Dubai Defaults, sends markets reeling
Nov 28, 2009
Remember back in 1998 when Russia defaulted on its debts? It brought down Long Term Capital Management, the American hedge fund, and Alan Greenspan had to jump to save the American economy from collapse. That was 1998, not 2008.
It all goes to show how interconnected the world economies have become. Every country is tied to everyone else, and so if one goes down, they all go down. It is a perfect set up for the world-wide collapse of Mystery Babylon.
Yesterday, Dubai effectively defaulted on its $80 billion debt load. This caused stock markets world wide to drop considerably over fears that this would stop any economic recovery.
This also has political implications, because Dubai is Iran's main business access to the world, a way to get around economic sanctions by going through a third party.
Of all the states of the United Arab Emirates federation, Dubai has maintained the closest ties to Iran. Indeed, as international pressure has built on Iran over the past decade, Dubai has prospered from those ties. It provides critical banking and trade links for Iran, often serving as the go-between for European or Asian companies and financial firms that want to do business with Iran without violating international sanctions. . . .
The US and Abu Dhabi are hoping to use Dubai’s financial troubles as a way of finally severing the close ties to Iran. For years, Dubai has enjoyed the benefits of walking the line between its military and economic alliance with the US and economic benefits from banking and trade ties to Iran. The price of a bailout from Abu Dhabi may be having to finally choose to give up the Iran connection.
If the US government tries to use the situation to pressure Dubai to sever its economic relationship with Iran, the economic consequences could be fatal to Dubai, which is already struggling. If business with Iran is cut off, many corporations around the world will lose a lot more money, and this will only make the economic condition worse.
While American companies are reported to have less stake in Dubai, the world economy is so interlocked that it will certainly have an indirect effect on everyone. Remember how the collapse of LTCM nearly set off a chain reaction with the potential of destroying the entire American economy in 1998. That's the power of financial institutions that are "too big to fail." The truth is that they are too big to fail without taking down everyone with them. And the more fragile the world economy, the less it takes to bring everyone down.
So I have wondered when we would see the next domino fall. It was only a matter of time before some small nation somewhere defaulted. Because Dubai is interconnected with Iran, the US government and others may interfere with any bailout plan without political conditions. This may set up a game of economic "chicken," and any delay would only make matters worse.
In Britain, government officials are being forced to admit that the problem is far worse than they had previously admitted. They claim ignorance, of course, and that the "new data" has now changed their minds, but the fact is that the pertinent data has always been available for all to see. It was simply ignored as the "recovery" was hyped in hopes that wishful thinking would inspire confidence and "make it happen."
The problem is that the bailout money to Wall Street has shifted a trillion dollars from Main Street to Wall Stret. That means the poor have a harder time buying bread, while the wealthy resume their investment strategies. This is deflationary for Main Street, but inflationary to Wall Street, much like a two-tiered economic system.
Meanwhile, big banks are not lending to small business, because they need to save money. What do they do with it? They invest it in financial deals and in Treasury bonds to finance the government's bailout program. So the money gets sucked out of the Main Street economy, only to get stuck in a merry-go-round, revolving between the government and the big banks.
That's what they call a 'recovery program."
The banks are certainly not going to lend money to Main Street, because Main Street is short on cash, and their properties are going down in value. Customers find themselves with less money to shop, so bankruptcies are way up. This makes banks nervous, so they make fewer loans. This is how an economic "death spiral" starts.
Meanwhile, Dubai is the place to watch. The government made its default announcement on the eve of a long holiday week end, so you can be sure that there will be many emergency meetings before the markets open again.
Sunday is November 29. It is a date with an interesting history, as I have written many times in weblogs. In 1993 it was the date of the Divine Court appeal that we made on behalf of the overcomers for the overthrow of Mystery Babylon at the start of the Jubilee Prayer Campaign.
November 29, 2000 was our meeting at The House on the Rock in Wisconsin in which we established (by the Spirit) the overthrow of the old Jerusalem in the same manner as David conquered Jebus. Then, even as David renamed the city to its old name, Jerusalem, and set it up as his capital city, so also did we set up the New Jerusalem as the capital city of the overcomers.
So let us continue to be watchful. We do live in interesting times.
Dr. Stephen Jones