Monday, December 14, 2009

Dubai’s debt: Abu Dhabi to the rescue

Last month Dubai rocked financial markets by seeking to restructure is $26 billion of debt. Today Abu Dhabi stepped in to save the day with a $10 billion dollar loan.

For Market Watch
TOKYO (MarketWatch) -- Dubai said Monday that it has received $10 billion in financing from fellow emirate Abu Dhabi, which it will use to pay part of the debt held by conglomerate Dubai World and its property unit Nakheel.
Of the total, $4.1 billion will be used to repay Nakheel's Islamic bond maturing Monday, while the rest will be used to finance Dubai World's obligations through the end of April 2010. MORE
I have been following this story offline, because I was curious what happens when a nation could not meet its financial obligations. As we all watch Obama and Congress rack up obscene debt, raise debt levels and pump trillions into the market from the Feds, one has to wonder what will happen when the USA cannot meet its financial obligations.

At $12 trillion and rising, I fear there is no Abu Dhabi that can rescue us. China is already sending signals of uneasiness about our reckless spending. Who else is there who can come in and save the day for America’s foolishness? I am hard pressed to see an answer.


Eric L said...

I just hate to thing what would happen if those countries that are funding our reckless spending decided to call in that debt.

I shudder at the thought.

Osumashi Kinyobe said...

I would like it if no one rescues Dubai.
Just me...

El Cerdo Ignatius said...

Clifton, I wonder if the other shoe isn't about to drop in Dubai. Abu Dhabi might have $10 billion now, but it might not have it next time. And I wonder what Abu Dhabi's balance sheet looks like - who are they tying in knots by floating this loan? And if the price of oil doesn't rise back over $100 per barrel, what is Dubai going to do a year from now? Two years from now?

It ain't pretty.

And you're quite right: this is a glimpse of what lies ahead for the USA if the Highway to Debt doesn't soon offer an offramp.

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