Well, the days are dwindling down. September. November. Tomorrow it will be December.
This bubbly bounce must not have much time left. And it is surrounded by 10,000 pins.
Last week, one of those pins took a stab at the bubbly bounce. While Americans enjoyed their turkey dinners, Dubai announced that it would ‘postpone’ payments on its debt. The world was left to wonder: what’s going on? Is Dubai broke?
Dubai was the great success story of the Near East. With nothing but rich sheiks behind it, this patch of desert had set itself the goal of becoming a major financial and tourism center. And for a while, it looked like the sheiks might just pull it off. Skyscrapers soared into the air. Manmade islands rose up out of the sea. You could ski indoors – and then go swimming in the warm waters of the Sea of Araby. They were even planning to put up the world’s tallest building…
But the whole place was built on debt and sand. And as the debts mounted, the sands washed away. Ashes to ashes…and debts to dust…or something like that.
Nevertheless, as Ian Mathias reports in today’s 5-Minute Forecast, the Debacle in Dubai does not guarantee a crisis of “Lehman Bros. proportions”:
Will the ripples stirred up in Dubai turn to Tsunami waves elsewhere? “One cannot rule out as a tail risk,” reads an emergency report from Bank of America, “a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.”
And speaking of BoA, what of the banks? Wherever there is a debt crisis, there’s at least a couple bank CEOs sweating through their suits.
for The Daily Reckoning Australia