Uh Oh

Dubai World, the state-owned company that has been borrowing like crazy and building artificial islands, fantasy structures, and other projects to convert Dubai into a kind of vacation wonderland, has announced that it will not be making interest payments on its loan debt.  In other parts of the world, where the markets aren’t closed for the Thanksgiving holiday, the reaction apparently is panicky and some banking stocks are getting hit hard.

My guess is that traders everywhere are still jumpy after the near meltdown that happened last year, and any sign of possible significant default by a big borrower is going to make the markets especially nervous and curious about on whose balance sheets the eventual liabilities may land.

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