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Which They Take from a Great Box They Have... in Abu Dhabi
The market rejoices and delights to see the image of Abu Dhabi's merciful hand guided by Sheikh Khalifa bin Zayed Al Nahyan extended to errant cousin Dubai in the form of Sheikh Mohammed bin Rashid Al Maktoum. Once the fingers unclasped a $10 billion cash injection fluttered into the outstretched salvation army tins. Bond prices soared. Sighs of relief were heard. Why exactly? $10 billion is a trifle. Also telling is that while the immediate needs of Nakheel PJSC looked something like $4.1 billion, $10 billion was immediately required to keep Dubai from... well who knows what. Dubai isn't struggling. It is totally broke, and $10 billion is a trifle.
Bloomberg points out that the cash is anything but cheap.
This is the big chance for the Al Nahyan family to dragoon its maverick cousins back into the union. Most of all, Abu Dhabi wanted to avoid the embarrassment of Dubai looking outside for its bailout.
...or, perhaps, a more open examination of Dubai's finances. Speculation continues to abound, credibly in our view, that Dubai's debt is much larger than publicly disclosed. But even if not, we wonder, what is the endgame for Dubai?
It takes no observation at all to see that Dubai's earning power, centralized as it has been on tourism and a certain color of affluent panache, has been literally crushed. Even assuming some sudden return of international tourist attentions, one should not make the mistake of attributing a great deal of management or operational competence to Dubai in the first place.
A host of disasters including the wholesale dump of raw sewage on tourist beaches, shoddy construction even in Dubai's highest end properties (construction problems in the Emirate's flagship Burj Al Arab "World's Only Seven Star" hotel, symbol of the absurd and unassailable affluence of the jurisdiction bode poorly for other less vanity-laden properties) and sinking islands along with astounding management incompetence (the almost shameful squandering of the Queen Elizabeth II comes to mind) suggest that even a sudden and sharp spike in tourism will do little for an economy used to (and unlikely ever again to see) cheap debt.
Further, to the extent that Dubai has styled itself a center for finance, this particular credibility scrap, and the slow and consummate realization that nothing is what it seems in Dubai, is likely to badly damage hopes for that sector's imminent recovery. True, financial client states like Iran, who have no choice but to deal with Dubai given the dearth of other options available to them, may continue to patronize the city-state, but the laws of mathematics must be tortured to an alarming degree to imagine Dubai finding solvency without the drooling and obsequious patronage of the West it has hitherto enjoyed (and the willful blindness that, at least for a while, accompanied it). This "Arab finance center" option might be less obvious a salvation if, as the likes of John Carney predict, Abu Dhabi's new control means less and not more intercourse with internationally unpopular states like Iran. This last point bears some expansion.
Abu Dhabi is highly unlikely to permit "business as usual" in Dubai if, as we suspect, it demands substantial control over the affairs of the city-state in exchange for its generous salvage efforts. Certainly, charity is not high on the list of motives for the recent intervention. One wonders who exactly bought Dubai tainted bonds at distressed (even desperate) prices over the last several weeks, for example.
And if, as seems likely, Abu Dhabi puts the clamps on the only excesses that made Dubai a stand-out (Eastern European prostitutes aren't likely to be welcome much longer), and gave it the black market economy to keep the trains running on time, what's left?

The problem is that Dubai can't just cross the Nefud and storm AqabaAbu Dhabi from the land. And even if Dubai could, would the victors find ought in the Royal Treasury of Abu Dhabi but paper?
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Dubai could become a type of eco-tourist trap. Set up airport style control towers to watch the islands sink, conduct seminars in all the beautiful hotels on the dangers of dumping the desert into a bay for the purpose of building a "new world." Maybe even allow researchers to "spend a night in a sinking house."
Hmmm... original and tantalizing!
That's a fair bit of creative thinking...
Maybe Amnesty International could give tours of the worker housing...cough (slums)...
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Islands that are sinking? Must be those rising sea levels - at last the University of East Anglia will have something to email about.
Dubai's debt hole has to be around $50+ billion. Is Abu Dhabi prepared to shell out this much? What is the point of buying a few more months when the writing is on the wall? I just don't understand anything anymore. They are sooo fucked.
Extend and pretend has gone global now. To paraphrase the old proverb, why, in a year, the king may die, I may die, or the horse may actually learn to speak.
A Desert Oasis without hookers is no oasis at all
LOLOLOLOLOLOLOL
Comment of the day for that one!
It's a mirage, baby!
Still bearable if you have alcohol
You can only drink in the Hotel Bars and Nightclubs. The bars and nightclubs are filled with Hookers. If you take away half the fun you're stuck with a bunch of drunk guys in a hotel dancing with one another.
but the buildings are pretty.....
"The desert has dried more blood than you can think of"
And so be it for debt and the vanities of man.
I'm the man that broke the bank at Monte Carlo! (Ben singin in the shower)
The Ponzi has always been global. The US has entertained willing partners in the global dance of death for decades. One could argue that the beginning of the end started when Nixon broke the Gold link to the dollar and basically told the world to join in a new form of insanity or be left on the wayside wanting to participate after it was too late.
If I owe the bank $10,000 and can't make my payments, I'm in trouble. If I owe $10,000,000 and can't make my payments, the bank is in trouble. This was the situation facing the rest of the world when Nixon took the US off the Gold standard. If enough people played the US game, the bad stuff could be pushed off to tomorrow.
Some pain now by rejecting the US insanity or the possibility of no pain now, untold riches over the next years or decades and if we are lucky, a collapse long after I'm dead and buried. The world is now looking into the collapse abyss and it doesn't like what it sees. So it's back to the old tricks of whistling through the grave yard. With a zombie nation (and world) in tow.
I am enjoying this too much. No wait.. not possible. Poor slave owners.
What is that German word?
Schadenf*ckyou!
I wonder how many people are skiing in the desert now?
Did Marla just get back from a Trip to Dubai :-)
Mr Cognitive Diss
i must congratulate you on your excellent writing and imagination. I especially enjoyed the end bit with the Zombies and the whistling...I hope like hell your wrong but i enjoyed your pessimistic outlook...
Spooky baby.
I suspect that within 50 to 100 years, and perhaps even sooner, that Dubai will be reclaimed by the great desert surrounding it; and that it will then have become the most recent set of archaeological curiosities partially buried in the sand.
Q: "One wonders who exactly bought Dubai tainted bonds at distressed (even desperate) prices over the last several weeks, for example."
A: Mohamed El-Erain
"Even assuming some sudden return of international tourist attentions,"
The only word I contend with is "return" - there never has been a tourist trade in any conventional sense of the term. The fundamental problem in Dubai is that there has never been a believable revenue stream plan. The number of buildings, hotels, apartments, etc etc were never scaled to any possible demand.
It is a classic case of construction firms being happy to build as long as someone was willing to pay, accompanied by astonishing ignorance from the lenders, most of whom I am convinced thought that Dubai still had oil. There have been many, smaller, precedents for this type of pointless building in undeveloped countries. The sadness of it is that Dubai has been badly advised, and the West will be shown to be, in Arab eyes, once more perfidious.
Plenty of pointless building in developed countries as well. Agreed-- the Ponzi is now global, and the death waltz has begun. Skiing in the desert. Viable tourist destination? What on earth were they thinking?
"What on earth were they thinking?"
Who said anyone was thinking... with a hooker in the arms and liquor flowing who in their right minds can think anything other than prolonging the party
new slogan DUBAI THE SCAVENGERS PARADISE
I blame Micheal Jackson.
If he hadn't died it'd still be going good.
The economy.
-MobBarles