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Dubai’s Predicament – The World’s Predicament

November 28, 2009

Dubai has seemingly taken to the American Dream over the past few years. They’ve done everything bigger and better than any other country has been able to in the past decade. From creating islands in the shape of the world out of thin air to designing the world’s tallest building and even a building with rotating levels, Dubai’s resources and construction crews seem to be in heavy demand.

How has Dubai been able to pay for these enormously luxurious additions to the city? Oil money may be the first thing that comes to mind. On the contrary, Dubai has built its wealth upon tourism and trade. What is interesting is that from halfway across the world, Dubai has had a very significant impact lately on global finances and markets.

Over the past several years, the construction and real estate debt that Dubai has incurred has reached almost $60 billion. Facing the reality of the global financial situation, it is clear that the market for such luxurious and frivolous expenditures in real estate has shrunken. As a result, Dubai recently asked to be exempt from paying  interest on its debts for the next six months. This request sent markets all around the world into a frenzy and even sent the Dow Jones spiraling downward 150 points. There has been speculation on the financial crisis worsening based on Dubai’s impact on the global economy. In the months to come, we will see how Dubai’s debts will affect the rest of the world…

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