The Dubai Debt Crisis Is Not Over

by a stretch of anyone's imagination.  This hit Bloomberg today: 

Bonds of Nakheel PJSC, the property unit of Dubai World that’s seeking to delay payments due this month, dropped to the lowest in four days before a call between creditors scheduled for today.  Nakheel’s securities fell to 54.88 cents on the dollar from 58 yesterday, the lowest price since Dec. 1 (here's the link:  Dubai Debt Crisis)

There are still a lot of unknowns surrounding this situation, not the least of which is to what extent foreign banks (U.S./UK) face billions in losses connected to plunging Dubai real estate values and failed investments. And the loans which are stated on these bank balance sheets can be quantified.  What can't be quantified is the notional amount of credit default swaps that are connected to the Dubai bank loans (ask AIG and Goldman Sachs how this works).  Furthermore, JPM and Citi, the two banks which appear to have the largest exposure, have been somewhat less than transparent with reporting the full extent of their liabilities - on and off balance sheet - and the Dubai crisis has all but disappeared from mainstream financial media.

The moral of the story is that the crisis in Dubai should be seen as a very bright warning flare to all that the global credit crisis is far from over.  Quite frankly, our leaders on Capitol Hill and at the Fed have done absolutely nothing to fix any of the financial or economic problems plaguing our collapsed system.  They have done a marvelous job printing paper to pay themselves and issue even more Treasury debt to pay for rediculously ineffective "stimulus" programs.  One massive simultaneous transfer of banking system debt onto the public (Govt) balance sheet and of public tax revenues into the bank accounts of Wall Street.

I have said all along that a second, more severe crisis is ahead of us and - now that the U.S. media has everyone "dumbed down" again - will originate from a source that very few will anticipate.  Given how the daisy chain of credit default swap counterparty defaults can be triggered, and given that monetizing such defaults globally are outside of Bernanke/Geither's ability to throw U.S. tax dollars at them, we won't know what kind of fuse has been lit by the Dubai default until it's too late to react to it.

Foretold is forewarned.  Get what you can out of the system and convert it into gold and silver bullion, especially on price corrections.