Dubai: An Enormous Ponzi Scheme?


Last week it was all over the news that Dubai World Corp was trying to renegotiate some of its debt repayments.  Unsurprisingly, stock markets around the world dipped.  Yet, at first many of the commentators insisted that people hold back the knee jerk reaction to panic because the economics of Dubai were at bottom, solid.  Hmmm…  From all accounts there are empty shopping plazas, restaurants, buildings etc. one wonders if a country with very little, if any natural resources, may want to “sober up.”  Anyway, here’s an article about Dubai I found on CNN:

London, England (CNN) — For the past decade, Dubai has been home to the greatest concentration of cranes anywhere in the world as billions of tonnes of concrete, steel and glass have refashioned the city skyline. But the rapid growth of the past six years has slowed recently due to the global slump in property prices. Hopes of a recovery have now been further imperiled by the news that the state-owned Dubai World has requested to delay paying its massive debts by six months. Dubai has become a playground for architects as well as millionaires commissioning a string of audacious building projects aimed at helping reposition the city as the financial and cultural hub of the Middle East. Billions of dollars have been spent transforming the landscape, erecting buildings which continue to break records of all dimensions. The Burj Dubai — at 818 meter the world’s tallest skyscraper, the vast Palm Jumeirah — built on land reclaimed from the sea, the Dubai Mall — the largest shopping center in the world and the Mall of the Emirates; home to the world’s biggest indoor ski slope form part of a very long list of completed construction projects. “The whole place is kind of like a time-lapse film. You wake up in the morning and it’s just a little bit different,” Jim Krane, author of “City of Gold: Dubai and the Dream of Capitalism” told CNN. But, according to Krane, some of these projects, like the Burj Dubai, suffer from a severe lack of practicality. “Dubai doesn’t really need to have to build tall asides from prestige purposes. If you look at it, it’s a really bad idea. It uses as much electricity as an entire city. And every time the toilet is flushed they’ve got to pump water half a mile into the sky,” he said. The telescopic shape is also presents problems of a more practical nature Krane thinks. “The upper 30 or 40 floors are so tiny that they’re useless, so they can’t use them for anything else apart from storage. They’ve built a small, not so useful storage warehouse half a mile in the sky,” he said.  Read the rest

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