What are the repercussions of Dubai’s Collapse

Now that the Dubai situation is becoming more clear, it is worth looking at the worldwide repercussions of this. Whether Dubai will actually default on some $80 billion in outstanding debts is still an open question, but Dubai World, the government owned property developer has fingers in pies all over the world, and one has to wonder if they will be thrown to the wolves, in which case – expect fire sales throughout, from London to Vancouver.

These are  few pies in Dubai World’s portfolio:

• Dubai Ports World, London
• P&O shipping
• Turnberry resort in Scotland
• Metropole, London
• 10 Whitehall place, London
• Chelsea Harbour, Regent Quarter at King’s Cross, London
• London Gateway Terminal
• Shell Haven refinery, Thurrock, Essex, UK
• V&A Waterfront, South Africa
• Vancouver Terminal, Canada

So – clearly the possible implications are spread around the world, although much of their foreign investment is in London. Gordon “no more boom and bust,” Brown made an attempt to down play any possible impact on the global economy, saying,

My own view is the world financial system is stronger now and able to deal with the problems that arise. I think we will find it is not on the scale of previous problems we have dealt with. I think global recovery has depended on monetary action and fiscal stimulus. The world economy has put in place mechanisms by which when a problem starts in one country we are in a far better position to monitor it and to gauge the effects.

The problem essentially for the Dubai ports has been issues relating to planning in Britain. This is potential project for Britain that will bring a large number of jobs. It has to go through a large number of hurdles. This is a setback but I think you will find this is not on a scale where previous problems have been dealt with.

There is five trillions of fiscal stimulus in the world economy – either had or about to have – and that is what is bringing the economy up. The monetary easing, with low interest rates and with quantitative easing in Britain and America – these have been the most important thing in giving the world economy a boost.

But – let’s be honest here – this was as much of a “surprise,” to Gordon Brown as the rest of the British Government, so not exactly confidence inspiring comments from the British Prime Minister. We have heard it all before Gordon, and we can only guess at just exactly how much extra money the Bank of England will be forced to print out of thin air in response to this. Any advance on £200 billion?