inancial markets around the world have been shaken by the revelation that Dubai, the skyscraper-obsessed emirate, may be running out of money. Dubai World, a state-owned property giant, is asking global creditors for a six-month freeze on repayments for debts totaling $60 billion. The move sparked market fears that other heavily indebted countries might be in similar trouble. What lessons should American investors take from this new threat to global financial stability? (Watch a report about Dubai's impact on American investors)
Don't count on "too big to fail": The U.S. government has bailed out several institutions it considered "too big to fail," says Phil Levy on NPR.org, but the UAE has thus far refused to do the same for Dubai World. This is a "rare test" of the bailout argument, and it might show that governments don't have to step in every time "big financially connected institutions" get into trouble.
"Dubai no longer flying high"
Be careful investing in non-transparent countries: This should be a "warning" to U.S. overseas investors, says Michael Casey in the Wall Street Journal. Nations with "closed political systems" like Dubai's do not have the "transparency" we're used to in the West. Americans should be wary of the risks of "limited accountability" in similar "closed" countries – "China, for example."
"Dubai shows why transparency matters"
Dubai must dump ties to Iran: This isn't about Dubai, says John Carney in the Business Insider. It's about Iran. Dubai has long walked a fine line between its "military and economic alliance" with the U.S. and its "banking and trade ties" to Iran. This is an opportunity for Dubai to "give up the Iran connection" and choose who its real friends are.
"The geopolitics of the Dubai debt crisis"
Skyscrapers? A recession? Seen it before: Dubai is facing problems New York City dealt with in the "ebullient 1920s," says Edward L. Glaeser in the New York Times. Sure, Dubai has "massively overbuilt" its skyscrapers, but it took more than a decade for New York's tallest building to stop being the "Empty State Building." Dubai’s "good infrastructure" and pro-business government should soothe investors, and keep its "dream of a great metropolis" alive.
"The ascent and fall of Dubai"
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