If DUBAI is broke, then we are in worse shape than we thought

When Uma Thurman divorced Ethan Hawke because he'd been cheating on her, I remember thinking, "If even Uma Thurman is going to be cheated on, what chance do the rest of us have?" I'm thinking that way about the situation in Dubai: If a country that's essentially the Cayman Islands of oil money can't pay its debts, then the rest of the world must be teetering on the edge of a precipice:

On Wednesday, Dubai requested that Dubai World be allowed to skip six months of interest payments on its debt. Before then, Dubai World, the corporate face of the emirate, had commissioned the city state’s flashiest buildings, managed ports around the world and reached far overseas to invest in properties like Barneys in New York.

Now, just as Bear Stearns was a harbinger of a string of failures of overly leveraged investment banks, the concern is that Dubai could be the canary in the coal mine for heavily indebted countries. The debts of everyone, including Japan and the United States, not to mention emerging markets, have risen greatly as the countries have fought the ravages of the global recession.

“You can print as much money as you want, but at the end of the day you have to pay the interest on your debt,” Mr. Tepper said.

Dubai is one of the few member states of the United Arab Emirates that has little oil wealth of its own. It acts as the trading, tourist and financial hub of the emirates. But it was assumed that the U.A.E.’s richest oil state, Abu Dhabi, would always bail out its free-spending neighbor.

Dubai’s announcement on Wednesday reversed that presumption — even as investors fretted that Dubai risked a sovereign default that would ripple to developing nations.

And while Abu Dhabi may well want to make its more exuberant neighbor and its bankers suffer a bit for their profligate ways before it rides to the rescue, that gives little comfort to investors already wary of the region’s growing debt.

While no one is expecting an outright default as long as global interest rates remain low — largely due to aggressive government bond purchases by central banks — concerns have been building for months that once these easing measures end, interest rates will spike and investors will become less willing to trust the word of heavily indebted governments.

Like ours.

Of course this is the cue for our various and sundry wingnut trolls to chime in screeching about Obamacare, but they conveniently forget that if George W. Bush hadn't dropped the ball on Afghanistan to invade a country that had nothing to do with attacking us -- a plan he'd had even before the 9/11 attacks -- and squandered almost a trillion dollars on his now-intractable war, and if his buddies hadn't decided to wreck the country by stuffing their pockets, and if he hadn't decided that no-down-payment FHA loans was a dandy idea (See? It wasn't the Community Reinvestment Act after all), perhaps the world might not be in this mess.

I'll grant you that Obama hasn't helped matters much, but that has less to do with health care reform (which we could have afforded if George Bush and his Republican lackeys in Congress hadn't decided to wreck the country) and more to do with his insistence on letting guys who were from the very cabal that created the financial bubble to continue to run our financial system. But no matter how hard Fox News tries to erase George W. Bush from history, pushing the 9/11 attacks back into the Clinton years and creating a time warp in which somehow we went right from Clinton to Obama, the fact remains that Bill Clinton left this country's coffers in better shape than he found them, and then the Republicans went on an eight-year crack binge from which we may never clean up.