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Analyst: Dubai is the mother of all too-big-to-fails

Here's a good piece in today's Wall Street Journal about the Dubai panic, noting that the problems in Dubai have been well known for more than a year -- ever since $140-per-barrel oil started to fade in the rearview mirror -- and that a Dubai default, while unlikely, would not presage another global meltdown.

Zach Karabell, president of River Twice research firm and a frequent CNBC contributor, writes:

So why did markets react as they did? Panic is the easy answer, and global investors do at regular intervals overreact. More disturbing is the possibility that investors in the traditional financial capitals of Europe, the United States and Asia have no better understanding of the world now than they did before last year's crisis.

He writes that Dubai -- "the shopping mall and nightclub for much of the region" -- is the mother of all too-big-to-fails, and will be bailed out by its "rich-as-Croesus neighbors."

There has long been an internal tension in the United Arab Emirates between Dubai and its neighbors. Dubai has the glamor and glitz and mega-skyscrapers, but it does not have the oil that Abu Dhabi and Sharjah do. Karabell writes:

As Dubai's ruling family preened, the neighboring emirs sulked, and when Dubai's debts came due prematurely, they swooped in, replete with the scolding I-told-you-so's and armed with billions in oil dollars.

-- Frank Ahrens
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By Frank Ahrens  |  November 30, 2009; 11:00 AM ET
Categories:  The Ticker  | Tags: Dubai, Zachary Karabell  
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