Bloomberg is reporting that Dubai World may end up in a sovereign default.
Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.
“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.
With that, I think it's time to review globalization and contagion.
The Financial Times Alphaville post, CSI: Dubai, has some snippets from Dubai world prospectus.
Check out the graph of transactions pulled from the prospectus:
Finally Krugman sums up the possibilities of Dubai World in this post; sovereign default, just a mega CRE bust or a brand new type of situation where no past history and corresponding analysis applies.