Ignore Dubai at Your Own Peril

$30B default could still take out other economies
By Emily Rauhala,  Newser User
Posted Dec 4, 2009 10:08 AM CST
Dubai should be a warning to investors    (AP Photo/Kamran Jebreili)

(Newser) – The Dubai disaster should have been a wake up call. But investors, seduced by an "extraordinarily precarious" recovery, basically ignored it and kept busy building yet another bubble, writes Sebastian Mallaby in the Washington Post. Even if Dubai, with its artificial island and indoor ski resort, is an extreme case —"a sort of Donald Trump of a nation"—it should have given investors serious pause.

The failure of a nation's sovereign investment company should not be met with a shrug. Remember that the $30 billion Dubai bust is at least as big as the crashes that hit South Korea and Russia in 1998, and has the potential to take out other economies. If that happens, there won't necessarily be a bailout this time— Abu Dhabi, for instance, says it will not be rescuing its fellow emirate. "Governments are tired of playing fireman."

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