Dubai Debt Impacts World Markets
[Guest post by DRJ]
Thursday’s announcement that Dubai’s state-owned corporation Dubai World is seeking an extension in its interest payments has shocked the financial world:
“Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill.
Shares plunged, weak currencies were battered and more than £14 billion was wiped from the value of British banks on fears that they would be left nursing new losses.
Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.”
Tomorrow could be Black Friday in more ways than one.
— DRJ
Oh great! What has been perceived to be one of the most prosperous and stable economies in the world is now in trouble? NOW it is time to start converting cash into gold, people!!!
Icy Texan (4c9f7e) — 11/26/2009 @ 8:13 pm“the price of insuring themselves against default” He’s talking about credit default swaps, those wonderful derivatives that cost us $180B for AIG. Selling CDSs is a great business: 1) sell “insurance” to somebody for an event you the seller believe will _never_ happen; 2) maintain no reserves for the potential payout you’re sure will never come; 3) get bailed out by taxpayers when the jig is up.
If this Dubai thing turns into a Sep 2008 level panic, expect the USD to strengthen a bit, and gold to take a little hit. We closed yesterday at long term support on UUP, and about 5% above support on DXY, so some kind of blip might be expected.
gp (d1217f) — 11/26/2009 @ 8:25 pmI bet you drive a really nice car.
happyfeet (0003d3) — 11/26/2009 @ 8:43 pmJust imagine where we would be had Obama not brought us back from the *brink*. I know, trillions less in debt, millions more employed, but, hey, I can imagine, right?
sybilll (2125e3) — 11/26/2009 @ 9:37 pmThey should do the same thing GM and Chrysler did – go to the government to ask for a bailout.
Wait – they are already owned by their government? Oh well. If Dubai World had 50,000 members of the UAW or SEIU then Obama would be shoveling money to them right now.
That would give him another 50,000 jobs he can claim he saved or created.
And the best part is Acorn would get all of them registered in time for the next election. Being from Chicago Obama figures foreigners are at least as eligible as the deceased to vote in our elections.
MU789 (4e85ea) — 11/26/2009 @ 10:35 pmReading the article, it seems that along with being rich from oil, their real estate market, which included man-made islands and such, went bust a few years ago, which is where the debt is, I guess.
MD in Philly (227f9c) — 11/26/2009 @ 10:52 pmAs I clean up the mess left by my predecessor, you don’t get to complain about how I hold the mop.
This is all George Bush’s fault.
Barack Hussein Obama (474dfc) — 11/27/2009 @ 6:54 amFrankly, I’m shocked that Dubai’s held on this long.
I’m been privately wondering when this shoe would drop, and what the effect would be.
Scott Jacobs (d027b8) — 11/27/2009 @ 7:34 amHey, what’s a few trillion, give or take? Can’t wait to see what our awesome financial leaders (particularly tax scofflaw/village idiot Geitner) have to say about this one. We’ve lost all moral and intellectual authority regarding economic systems.
Dmac (a964d5) — 11/27/2009 @ 7:36 amMeanwhile, Paul Volcker just turned over in his grave – oh, wait…
Dmac (a964d5) — 11/27/2009 @ 7:37 am“really nice car” Well, it _does_ have a 10 yr/100K warranty! 🙂
gp (72be5d) — 11/27/2009 @ 8:24 amA lot of people on “The Street” thought that Sovereign Wealth Funds would be their new tickets to The Hamptons…
AD - RtR/OS! (5fb16f) — 11/27/2009 @ 9:11 amI wonder how that’s looking for them now?
CitiBank…CitiBank…???
Gold. Dubai, or not Dubai… that is the question.
DCSCA (9d1bb3) — 11/27/2009 @ 1:09 pm