http://www.citycenter.com/

According to Bloomberg: “The 67-acre site contains 18.5 million square feet of built space … The largest privately funded construction project in US history … a complex, interconnected web of hotels, condominiums, pools, spas, high-end restaurants and retail outlets, a casino, convention space, ‘pocket parks,’ public artwork and pedestrian walkways.”

According to Times Online: “no fewer than five ‘starchitects’ were involved in the design process: Norman Foster, Cesar Pelli, Daniel Libeskind, Rafael Viñoly and Helmut Jahn.”

This is an amazing piece of land development. I take it this might be part of the CRE bubble some are worried will burst. Perhaps a symbol of why everything went so wrong in the financial system.

How can anyone trust UK authorities after they indulged in this kind of “secret” dangerous market manipulation. Is this “secret loans” business legal? If it is how can anyone calculate CDS’s? Are secret interventions o.k. if they are for the “right” reasons because that is what is implied.

It definitely stops investors from making fully informed decisions. Surely,i t opens up government manipulators for legal actions.

The Telegraph article above quotes the corporate debt at $70 bn.

Dubai itself could put the corporation in a bankruptcy situation wherein the state acts as trustee to operate the business’ of Dubai World so as to preserve the assets. That is, the real estate is now so all pervasive they cannot abandon it and stay viable. Whatever cash flow there is after cash expenses is distributed to the creditors for as long as it takes. If the values of the assets get truly low condemn them out and distribute the money.

After all, the Rio Grande Southern Railroad was in bankruptcy for around 40 years. They had 1905 bonds with accrued interest never paid that exceeded bond principle by the time they shut down and were scrapped in 1951.

Dubai the state must do something in 2009 or 2010. The creditors make a deal or they can wait till hell freezes over if the state is unable or unwilling to make good.

Why not say .. hey people, you bought insurance collect from the insurance company. We are dealing after all with sovereigns at the end of the day. If they cannot pay anyway what else is to be done but telling the creditors so sorry but you wait for the assets to pay off. Sovereign jingle mailing.

The private restructuring is the best choice for Dubai and UAE countries or not the best choice for creditor but this would be the best choice for global market to show that government-holding company will also be restructured under the private method and moral hazard of understanding that government will support all the losses of government-holding companies will reduce or disappear. But one thing we know is wrong is that the credit rating companies tend to give higher rate for the government-holding companies from government support and that is wrong because that is not reflecting the fundamental of companies and credit rating should separate the support of government from the strength of each individual companies.

Another thing that we can expect is that all central banks policies to inject liquidity failed to tackle to bankruptcy of the companies or even sovereign debt default crisis in the fragile companies or countries because, for example, Dubai world that may have debt near 100 billion with market value of assets that are likely to be lower than book values by more than 30-50%, meaning that Dubai world has already bankrupted. A lot of Dubai assets can never generate cashflow currently but in the future and book value is higher than the intrinsic value that may be from the fraud in the companies or the wrong decision of management.

The zombie banks and corporate are still a lot in US, Europe, Asia and emerging markets and have never been restructured to improve the capital adequacy or the profitability. We never know the book value is reflecting the real market value of the companies and we could face the unexpected default from here in corporate and sovereign debt default.

Thanks for Benanke who support the excessive speculation currently in financial world with reduction of the risk aversion of tailed risk, like unexpected default and surely, if there is the unexpected shock like default risk with excessive risk taking without central banks control, we can never avoid the crisis like subprime crisis in the future. Should we support FED creating the subprime speculation with too low interest rate without any regulatory or expert committee audit?

It is time to tackle excessive speculation and focuses on the real restructuring in the companies and sovereign balance sheets and income statements.

There are many ironies to this situation:

http://www.independent.co.uk/news/business/news/head-of-dubai-world-threatens-to-take-his-money-out-of-europe-790076.html

My question about the Federal Reserve was somewhat rhetorical. If our central bank has to manipulate the yield curve to keep our banks stable, despite the risks associated with that policy, and part of the reason that it has to do so is to offset real or potential losses associated with distressed sovereign debt, that would suggest that the borrowing habits of small states have an influence over our monetary policy (and it should be the other way around). And that should be a very scary thought, which should give our government some incentive to address the issues of moral hazard and capital flows.