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. 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."
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 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 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. 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."
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