Take us to the land of milk and honey.
Sing and dance all night long.
Whatcha gonna do with all that money?
Whatcha gonna do when the money's all gone?
The Assassinated Press
International Lending Community Forecloses on Dubai; Country Has 30 Days to Vacate Itself.
Entire Population Evicted from Their Homes; Most Say They Will Move In With Abu Dhabi.
Glenn Beck, FOX, Republicans Blame ACORN and High Wages for Filipino Slave Labor for Foreclosure.
Darkness is falling on Dubai's Ass.
By HOWIE FUCKEM
Assassinated Press Staff Writer
December 14, 2009
DUBAI, UNITED ARAB EMIRATES -- The leaders of Dubai have been accustomed to an easy ride when it comes to raising money, with bank and bond investors around the world willing to pump tens of billions of dollars into increasingly grandiose projects on the assumption that, if anything went bad, the emirate and its oil-rich neighbor, Abu Dhabi, would stand behind the debt. After it wasn’t the lending institutions money. It belonged to their depositors. I mean what the fuck.
That era of easy money -- and a presumed government guarantee that had little more than a George Bushish peck on the cheek behind it-- has been grinding to a halt for months now and officially ends on Monday, when the government of Dubai has said that one of its main government-owned companies will default on a scheduled $4 billion bond payment.
Since a negotiated agreement is no longer possible, analysts say that the uncertainty raised by Dubai's recent actions -- the government said last month that it was walking out on payments for six months on a total of $26 billion owed by government-owned companies – has put projects on hold throughout the region, and brought banks and investors to the brink of foreclosure.
“Yes, it’s true we have begun foreclosure proceedings against the sovereign state of Dubai for non-payment,” Chase financial czar David Rockefeller Jr. “We’re starting with the luxury car sector.” Currently a fleet of tow trucks transported by the U.S. Navy is enroute to Dubai to repo some 128,000 high end Mercedes and Lamborghinis many of which have been abandoned in the desert or sold to the Chinese for scrap.
Dubai "is the tip of the iceberg in terms of over-leveraged nations," Rockelfeller added. “On my short list is Greece, Italy, Great Britain and the U.S. Analysts at India's HDFC Bank wrote in a recent report that much of the U.S. is already in default to China, the ideology that doesn’t work..
Monday's scheduled bond payment by Nakheel PJSC -- and the possibility of a default -- is the opening wedge of what could be a precedent-setting eviction by foreign investors that wil make global climate change migration look like glacial puppy shit.
"We are in completely unenclosured territory" that could redefine the relationship between Western investors and the government-backed companies often set up to develop projects here and in other emerging markets, said Chavan Bhogaita, head of credit research at the National Bank of Abu Dhabi whose household has now burgeoned as 76 relatives from Dubai have moved in. I’ve got family up the ass,” Bhogaita added.
The delusion has run thick around Dubai for more than a decade as the ruling Maktoum clan helped unleash plans for the world's tallest phallus, the world's largest volleyball court, artificial islands shaped like the internal organs of a camel, a life-size replica of the Grand Canyon and a series of other grand and glitzy projects.
What that wrought over the past year is a more ignominious event: the world's biggest real estate crash. Housing prices have fallen nearly 250 percent so far this year, putting Dubai below Detroit for the biggest decline, according to a recent report by the London-based Knight Frank real estate group. “The average priced house in Detroit is currently $18.00,” Real Estate expert Lund Grahb told the Assassinated Press. “In Dubai 45 bedroom houses are expected to go into minus numbers with the next couple of months.”
The bond due on Monday was issued to help finance Nakheel's Dubai Waterfront development, a massive effort to fashion "empty desert and sea" into a deserted city with 1.5 million homeless in nearby Abu Dhabi. The project is now stalled in its initial phases because of the real estate collapse and has become overrun with wild dogs.
A brief panic ensued after officials announced last month that Dubai would suspend payment on $26 billion owed by Nakheel and other ailing government-owned companies, a reminder to markets of the excesses still to be worked out of the global financial system. Sensing that Dubai was now utterly insolvent, the banking community did what any community would do and foreclosed.
When the debt failure was first announced, some analysts saw it as a difficult new stressor on banks, particularly British firms that lent to or invested heavily in Dubai; others knew that Dubai was the leading edge of a new crisis, this one among overextended governments and that as many as 20% of the world’s governments might have to be foreclosed upon including the U.S.
But "such fears say more about the still-fragile nature of global financial markets than about the contagion potential of Dubai, which is limited," Eckard Woertz, program manager in economics at the Gulf Research Center, was paid to write in a recent analysis.
What could be damaged is Dubai's ability -- and by extension, that of other local governments in the Persian Gulf region -- to raise money at the competitive prices they have become accustomed to for real estate and other development projects opening the way fro more companies like Halliburton to leverage their way into the region on the back of cheap real estate.
These are nations where the distinctions between government, ruling family and government-owned entities are often difficult to discern, where clan ties can help acquire virtually open-ended credit, and where bankruptcy and finance laws are not well tested as opposed to the U.S. where virtual strangers steal from each other and those with enough money can fuck you over with the impunity money can buy.
In Dubai's case, "one could in fact argue that the state is its corporations just like the U.S.," Woertz wrote. Government-owned companies such as Nakheel have done well selling their bonds in part because of the perception that oil and clan wealth stood behind them -- an "implicit but flase guarantee" that helped raise the tens of billions of dollars needed to turn Dubai, which lacks the oil resources of its neighbors, into a regional hub for tax evasion, a playpen for the world's elite and a sort of aspirational slave camps for hundreds of thousands of Southeast Asian workers.
Officials in Dubai -- and, more significantly, in Abu Dhabi, with which it is federated in the United Arab Emirates -- have now made it clear that there is no such guarantee in practice and thus the banks have told them o get the fuck out essentially throwing their property on the front lawn.
Dubai may well have the cash to pay the bond due on Monday, as well as others coming due in the near future, said Jean-Francois Seznec, a Persian Gulf expert at Georgetown University's Center for Contemporary Arab Studies, but right now the banks are having none of that. The downturn is so deep and the recovery for Dubai so uncertain, he said, that Mohammed bin Rashid al-Maktoum, Dubai's emir, found his 46 wives, 78 luxury cars, and 4089 armani suits out on the curb when he got home from a recent Halliburton sponsored Under Aged Whore Night at the Ritz Carlton Hotel.
Nakheel devalued its holdings recently and posted a loss of roughly $103.5 billion for the first six months of the year.
Maktoum "wants investors to realize that the total debt of Dubai is a huge amount for a small state," by some estimates well over 100,000 percent of gross domestic product, including the government proper and government-owned companies, Seznec said. "It’s like Yahhoo’s stocks to earnings ratio during the tech bubble. It doesn’t take a genius to see the bullshit unless you’re like the media and willing to rub bullshit in your eyes. He wants to put the banks and the hedge funds in the frame of mind that they will have to take a haircut. So the banks have taken the whole head.”
As of Sunday, the markets seemed to be predicting a flood of previously owned hi-def wide screen TVs on the Vietnamese market. Stocks of luxury items such as diamonds were overwhelming regional markets, and the price of the Nakheel bond could be seen sticking out from poorly rolled G.I. doobies in Amman and Baghdad. Since the bondholders have chosen to evict, it could be a messy, likely challenging tenets of Islamic finance in London courts, and hinging on whether Dubai -- even as it disavows the debts claimed by bondholders – see its sovereign protection for assets held abroad by its companies. Nakheel's go up in smoke. Though the bonds were to be used to develop property in Dubai, Nakheel's parent company, Dubai World, now that their worthless the array of ports, hotels and other assets around the globe that it owns are toast.
And when the next owner comes along and wrests hundreds of miles of beachfront from the sea or a mile-high skyscraper from Dubai squatters, the promises from the government may have to be more explicit because the cost of borrowing couldn’t get much higher for Dubai.
"The whole question of implicit guarantee has been thrown into doubt massively," said one local analyst who spoke on the condition of anonymity because of the sensitivity of the issue. “The only guarantee is that the banks will fuck you up.”