Why is Dubai in so much trouble?
Great rant from blogger David Galbraith via Boing Boing:
Short of opening a Radio Shack in an Amish town, Dubai is the world’s worst business idea and there isn’t even any oil. Imagine proposing to build Vegas in a
place where sex and drugs and rock and roll are an anathema. This is
effectively the proposition that created Dubai – it was a stupid idea
before the crash, and now it is dangerous.
RGE Monitor’s Rachel Ziema has a somewhat more sober version:
Unlike some of its neighbours (especially Abu Dhabi) Dubai’s growth was
primarily debt financed, making it more vulnerable to the global
liquidity crunch and more local liquidity tightening triggered first by
the withdrawal of speculative capital and – later by the fall in the
oil price. Although Dubai has little oil, it was clearly a petrodollar
recycling hub. It accounted for much of the UAE’s external debt stock
(some of Abu Dhabi’s state investors like Mubadala and others accounted
for the rest ). Dubai based banks likely also accounted for much of the
bank lending to the UAE. Moodys vulnerability indicators show that the
UAE is among the most vulnerable in the MENA region.
David Cannon/Getty Images
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