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, according to Bloomberg.
“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,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.
A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.
The BofA scenario is a very real possibility. The Dubai "problem" is the result of fewer dollars circulating because of Bernanke's halt in money printing. Someone had to come up short. This time it's not the pulverized US real estate market. It's the Nicolas Cage like spenders, Dubai.
Keep an eye on Greece and Vietnam for more signs of trouble.
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