Dubai Debt Default -

Miscellaneous Current Events
1

I have read some of the past Daily Mises articles regarding Dubai. Question: Will the Dubai debt default announced on 11/25/09 cascade into the next major credit system collapse, or will this blow over?

I am looking for perspectives from the Austrian point of view. It seems to me that there has been massive central bank intervention in Dubai that drove the real estate boom. Are malinvestments ready to be liquidated? My understanding is that European or Russian banks have more exposure than U.S. banks to Dubai’s woes. Could Dubai be Europe’s or the Middle East’s “Lehman”? Is Dubai only the tip of iceberg of Middle East malinvestment?

2

From what I’ve been reading, the debt of Dubai World (a state-owned holding that bought things as varied as ports, the CityCenter in Las Vegas and Cirque du Soleil) has a debt valued in the measly 80$ billion. Compare that to the hundreds of billions different governments are currently borrowing, and the trillions in debt they are going to default on, Dubai is actually a healthy default.

When Euro states start defaulting because the ECB won’t buy their debt like non-Euro states, that is going to trigger a bloodbath.