CHESSNOID

I didn’t make that title up but thought it was a funny play on words, so I copied it.  You might think this doesn’t affect America since the country owned company is so far away.  England has more exposure there than any other country.  Definitely more than the US.  The only bank here exposed I believe is Citibank. Doh!  Yet, it has affected all our stock markets and even increased the value of our US dollar.

I remember reading about this country’s economy over a year ago, when trouble was still brewing.  The story I read was about cars being abandoned at the airport.  This country actually has a debtor’s prison meaning you don’t pay your bills, you go to prison. Yikes!  How did they get anyone to spend anything on credit. 

World: Reporter’s Notebook: The Cars of Dubai

Imagine if we had that law here.  About 30-50% of our population would be in prison since we have almost 30 million unemployed people who have no income to pay their credit card bills and car loans, graduating college students that can’t get jobs but were given credit cards for being students, and lots of self employed people and even major corporations filing bankruptcy.

If I were employed in Dubai and suddenly laid off, then I would have been on the plane that very same day.  No need to have any other exit strategy except get the heck out or you go to prison.  Here is the story from February 2009.

New York Times:

Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.

Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.

“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.

No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.

This was about 10 months ago. Even then the government was already doing things behind the scenes to prepare for the worse. Apparently it wasn’t enough.

Last month, local newspapers reported that Dubai was canceling 1,500 work visas every day, citing unnamed government officials. Asked about the number, Humaid bin Dimas, a spokesman for Dubai’s Labor Ministry, said he would not confirm or deny it and refused to comment further. Some say the true figure is much higher.

“At the moment there is a readiness to believe the worst,” said Simon Williams, HSBC bank’s chief economist in Dubai. “And the limits on data make it difficult to counter the rumors.”

Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai’s roads, usually thick with traffic at this time of year, are now mostly clear.

It’s funny how history repeats itself. This looks similar to the US Economy 3 years ago when it started to drop from the real estate bust. You know, the one Bernanke denied would happen and couldn’t utter the word recession. (We should fire that guy).