Dubai’s government investment firm Dubai World shocked markets on November 26 when it asked for a six-month delay in repaying a US$59 billion tranche of its total debt of US$80 billion.
The news, which credit rating agency Standard & Poor’s said amounted to a default, recalled Argentina’s sovereign default in 2001, the biggest in history.
So hyper wealthy Dubai is a myth after all.
All that talk about “monetizing the sand” was just a mirage in the desert.
For years, Dubai’s opaque finances were run by local, well-connected insiders with limited managerial know-how.
The primary success criterion of being first, biggest, tallest and fastest endeared itself well to the towelheads and set in motion the destructive cycle.
Now we have to wonder about Mumbai and Shanghai too. Are they next in line for a fall?
For the last couple of years, the running joke on Wall Street was “Dubai, Mumbai, Shanghai or goodbye.”