First with Financial Comment from Arabia

Bill Bonner’s praise for the Dubai debt approach

with 2 comments

The Daily Reckoning’s enigmatic boss Bill Bonner has given Dubai a pat on the back for its handling of its debt mountain. He writes:

‘Dubai was nothing…like getting stuck by a mosquito. It itches. It swells. But it does no lasting damage. It could be much worse. Now, the government of Dubai says that Dubai World is on its own. Good luck to the lenders.

‘Those Arabs are pretty smart. If the US feds had only done that with AIG, GM, Fannie Mae and other big debtors…the whole thing might have blown up and blown over …and now we’d be picking up the pieces and getting back to work.

‘Instead, the pols and central bankers trod in where angels and sensible investors feared to go at all. Now, they’re wondering how to tread out.

‘Germany announced that its deficit would not be as big as expected. Instead of 49 billion euros, it will be only 39 billion – below 3% of GDP this year. France says it’s bringing its deficits down too – to less than 3% of GDP by 2013.

‘The US and the UK, on the other hand, are out of control – with deficits over 12% of GDP and no credible plans for substantial reductions.’

Bill Bonner has a good point, actually several. He always does. Dubai has appalled the world by facing up to it debt crisis. Perhaps the PR could have been handled better.

But accepting business failure, taking the hit and moving on, that is how problems are solved, not by borrowing more and more. Dubai will have its debt crisis well over before the major countries get there, and that crisis will be so big that Dubai’s will soon be forgotten.

Is that a cue to invest in Dubai? Not really, the wider collapse of emerging markets has not even begun just yet. But it surely will, very suddenly, without any warning. Best to stay away and live to invest another day.


Written by Peter Cooper

December 3, 2009 at 5:08 am

2 Responses

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  1. if AIG was left on their own, the financial system would shut down. nobody except the govt had tens of billions lying around. the question should have been- had lehman brothers been saved, would we be picking up the pieces.

    Now that the govt of Dubai has extricated itself from backing the Dubai world debt, getting large loans in the gulf is going to become pricier, at least in the short term


    December 5, 2009 at 5:03 am

  2. Bill Bonner’s commentaries (e.g. are ALWAYS a great read.

    And his comments regarding the Dubai crisis are right on target. It’s comforting to know that there are some governments (e.g. Dubai) in the world that are trying their best to be forthright and honest.

    We certainly can’t say that for governments of the western world, where deceit reigns. Western governments are continually deceiving their own citizens by continuous cover-ups and bailouts for those who have made bad decisions and bad investments.

    Their motto: screw the citizens, & protect the guilty.


    December 3, 2009 at 9:51 pm

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