world economic crisis explanation

The Dubai Crisis – An explanation

The saying some years ago was, “If the US sneezed, the world caught cold”. Looking at the developments filtering out of the Middle East in the past few days, it is fair in saying, “If Dubai sneezes, the world catches cold.” But the dominoes effect of Dubai on other economies has forced me to say that it is a bit of a VIRAL!

First, for all of you who have been wondering what the fuss is all about, let me put things in right perspective – Dubai World, an enterprise associated with the Government of Dubai, has asked its creditors to hold off on their repayment schedules. The finance on stake – A whopping $80 Billion Dollars!

Why did the Dubai economic crisis ever happen?

Dubai has been perennially known to be the most Un-Gulf state. It doesn’t rely on oil as a key driver for its economy. Instead, during its heydays between the late 1980s right until 2005, Dubai relied on tourism, real estate and commerce for driving its economy. People who lived in Dubai during these times, witnessed the transformation of what was an absolute Sand dune to a city where everyone wished to live in!

All of this had to come with its own set of pitfalls. The ambitious plans of the Dubai Government, spearheaded by Shaikh Mohammed bin Rashid Al Makhtoum to set up dream ventures at exorbitant prices had to meet with an anti-climatic end. And it did meet one, in the form of the global recession!

The global recession meant one thing – Dream initiatives like the Palm Islands and the Seven Oceans had very few takers, by the time they went live. These projects also had the backing of the Government of Dubai. Now, with not many people willing to spend their monies (Actually, they didn’t have a lot on their hands), these properties stood half-empty.

With not many units of these ventures finding customers, developers started to default on their payments back to their creditors. And this is where, Dubai World finds itself in a mess! It was just unable to find people to buy their ventures, or units in their ventures.

Global recession bought with it, a downward spiral in the prices of real estate in Dubai, but only to the tune of about 15-20%. Some of these ventures were so exotic that they had to be priced relatively high, and obviously then, they had to go empty.

The impact on Dubai itself

Layoffs – The already reeling construction industry could see a major freefall from here. Laborers could be asked to go home and whatever little construction projects would be on the anvil, will surely be shelved.
Banking – Local banks would surely feel the pinch of this crisis. Though, they have pledged their support to Dubai World, there could be a time not too far off from here, when they might be in the red.
Bullion prices – Gold may see a big drop in demand. Dubai has been known to be a Gold Hub, and though it doesn’t produce Gold on its own, it seeks exports from countries like India and re-exports them to other countries, prices can be expected to go down surely.
Crude Oil – The crude oil prices could go down too.
Foreign Exchange – The valuation of AED (The local currency of Dubai) could see a drop. This could probably mean the strengthening of the Dollar, by a bit.

Summary

All in all – This is nowhere as catastrophic a disaster as the Sub-Prime Crisis or even the Lehmann bust. The Lehmann bust was surely a systemic malady, while Dubai World is probably in a mess due to cash-flow mismatch. The next week’s events could probably dictate, which way Dubai is heading to!

About the Author

Article author having expertise in Financial Services, Internet Marketing, Healthcare and Legal Affairs

Can you explain to me the difference between the banking crisis and the world economic crisis?

Watching a Question time special for new voters a Conservative gentleman began to explain the difference but was cut off and never got to give his explanation. He is a black English politician and seemed rather nice. That’s beside the point. Labour didn’t create the world economic crisis but did contribute to the Banking crisis. Please explain what the banks asked labour to do and what labour said yest to that caused the banking crisis.

The city / banks asked to be deregulated (and I can’t remember who deregulated the banks here, it may have been under the tories). The banks took massive risks in lending to each other for massive performance bonus of meeting daft targets and they spread there debts everywhere the Americans were lending money (sub prime loans) to people who did not and could not have the means to repay and the (sub prime) properties value did not cover the cost of the loan which was spread over many banks. The world is connected now like never before and the Global market is the result and it has it own complexities and benefits.

I hope that helps… Or in short greedy, short term, arrogate thinking gamesmanship crumbled. You cannot make a silk purse from a sours ear just like you cannot invent wealth. Money should really be like energy in that it cannot be created or destroyed but can be used, converted and transformed.

(1000) WHOLESALE ANTI OBAMA BUMPER STICKERS~OOPS! (c) HIGH QUALITY VINYL!

$415.80

(500) WHOLESALE ANTI OBAMA BUMPER STICKERS~REVOLT (c) LMFAO HIGH QUALITY VINYL!

$251.96

Conservative Bumper Sticker Ultimate Collection! 350+, Anti Obama Stickers!

$199.00

Anti Obama Bumper Sticker MULTI-PACK 125+ pcs!

$149.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ T

$140.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ U

$140.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ V

$140.00

(250) WHOLESALE ANTI OBAMA BUMPER STICKERS~REVOLT (c) LMFAO HIGH QUALITY VINYL!

$134.36

LOT OF 12 NEW ANTI OBAMA T SHIRTS 2 S 2 M 4 L 4 XL

$119.00

Anti Obama “Nobama” bumper sticker (lot of 50 stickers)

$99.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ Q

$75.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ R

$75.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ S

$75.00

10 Recycle anti Obama T-shirts republican WHOLESALE

$74.99

1-20-13 anti Obama conservative 10 T-shirts WHOLESALE

$74.99

NEW Obamao anti against Obama 10 T-shirts WHOLESALE

$74.99

NObama 10 T-shirts WHOLESALE anti against Obama S-3X

$74.99

NOPE 10 T-shirts WHOLESALE anti Obama S-3X conservative

$74.99

President Ronald Reagan Bills – 250 Pack – Capitalist Conservative Anti Obama

$69.95

Anti Obama “Nobama” bumper sticker (lot of 30 stickers)

$60.00

(20) 1-20-13 / NOPE anti Obama bumper stickers

$59.99

(100) WHOLESALE ANTI OBAMA BUMPER STICKERS~REVOLT (c)

$58.76

NOBAMA Barack Obama Anti President Trump Hoodie T-Shirt

$49.95

Anti Obama Black T-Shirt, with hand painted universal NO symbol!

$45.99

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ N

$45.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ O

$45.00

Tea Party Anti Obama Decal Bumper Sticker GOP 3″ x 9″ P

$45.00

NOBAMA Barack Obama Anti President Trump Hoodie T-Shirt

$44.95

Retro USA Flag Ron Paul 2012 President anti Obama Revolution T-Shirt Hoodie

$44.95

NOBAMA Barack Obama Anti President Trump Hoodie T-Shirt

$43.95

LOT OF 50 3.5″ X 9″ ANTI-OBAMA TEA PARTY CONSERVATIVE BUMPER STICKERS

$42.00

NOBAMA Barack Obama Anti President Trump Hoodie T-Shirt

$41.95

Anti Barack Obama OMG Must Go Funny T-Shirt Hoodie

$40.45

Retro USA Flag Ron Paul 2012 President anti Obama Revolution T-Shirt Hoodie

$40.45

Sign of the Easily Fooled Button Anti Obama

$2.99

Obama’s 2008 logo is now the sign of the “Easily Fooled”. Show your feelings with a litte humor….

O.B.A.M.A. T-shirt, One Big Ass Mistake America, Mens T-shirt, Anti Barack Obama Funny Trendy Political Men’s Shirt

Our Mens T-shirts are made of a fully machine washable cotton blend for a cool, versatile and comfortable fit every time….

ONE TERM Anti Barack Obama Political Pinback Button 1.25 Pin / Badge

$0.01

These buttons are manufactured from the highest quality materials… made of a hard metal base, thick mylar, and true to life vibrant colors. Put them on your bag, t-shirt, jacket, guitar strap, or anywhere else you can think of! Buttons are great party favors for your next gathering and also make great prizes/giveaways. They are wonderful gifts for everyone!…

The Anti-American President: Barack Hussein Obama

$5.97

This book examines twelve ways in which Obama is systematically destroying our country. Obama’s father said, “[T]heoretically there is nothing that can stop the government from taxing 100 percent of income so long as the people get benefits from the government commensurate with their income which is taxed.” Obama wrote, “It was into my father’s image, the black man, son of Africa, that I’d…

The UN-AMERICAN President:Barack Obama

$8.46

Barack Obama is truly worthy of being called an Un-American President: and it’s not because he wasn’t born here. It is because his beliefs are antithetical to everything that is American. Most Americans are completely unaware of just how far he has already gone and how much damage he has already done to undermine the United States of America. This book tells the truth about Barack Obama and his…

Blacklash: How Obama and the Left Are Driving Americans to the Government Plantation

$12.99

Prominent black conservative and Fox News contributor Deneen Borelli looks at how President Obama’s policies are harming both the black community and the entire country. A call to action for freedom-loving Americans everywhere, The Obama Blacklash exposes the lies behind government handouts and the story of America as an expanding welfare state. Borelli identifies the culprits responsible for k…

Anti Obama GONE 1-20-2013 1-20-13 bumper sticker decal

$2.99

Obama scares me. You should be scared too….

Anti Obama Bumper Sticker – Bend Over Here Comes The Change – Bumper Sticker Decal

$2.39

Bend Over Here Comes The Change – Anti Obama Bumper Sticker. High Quality Bumper sticker. You read this you get the point. Bumper Sticker Info | 10 x 2.5 inches | Waterproof Vinyl | Printed with amazing clarity and quality….