Dubai, the Emirate (now having pumped all the oil from under the sand) refused to step in and guarantee the debts of the wholey owned Dubai World Group today. The self-fueled building boom balloon popped and the pop was heard round the world.
Investors, concerned that governments, owing trillions of dollars in debt, might start opting one by one to not pay them, are pulling back, recoiling even further. Who can blame them? One new commentator suggested today that Dubai needed a stimulus (one that didn't work like the ObamaPlan) based on more borrowing. It makes no sense for Dubai to do that and it made no sense when we did it last Spring.
The Obama Administration wants to borrow another trillion dollars and use it to "stimulate the economy". I can't speak to Dubai's woes, but I can suggest that what we need less of is government spending, less government involvement in our lives at every level. The US Government has proved itself incapable of prudence, restraint or showing any real competence at all in just about any program it has undertaken. We need to learn from Dubai's insane excesses (which mirror our own).
19 comments:
"Less is more", to borrow a quote from Mies van der Rohe (hey, I live in Chicago!).
And to borrow another? "God is in the details."
What are the chances that China will rush in with assistance in order to strengthen their presence and leverage in the region?
There is nothing true about this story. All the arab neighbours will offer help.
The thought of a large group of bankers burning their greedy fingers due to the building slump in Dubai, warms the cockles of my heart.
Looks like they'll have to cancel the Dubai Open, now that they don't have the money to keep the greens watered, and Tiger's a bit banged up as well.
Might I ask you free market proponents what do we do when the government steps back and allows the market to right itself and it heads immediately back into the type of sleazy practices that led to the recent meltdown in the first place?
Seems to me there is no good answer for fixing what we have now other than time and keeping a sharper eye on the practices of the financial industry. Left to their own devices, the free market will not watch out for the damage left in it's wake. It never has.
I'm afraid this is just the beginning.
It was a dark and stormy night.
Anon put on his garlic necklace and rolled his chicken bones...
The bones said that insolvency can be overcome by liquidity provided by someone else.
Anon is content.
"Stimulus Package" is a misnomer. It was never and is never meant to stimulate anything but Democrats' friends needing favors. That's why our economy was never stimulated ... capitalism was never a friend to the Democrats.
Macrum, that is like asking "Might I ask you let-you-body-heal-itself proponents what to do we do when the Mafia comes back to your house, gives you a few hours to recover from the daily beatings,and then heads immediately back into the type of same violence that led to the near fatal beatings in the first place?"
The government is the Mafia and, rather than encouraging the host to greater health and productivity, instead mugs the guy every time he's put together a bankroll.
The answer is for government to offer guidance and oversight while limiting the enthusiastic blood-sucking.
Out of control spending.To borrow a quote:The chickens are coming home to roost."
debt to gdp is out of control and with an aging population the shit will soon hit the fan.
with a falling dollar and skyrocketing taxes to pay for the debt, gold looks mighty good. it'll appreciate in value and it'll also be out of reach of the taxman.
all these impoverished administrations are governing based on the next election rather than fiscal prudence.
i be worried.
Nothing true about the story?
Anon, you're reading the tea leaves wrong again. An oil potentate's kingdom, said to be awash in petro-cash FAILED. They are on the dole now, beggars. Sure, people will loan them money against hard assets - but the snake can't eat its tail forever. Not in Dubai. Not in the US.
Nickie - China will wait for the fire sale. They won't buy yet.
This is news to me. And food for thought. Stimulated a nice conversation between myself and my daughter, who is learning much about business economics in school. And I hope I am opening her eyes to the evils of bailouts and overspending.
Dubai has been spending money like a college student with their first credit card.
Why is this not a surprise.
Good post. Demonstrates that the evils of debt and overspending are universal.
Nice retort to Macrum, Nick. It's hilarious that Macrum blames the free market when government corruption (i.e., Fannie/Freddie & runaway deficit spending, entitlements, etc.) are so clearly major players in national/global economic problems.
In truth, we haven't had anything approaching a truly free market in a very long time. Same thing with medicine. With all the govt. subsidies, free care, and the encouragement of the purchase of ins. policies that remove the consumer from health care decisions. Everywhere we turn, the market has been crowded out.
C'mon, Macrum. You are making an argument from the 60s. No surprise, I guess.
Exactly right. The only reason the market is "up" is because the dollar is down. Take oil as a simple example. Today's Dollar is worth less than it was 2 months ago means it takes more dollars to buy a barrel of oil. Apply that to every asset class on Earth - Gold, a share of IBM stock, whatever.
This won't end well. This won't even transition well. Dubai may be the catalyst that signals the party is over for now and causes fund managers to protect profits by selling. Or maybe it will be something else. But it will happen. And it will be painful.
Economic recovery is a total fantasy. Hell, just like anything 'obama' is a total fantasy.
Risk is high if your 401k is in a market stock based fund versus say a money market fund.
We have the biggest stock market rally in the history of the market in the midst of the world economy falling apart. Profit lies is capturing the difference between perception and reality.
The market could keep going for a while. It can do anything it wants and usually never does the reasonable or rational thing. But it won't live a fantasy forever.
I think it takes a dive pretty soon. Matter of weeks. Just for a fun guess.
Here's an interesting stat. From the recent S&P500 low of 666, the market has rallied 66.6%.
La la laaa la laaa la la.
Anon, put your money where your mouth is. I dare ya.
Here is a tip I heard in the early `70's. Dems in control of Congress- Money Markets. Repubs in control-Stock Markets. I don't know if it is for every time, but historically it has seem to be this way.
Sorros hedges against the dollar like he did in the UK a few years back and almost collapsed the Pound, maybe he is targeting the $$.
I would think soros Is short the dollar. But so are a lot of other large players. Hedge funds for one.
The short dollar trade is what investment professionals call a very 'crowded trade', which basically means Everyone is short the dollar.
When the music stops and everyone has to find a seat, the short covering bounce in the dollar will have people wondering why the dollar is rising and everything else falling.
Though the dollar's drop has a lot more to do with the Fed printing trillions of dollars to give banks and other financial institutions domestic and foreign as well as the administration's total lack of an economic plan.
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