Dubai World

Dubai World, the government owned enterprise for developing Dubai, shocked international markets yesterday by asking to delay some debt payments. http://preview.tinyurl.com/ydutgdm. According to the Guardian’s ariticle,

The FTSE 100 tumbled by 70 points, or nearly 1.4%, to 5123 when trading began. But with share prices volatile, it clawed back most of the losses by 10am, hovering around 5171. The Nikkei 225 closed 3.2% lower, with Japan’s biggest banks leading the fallers. Hong Kong’s Hang Seng index fell by 5.3%.

Remember we asked the question last week – could a major nation default on its debt? With £48.8 billion of debt, Dubai may not be the largest debtor nation, but it has been maintaining a reputation as the most expensive, most luxurious, most everything for the past several years.

Another source, Breitbart, asserts that Dubai’s move was carefully planned:

“Dubai’s move to suspend payments on its Dubai World conglomerate’s debt was “carefully planned” and done in full knowledge of how the markets would react, the chairman of the Supreme Fiscal Committeesaid on Thursday.

“Our intervention in Dubai World was carefully planned and reflects its specific financial position,” Sheikh Ahmed bin Saeed al-Maktoum said in a statement.

“The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular.”

Germany

In a separate article, the Guardian confirmed that Germany will bear the brunt of an anticipated job loss from GM of 9,000. http://preview.tinyurl.com/ye44fly.

The Washington Post weighed in on the Dubai debt crisis by forecasting heavy selling on today’s opening. http://tinyurl.com/yhep5s2

A Foreclosure Victim Saved

And some good news for a change: after being ripped off by an unscrupulous seller placing her in a $698,000 home on a no document loan (this single mom’s sole source of income was a small day care center), the family lost everything in a foreclosure. This past week, their County came through and after 167 days of living in a motel room, the family of 4 moved into a subsidized 1800 foot apartment this week. http://tinyurl.com/yebrxrc

New York – the Next California?

And on to the next depressing financial story: New York state is running out of money. According to the New York Times:

“Without a budget deal, New York will be left with just $36 million in the bank by the end of December, according to current projections. And the money will last that long, officials say, only if the state chooses to fully exhaust its emergency reserves by tapping several billion dollars’ worth of temporary loans from its rainy-day fund and short-term investments.” http://tinyurl.com/yhfqyhf

New York State has the second largest budget behind California, $130 Billion per year, with a deficit this year of $3.2 billion that the Governor and the Legislator have, so far, been unable to resolve. Now New York is no California, and their have so far been no payment in “script”, but its problems are real. The biggest bills in December, according to the times stories are “… $1.6 billion in aid the state … to pay school districts, $2.5 billion in property tax relief to individual homeowners, and $500 million in general aid meant to go to local governments.” The New York State legislature, like most State legislative bodies, has more than its fair share of, shall we say, “unusual personalities.” I’m predicting we will get some real entertainment out of them over the coming weeks.

So, are we looking at the beginning of another financial crisis? Another bubble bursting? Only time will tell.