You know about Dubai's economic crisis. But do you know the background to - and fallout from - the crisis?
A Brief History
Historically, Dubai had an oil-based economy.
But the global property bubble is bursting.
As I wrote last December:
But Dubai got hit the hardest.
As Bloomberg notes:
As the CBC notes, things went South quickly in Dubai:
The CBC also notes that Dubai World has holdings worldwide:
In addition, Bloomberg notes that India might be effected by Dubai's economic problems:
The Royal Bank of Scotland is Dubai's biggest creditor, with $2.3 billion, or 17 percent, of Dubai World loans since January 2007. HSBC, Europe’s biggest bank, has the “largest absolute exposure” in the U.A.E. with $17 billion of loans in 2008
Yves Smith notes that Dubai's default caught creditors by surprise:
Zero Hedge has a good roundup of statistics regarding the biggest creditors of the United Arab Emirates, of which Dubai is a part:
The Associated Press has additional details.
Bloomberg notes that Dubai's default might increase risk aversion of investors to emerging markets:
Zero hedge also notes:
British prime minister Gordon Brown has indicated how serious the situation is:
And the Associated Press is asking whether Dubai's default will cause another financial panic.
The numbers involved are not that great for most creditors - on the order of hundreds of millions of dollars.
But the sense of shock and loss of confidence - when many had optimistically believed that the world economy was out of the woods - could indeed be profound.
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