An interesting tidbit

Fiat Currency, in this iTulip thread, has pointed out something rather interesting about the stock market turmoil in the wake of Dubai's troubles:

A computer crash at the London Stock Exchange, which by coincidence is 21 per cent owned by the Dubai Government, left dealers unable to trade for three and a half hours.

From the Times of London (UK). Also interesting that their impending default was announced on American Thanksgiving, perhaps in the hope that an across-the-board selloff could be averted. So far, it doesn't seem to be working.

Edited to add: Looks like the timing was indeed deliberate:

Just after 4pm on Wednesday, his Highness Sheikh Mohammed bin Rashid Al Maktoum wrote on his Facebook page: "I would like to congratulate all UAE citizens and Muslims around the world on the advent of Eid Al Adha."

The flood of replies started instantly: the tech-savvy Ruler of Dubai is a favourite with young Muslims.

But among the well-wishes a few rogue messages started to slip through, tarnishing the illusion that all was well: "Good lucky buddy it looks like you bit more than you can chew. Hopefully Abu Dhabi can bail you out," said one.

Another read: "May the clouds of despair flow away from the country." And another: "I wish you all the power and wisdom to guide your country through this difficult times."

The Sheikh's holiday message had co-incided with the announcement from his government that Dubai World, the key conglomerate behind some of the emirate's most ambitious projects, was seeking to delay the repayment of its debts.

Released after the markets shut, ahead of the 10-day Eid holiday and the Thanksgiving break in America, the notice was designed to have minimum impact. It wasn't the Dubai government's first miscalculation.

From the Telegraph. Still unclear how this will pan out, but it makes the average investor a bit nervous, that's for sure. It probably makes the average Emirates resident downright terrified, for reasons we've already seen.

Another bump in the road to economic recovery

Markets around the world are in turmoil yet again, this time because Dubai's economic development agency has, er, a cash flow problem:

The global stock slump was in response to Wednesday's surprise announcement of an overhaul of Dubai World, the state-run organization that holds almost three-quarters of the Middle Eastern country's total debt. As part of the restructuring, Dubai World's creditors were asked to hold off on requiring debt repayments until at least May 30, 2010.

Funny thing is, the word "default" doesn't even appear in that article, but what else do you call it when they tell their creditors they can't pay for six months?

Dubai is actually a truly strange place, if this story is any indication. The United Arab Emirates, which includes Dubai, has the largest per capita carbon footprint of any nation, owing largely to the energy needed for desalination. And those desalination plants are expensive to run. So what if they can't afford to?

If a recession turns into depression, Dr Raouf believes Dubai could run out of water. "At the moment, we have financial reserves that cover bringing so much water to the middle of the desert. But if we had lower revenues – if, say, the world shifts to a source of energy other than oil..." he shakes his head. "We will have a very big problem. Water is the main source of life. It would be a catastrophe. Dubai only has enough water to last us a week. There's almost no storage. We don't know what will happen if our supplies falter. It would be hard to survive."

Crazy. I wonder if Raouf is right? You'd think the water supply would be kept going above all else, but...

And what would happen if a resident of Dubai were to default on his or her debts the way Dubai World has? Dubai actually still has debtors' prisons. A bit of an irony...