The Dubai Financial Nuke

The Dubai Financial Nuke

www.ibtimes.com

What happened in Dubai just over a week ago was the bright flash, and the media have used the intervening period before the shock wave hits to reassure everyone that everything is going to be just fine - "You just relax, nothing will come of it, it's only $60 billion down the drain or whatever - have a cup of tea". The trouble is that it's not $60 billion at all - the reality is that this is a default on a massively larger scale. Dubai was a vast sinkhole into which western banks and governments unquestioningly poured not just billions but trillions of dollars which was then leveraged enor

(visit the link for the full news article)


Related News Links:
www.guardian.co.uk
www.globalcrisisnews.com

Related AboveTopSecret.com Discussion Threads:
Dubai can't pay
Dubai says Dubai World is on its own

Hello everyone....I have been a long time lurker......but this is my first post. Looks like the Dubai crisis was in the making for a very long time indeed. The following two links that mentions a potential financial crisis in Dubai are from February and March of this year. Looks like the skeleton has just stepped out of the closet.

www.ibtimes.com
(visit the link for the full news article)

Good riddance. These guys were funding terrorists anyway. Some say the elite are taking down Allah's treasure chest by crashing oil prices. No investment will be safe.

The Bible says that just when they are saying "Peace and Safety" sudden destruction will come upon them.

reply to post by order in chaos


Hello and welcome to A.T.S. friend!

Great first post! Opened my eyes a bit but I can't say I'm surprised. I just hope it doen't end up as bad as this article indicates.

Man you just reminded me of the Financial Weapons of mass destruction. 60 Billion and CDS's and CDO's

Things are not good. So basically we have about 6 months to see if they can come up with a payment, if they default that is going to trigger the collapse.

That guy at the IB times link does not know what he is talking about. Everyone has known for a long time that Dubai does not have much oil.

The number of Dubai's debt are actually around $70billion Dubai did not have the means or the sophistication to create cdo's.

This Dubai thing will affect the Middle East and some European banks not the US.

Dont get me wrong the US has LOTS of problems of its own, with the fed printing money and keeping interest rates at near 0 but this Dubai thing is not one of them.

I commented when this happened. I knew then that it was more than 60 and 90 billion dollars. If you look at the amount of money that was flooding into that place and all of the high end construction that was happening, you had to know that it was in the hundreds of billions if not a trillion and a half. We are going to feel this big time and once it hits we are done economically for at least 20 years if not longer.

oh no more immenint doom!
some small city in the middle east is ahivng money problems, were doomed!

Originally posted by SevenThunders
Good riddance. These guys were funding terrorists anyway. Some say the elite are taking down Allah's treasure chest by crashing oil prices.
.

WHO TOLD YOU THEY WERE FUNDING TERRORIST??????DO YOU HAVE ANY PROOF??
BY THE WAY TERRORIST NEEDS FUNDING?WEIRD, WHAT ARE THEY DOING ANYWAY, HIDING IN CAVES.

reply to post by Desolate Cancer


You do realize that Citibank loaned Dubai 8 billion right? You do realize that these are loans from other banks across the world that do deal with CDO's and CDS's right?

I'm just wondering if you are aware of that.

Could this whole Dubai thing be engineered by those bankers who wish to see "islamic banking" fail?
I am not sure,but wouldn't the big banks of the world make more money from Dubai if they had to change from their non interset based systems to the more capitalist ways of banking?
This crisis could prove to the world that "islamic banking" is a failure-thus sending the companies involved to the bigger western banking system,who would then make a lot more profit.
Just a thought.

reply to post by Silcone Synapse


I don't think there is a conspiracy behind Dubai's possible fall.

Not because there isn't a plausible scenario or chance for it, but because this is actually very simple to look into.

We are talking about the country that decided "let's build an island in the coast line", and that turned out to be a shot on their own foot.

After that, they decided to make even more coast extentions. Now they have that cute, but expensive, world map that costs billions by itself.

And these are just examples.

They spent money that was "guaranted" in things that didn't have that much "guaranted" income.

I think this isn't any surprise after watching what those guys were spending their money on...

...I think it was just a matter of time untill people realize they were spending money that they didn't have at the moment, on things that didn't produce any substancial income.

[edit on 7/12/09 by Tifozi]

[edit on 7/12/09 by Tifozi]

Originally posted by SevenThunders
Good riddance. These guys were funding terrorists anyway. Some say the elite are taking down Allah's treasure chest by crashing oil prices. No investment will be safe.

The Bible says that just when they are saying "Peace and Safety" sudden destruction will come upon them.

Let me start with the hope that you will do a better job on your future posts.

"Funding terrorists anyway" seems somewhat excessive as an unsubstantiated opinion; however, I will agree that obviously terrorist supporters are hiding behind every tree.

As for myself, I've been praying for "Peace and Safety" for years (as I'm sure the Muslims have been as well) and notice that my life has been being totally "destructed" in return. What's the Bible say about that?

As for "them," the impact will begin in Europe and then be just another ripple crashing against America's shores. In short, this will contribute to the US demise but not accelerate the inevitable. The Euro is at $1.50, wow.

Have you noticed the damage that America is taking from its perverted War on Terror? Karma coming back or just dessert being served?

Go with God



[edit on 7-12-2009 by Brown Bear]

The most idiotic thing about those islands it the constant need for maintenance (in the form of sand-sucking-and-spraying boats) to keep rebuilding the bastards. Once the well dries up it will only be a couple of decent sized storms away from oblivion. I expect they won't last ten years without maintenance.

Some (such as Desolate Cancer) have raised questions about the reliability of the source article. It does come across as somewhat sensationalist, and it's understandable that the following would provoke animated responses:

When people think of Dubai the things that come to mind are the massively extravagent 7-star hotels, the towering record breaking skyscraper, palm-shaped island resort complexes etc and forests of new office buildings and apartments etc. What the vast majority don't realize is that the stupendous leverage afforded by derivatives has in addition enabled Dubai to create an immense global empire of businesses, most of the elements of which are broke, having racked up staggering levels of debt. Dubai is the nexus of the derivatives pyramid and it is flat, stony broke. Where did all the money come from to pay for all these things? - why from taxpayers and pension fund contributors the world over of course, but especially in the US, with Wall St acting as a giant conduit sluicing a torrent of cash into Dubai. The interesting thing is that there was never any accountability - countries and companies vied with each other for the privelege of pumping money into the exalted kingdom, seduced by its supposedly limitless oil wealth, and requesting or requiring guarantees was regarded as impolite.

Now that Dubai is broke, the Dubai government has suddenly distanced itself from Dubai World, and the attitude towards the Western banks and governments who have poured trillions into Dubai is "Tough luck - you lose, suckers". What this means is that trillions of dollars which are now counted as assets on the balance sheets of banks worldwide and especially in the US are actually liabilities.

While the article does lack depth, the site as a whole does have some merit, and can't be written off quite so easily as that.

Turning to a standard source we find that the FT has a whole section devoted to the Dubai crisis. As would be expected, the whole tone is very measured, and much of the editorial slant downplays the potential global ramifications, but as the following example shows, some institutions are exposed to a significant degree:

UK banks have an aggregate exposure to Dubai World of about $5bn, the Financial Times has learnt, confirming them as the biggest creditor group at the crisis-hit emirate holding company.

A week on from the emergence of Dubai’s financial turmoil, banks and their advisers are still scrambling to pin down exactly how much they are on the hook for, but last night it became clear that Royal Bank of Scotland was the most exposed of the UK banks, ahead of HSBC, Standard Chartered and Lloyds Banking Group.

Of the $40bn of total Dubai World debt, bankers close to the situation said RBS had between $1bn and $2bn (£3.3bn) of exposure, compared with about $1bn apiece for the other UK institutions. One senior banker with knowledge of the debt portfolio said Emirates National Bank of Dubai was the biggest single creditor with outstanding lending of about $3bn...

...Other top 15 creditors include international banks such as BNP Paribas, Société Générale and Calyon...

Anger has been mounting in recent days, particularly among bond investors, who complain that they were duped by assurances given this year from Dubai’s rulers as to the emirate’s creditworthiness. After an announcement by Sheikh Mohammed bin Rashid al-Maktoum on September 8 that he was “not worried” about Dubai’s debt position, international investors piled into Nakheel bonds.

...“Nakheel is one of the most leveraged companies I’ve seen in my entire career,” said one hedge fund manager. “People bought it because they’d assumed there was some kind of state guarantee, which there wasn’t.”

Ashmore, the emerging markets fund manager, was a substantial buyer of Nakheel bonds this year. It increased its holdings in debt issued by the property developer by as much as 25 per cent, according to people familiar with the fund.

Other large institutional money-managers thought to be involved include Blackrock, Julius Baer and Bank of America Merrill Lynch.

Source

I would suggest no-one on either side of the fence has a full grasp of the implications at this point.



[edit to fix code]

[edit on 7/12/09 by pause4thought]

from my understanding, it was a major Islamic investment center. en.wikipedia.org... is diffrent from western banking because in theory bankers arent allowed to charge interest, so its like if you invest in something, your buying a part of the final project or something. most financial products have to be approved by their religious leaders, but it looks like they were playing just as fast and lose as the wall street guys

reply to post by Brown Bear


Been there, lived there 1 year ago.
They did this to themselves.
They became so greedy! Taking money from people from each law they create. They create laws and change them every day just like winds change their directions every minute.
People there were fed up from life in cartoon motion. Everything is fake, no culture no heritage. People their are worthy the size of their pockets. I suffocated when I was there.
And there was rumor that some people there (not the government directly) were secretly financing people using bombs and explosions that happened in Lebanon and Syria because as they were always afraid from them in terms of tourism economy and banks power. But no proof for that.
However, they always wanted to build the biggest, the tallest, the newest things and using other people money. The tower of Babel collapsed over them this time.
Bank sales-people were offering Credit Cards just like offering candies! Never checked the background of anyone, never asked for financial guarantee or safety.
Local people there never really worked. Never seen a local guy as a normal employee. All foreigner working there. So the money of the west went to Indian mainly and Philippines.
It's all related. Anyway, this is my point of view with all respect to all.
Everyone learns from mistakes maybe it's Dubai's time for now.

The Dubai crisis is nothing compared to let's say, the demise of the Lehman Bros. Most of the large projects in Dubai have been comissioned during the boom years, with an insane amount of leverage. I was working on numerous projects down there that had 70:30 debt/equity ratios.

Now, for those of you who say it won't affect the states, you are delusional in the same way that the guys in Dubai were when they said "the crisis in the US won't affect us". How do you think Dubai World will pay off their debt? By SELLING THEIR OVERSEAS ASSETS. A lot of those assets are in the US...so saying it won't affect the US is stupid. I doubt it'll be as bad as Lehman/AIG/etc....but it'll definitely have a severe impact.

reply to post by MrXYZ


It will have an impact sure, like for example I know that Dubai world is majority owner in the new City Center casino and resort that is opening up in Las Vegas this year.

As a matter of fact back in march or so Dubai almost defaulted on their debt obligations for the casino but managed to secure the funding they even paid for MGM Mirage's part as well.

So yes I realize that Dubai has holdings across the US but my response was in reference to the article at the website. Where the author of that article was saying there are trillions of dollars involved and how this will domino across the US and to those points I took issue saying it will not have such an impact.

I believe Dubai world also owns relatively decent amount of Manhattan real estate. So either these holding will have to be auctioned off or something, which could be great for the buyers.

I have to agree.

Most of the burden was put on RBS.

If big money thought this would cause a problem in USA we wouldnt have rebounded from where the futures fell last week, this might even keep our Dollar/Equities higher in fact.