Obama administration closely monitoring Dubai debt crisis

November 29, 2009 by · Leave a Comment
Filed under: Global News 

The White house and most of the world are looking intently at the looming situation in Dubai after the announcement from Dubai World that they will be postponing almost $60 billion dollars in scheduled bond payments.  Reaction on Friday was severe compared to what is usually a light trading day.  The dollar fell on this announcement and stocks sold off worldwide.

This does not bode well for the recovery that all central banks are trying to engineer and this could be the catalyst that starts the correction many investors have been waiting for after this major run-up in stock prices.  If these types of announcements continue in other parts of the global economy, it is going to make banks even more reluctant to lend which is the lifeblood of any glowing economy.  This week will be very important to watch in the markets.

The Obama administration said Friday that it was monitoring developments in a looming debt default by the Persian Gulf emirate of Dubai, whose efforts to fend off creditors sent stocks skidding in the United States and around the globe amid fears of new bank losses.

The Dow Jones Industrial Average opened down by more than 200 points during Friday’s abbreviated session, recovering slightly later in the day as analyst reports suggested that U.S. banks had little exposure to Dubai, one of seven sheikdoms that compose the United Arab Emirates.

Around the world, fears focused on the danger that a massive debt default by Dubai could trigger similar defaults elsewhere. Such defaults in Mexico, Russia and Argentina over the past two decades proved contagious.

“The Treasury Department is monitoring the situation,” said a White House official, who spoke only on the condition of anonymity because she wasn’t authorized to talk about the issue for publication.

Source: Miami Herald

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