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Dubai’s debt crisis in context

Today, as over the weekend, markets shuddered at the news that Dubai World, a state-controlled investment company, has delayed some debt payments. Investors feared that Dubai World might default or collapse, hurting its counterparties (especially fragile British banks) and perhaps even tipping the world back into recession. But, as many commentators have noted, even if ...

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Today, as over the weekend, markets shuddered at the news that Dubai World, a state-controlled investment company, has delayed some debt payments. Investors feared that Dubai World might default or collapse, hurting its counterparties (especially fragile British banks) and perhaps even tipping the world back into recession.

But, as many commentators have noted, even if Dubai World went totally belly up, it wouldn’t have anything close to systemic effects. Why? It just isn’t big enough. Here’s a chart of the debt on its books, in comparison with Lehman Brothers, when it declared bankruptcy. 

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