave and move elsewhere - a monument to Hubris to stand in the desert for all time.

    What a waste - but then isn't that what the free market does best?

    Should Abu Dahbi step in - or should Dubai be allowed to fail.

    Come on folks - you've all been saying how the banks should have been allowed to fail in the UK, so now's your chance to speak up before the event.

  • Comment number 81.

    As an update on various recent postings.
    Post 69 re AIG. Their share price has dropped due to a downgrade by an analyst who reckons that there could be an up to USD 11 billion hole in their reserves for property & casualty claims (commercial and domestic property claims and liability insurance).
    This isn't a great surprise to those of us in the insurance market as despite what the powers that be may say everyone in the London market and New York knows that they have been cutting premiums to retain business and keep up written premiums and hence try to keep their job. This works until the claims start to come in. However if the account tanks then they need someone to re underwrite and sort out the mess (see the same issue with the banks).
    Post 75, I haven't been following Lloyds to be honest but most big companies have a shareholder relations section or something similar on their website. This normally has a page that tracks the share price and allows you to see charts tracing how the shareprice has done generally over a week, month, 3 month and annual basis. Some sites also allow you to put in a specific date and number of shares purchased and you can see how much the shares have risen or fallen. If I want ot be depressed I look at the Aviva site and see how much my shares have fallen there.
    For Lloyds the first place of call should be the link below
    http://www.lloydsbankinggroup.com/investors/share_price_information.asp
    I hope this has been helpful.

  • Comment number 82.

    80 WOTW,

    I spoke up before the event on day1, let the banks fail I said (recorded on BB's too) in case you need evidence ;-)

    Dubai? Let it fall and stand as a monument to greed, ashes to ashes, dust to dust and all that..........

  • Comment number 83.

    Ian the chopper

    Very helpful thank you.

    Our only exposure to Aviva is from the free shares we got from Norwich Union so anything north of the dealing costs is a bonus! No consolation if you bought them in the market (my records show that they traded at highs of 10.82 as Norwich Union on 31/13/00, at 10.19 as CGNU on 1/9/01 and at 8.22 as Aviva in 2007).

  • Comment number 84.

    Gosh, another wholly avodiable crisis in the global economy which was allowed to happen. Just like the recession, could have been avoided and yet those at the top who were meant to do their job regulating the event let it happen. I wouldn't be at all surprised if the world treated us like this a Britain with the mounting debt we are in.

  • Comment number 85.

    I'm looking for work in Dubai and I still see tonnes of jobs there in all sectors. My cousin has been out there for 3 years now as a Project Manager and this supposed incident barely registered except in headline from the foreign media. Some of the zanier projects might have folded but so long as there's oil in the ground nothing is going to seriously dent the gulf economies. I think it's wishful thinking that somewhere like Dubai is in any imminent danger of collapse compared to a country like Britain where recent growth has almost entirely based on debt and speculation. The only guessing game is when the oil will become redundant and if Dubai etc can find alternative ways to make money in the meantime. As for me... I'm packing my sun lotion :)

 

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