Where is the economy headed?
The Dubai crisis is related to the current downtrend in the commercial real estate market. We don't hear much about this in the mainstream news, which seems to be concentrating more on "good" economic news.
However, we have to remember there are still a lot problems there are still "on the books." For example, in the U.S. monthly mortgage rate hikes (resets) will begin climbing again in 2010. The resets will peak near the end of 2011 when the amount reset due to adjustable rate mortgages will exceed the level of sub-prime resets in late 2008.
Unfortunately a lot of the conditions that caused the economic meltdown of 2007-8 are also "resetting" as well. The higher end of the equities market is still largely unregulated and risk-taking is now back in style among the remaining big banks.
No lessons about risk seemed to have been learned because the people now in charge of financial institutions were all saved by the government and all of them have fattened bank accounts after giving themselves big bonuses.
They know that they can take risks because it makes them wealthier in the short-term, and when the cards fall, the government will step in to protect their interests.
Now getting back to commercial real estate, the cards are already starting to fall. There appears to be a lot of hidden debt out there. Much more than is declared publicly. I'm not making this up as it was the IMF chief who brought up the subject of this debt. Many corporations have been hiding the debt with accounting tricks in hopes that the financial environment will change.
However, this debt is now forcing its way to the surface. The Dubai debacle is just the first sign of this problem.