Sometimes things come out of the blue which you never expect.  When I heard there were financial problems in Dubai I was a bit taken aback.  Last week Dubai World, a large financial conglomerate in Dubai announced that they were seeking a six-month delay in payment on the servicing of $59 billion of debt.  It had the effect of somebody throwing a pipe wrench into a glasshouse.  You could just feel everybody grabbing there wallet.  Stock markets tumbled in commodity markets grew nervous in wake of the Dubai bombshell.

Things have settled down a little bit since than as Dubai World is now talking about $26 billion worth of debt which they’d like to delay servicing.  This is a far cry from double that but there’s major exposure to this back in Europe and the Middle East so just like Lehman Brothers it sent nervousness thru the markets.  There is nothing worse than uncertainty to make a market nervous and when we’re talking big dollars like we were talking with Dubai, it just makes it that much worse.

In many ways Dubai is like forbidden fruit for many travelers.  You might remember last year the British couple that were charged for having sex on the beach in Dubai.  There is also the tallest building being built in the world there as well as the unbelievable Palm Island developments which jut out into the ocean.  All you have to do is watch the Discovery Channel a little bit and you’ll find the next big megaproject that is being built in Dubai.

From my perspective way back here in southwestern Ontario it all seemed so extravagant.  I had never been to Dubai and so I was just as taken aback as anybody else.  That all changed this past January when I set off for Bangladesh via Dubai.  I noticed earlier in the year that Emirates Airlines had started flights from Toronto direct to Dubai and I knew that that would cut off almost half the hours off any future trip to Bangladesh.  It just so happened that 2009 was one of those years when I trek off to Asia so I made my arrangements and I arrived in Dubai on January 12, 2009.

You could imagine my excitement as that big Emirates Airline wound its way to Dubai.  My thoughts about Dubai had everything to do with the Discovery Channel and all the sexy things that I heard about the place.  So as we circled that night going to Dubai I could see all the minarets and walled compounds of the city would below me.  Of course I could see the tall buildings and I already knew the airport would be spectacular.  When I stepped out of the airplane and into the terminal I was greeted by the waterfalls which reminded me somewhat of Niagara Falls.  This was Dubai, opulent like you couldn’t imagine and I hadn’t even stepped out of the airport yet.

It continued on as I went through the baggage claim.  For those of you from southwestern Ontario you are very familiar with the baggage claim areas of the Detroit or the Toronto airport.  Those are some of the most crowded unappetizing places that anybody wants to go.  Needless to say in Dubai they were beautiful high ceilings marked with culturally appropriate pillars all the way through.  It was one of the most attractive baggage claim areas I had ever seen.  I’d only been to Dubai for about 20 minutes and I was impressed beyond my years.

So when I heard the Dubai world was having its problems servicing its debt in some ways I could hardly believe it but in other ways it seemed maybe all this spending was getting a bit out of control.  Dubai is on the other side of the world south of Iran and relatively close to India.  In other words it’s on the other side of nowhere and what it was doing with all this wealth never quite added up.  The difference this time is with regard to the debt servicing there is some real money in the area in the form of oil revenue.  The Dubai government says they’re not going to bail out Dubai World but there is some other real money in that area of the world that could do something.

Of course this is important to us because the Dubai hiccup last week should serve as an example of how fragile our global economy is.  Sure most of the bank exposure was in Europe but overnight stock markets and commodity markets tumbled.  So even as Statistics Canada is reporting today that we are officially out of recession in Canada, keep in mind there can always be something coming out of the blue which will affect our financial markets.  The Dubai World debt issue was certainly one of those things.  The question is, are there any more Dubai’s out there?