Saturday, November 28, 2009

The Debts of the Spenders: Is Dubai Too Big to Fail?

I have characterized Dubai as a "lender" state on this blog for a while now under the mistaken assumption that they were the main financier of US and other Western government debt obligations. Instead, recent events have revealed that Dubai is instead a net "spender" state that owes a great deal more than it lends out.

I have written about Dubai in the past. The most recent post had a generally positive tone. It is my personal belief that the whole issue is being overblown and that the emirate will be bailed out by their fellow Emirati, Abu Dhabi. Failing that, a coalition of the unwilling led by Bailout Bernanke, Mervyn King, and other Keynesian luminaries will ride to the rescue on their white horses. There will be a catch of course and that will take the form of some sort of political or social capital being redirected towards Abu Dhabi at the expense of the proud Dubai prince(s).

In an era of 0% interest rates, backdoor bailouts, frontdoor bailouts, and sideways bailouts, it is not too hard to imagine that politicians will bend over backwards to help their corporate constituents.

Since the blogosphere has already been abuzz about the topic for several days already, I am directing readers to more developed minds. Here are some good sources:
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