Jet II:
The one thing you are not understanding is not the issue of whether Dubai would or would not be able to get credit.......you can always get a loan. The key is how much is it going to cost you?
Since you referenced Argentina as a "model" of success following default previous, here is what happened there in late 2001 when they defaulted:
Argentina bond yields hit 42pc
By David Litterick
Published: 12:01AM GMT 11 Dec 2001
ARGENTINA'S MerVal stock index fell 7.58pc to 235.12 last night as the country's risk premium on bonds jumped amid growing concerns about a possible default on debt payments.
The yield on Argentine bonds is now 42.06pc above that of comparable US Treasury bonds.
The yields on Russian bonds during their default in 1998 went to similar levels and took down Long Term Capital Management in the process.
I am not suggesting the UAE would be in default; however, because of the "close association" the government has with these companies, it would be natural to assume if the government does nothing to alleviate this situation the markets will use a very "broad brush" when loaning funds to any entity in the UAE.
Companies would get hit very hard on bond issues but also banks (and therefore mortgages rates, car loans, personal loans, etc).
I would hate to see the UAE property market with 30% mortgages rates; if you think the decline so far has been spectacular......you ain't seen nuthin yet!
