Yes, Virginia, there is a Santa Claus. But he only comes for kids -- not for governments that have bragged, borrowed and spent their way into bankruptcy. Two Thousand Ten is going to belong to the Grinch.
For spendthrift governments around the world, the new year's going to bring massive defaults. The new globalization may be the globalization of a second wave of financial crises.
The world economy is not convalescing. It's just been pumped full of unaffordable medicines. Borrowing madly, countries as diverse as Greece and Dubai have been buying time, not fiscal health.
Built on financial quicksand, Dubai (an Arab Las-Vegas-without-the-fun) is in collapse (predicted by this column years ago). Quasi-governmental corporations backed by the ruling family are at least $80 billion in the hole. The recent transfusion of 10 billion bucks from Abu Dhabi merely applied a Band-Aid to a hemorrhage. Dubai can't pay.
Eighty billion in bad debts may not sound high in President Obama's Washington, but Dubai's just a city pretending to be a country. It produces nothing. There's no inherent wealth. It Madoff-ed the world with extravagant brochures and nutty projects.
Speculators went nuts, proclaiming Dubai the city of the future, where wealth could only beget more wealth. The frenzy produced the craziest real-estate bubble in the world, as gullible investors mistook a couple of shopping malls for a civilization.
Dubai's approach to development mirrored that of much of the Arab world, expecting money to do all of the work. But Dubai's ambitions weren't backed by oil wealth, only vast development schemes that never should have fooled a single investor. But investors wanted to be fooled.
Speculation hasn't been the only villain generating financial ruin around the world. Another villain has been exploding entitlements. Several European states (plus my favorite foreign country, California) have been downed by a self-inflicted one-two punch. ...
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