This situation is interesting.
I have been raving for a while now (in person, to people who will suffer my ravings) that all of the insane building in Dubai was going to implode one day. I don't know a lot about economics, but I subscribe to the radical notion that "bust" follows "boom". Dubai has to be the single largest boom town ever created by man, so when it goes bust, I predicted it would become the largest ghost town on the planet.
But, because I don't know much about economics or finance, I wasn't sure how it would happen, or when.
It appears that time may be now, and the cause our old friend leverage. As this thing unravels, I'll be unsurprised to learn (and by that I mean "Shocked and outraged by this unprecedented betrayal!") of Dubai World's off-the-books debt obligations. Banks are freaking out about getting back what their owed now, but I submit that they have no idea what their exposure actually is - and won't until the implosion is well underway.
So, on my "ghost town" outcome prediction - any bets how this thing actually ends? I'm not sure the UAE will let that actually happen, but I don't know what their options will be. I guess that depends on finding out just how bad the situation really is.
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