Jan Ake Jonsson, the CEO of Saab, is in Detroit today – along with a number of Swedish government officials – in hopes of speaking with other potential buyers after the deal with Koenigsegg Automotive AB fell apart.

Three potential buyers have slowly come forward including Beijing Automotive Industry Holdings, The Renco Group Inc. and investors Merbanco Inc. Obviously, the biggest name on the list is BAIH, and they are truly in a position to execute a Saab business plan; however, will BAIH and GM be able to finish a deal?

Frankly, this sounds like a last, desperate, Hail Mary type of play on the part of GM but if Beijing Automotive Industry Holdings plays their cards right they company can walk away with Saab at a fire sale price.

On another note, it looks like the problems of Dubai are going to magically go away… OK, the situation is not exactly that happy but it now looks as if the central bank of the UAE will provide a funding to insure against a default of Dubai debt. The roughly $700 billion the UAE central bank has on the books is more than enough to save Dubai, it is sad to see this happen.

Why?

Quite simply the action will calms fears and perpetuate the unrealistic belief that there will always be someone to bailout those in need, that too big to fail is a reality. If a default can happen to Dubai, it can happen to any government, but not every government will have an angel to provide them with a rescue package.

What would the world to then?

My guess is panic.

While the world was caught off guard by the news that Dubai is on the verge of defaulting on their debt, Sheikh Ahmed bin Saeed al-Maktoum, a family member of the Dubai’s ruling class, noted the decision to announce was carefully planned. I have no doubt the decision was planned; however, what does not add up to me is this quote:

“unprecedented growth, in Dubai and across the (United Arab Emirates), over the past decade has helped lay the foundation for what is now a broad-based sustainable economy beyond just natural resources.”

Is the United Arab Emirates truly in a position to continue growing beyond their involvement in natural resources? I would be hard pressed to believe such a statement.

The unprecedented growth in the UAE was based on energy, all other industries were offshoots. Why do you think the UAE is pushing for higher energy prices? The revenues from energy production fund government operations, and without that revenue the governments of the UAE will constrict – if not collapse.

A potential saving grace for Dubai may be their big brother, Abu Dhabi.  This write up by Northern Trust bank suggests Abu Dhabi may help the country restructure debt in exchange for assets such as Emirates airlines. As John Galt points out, someone sold a large amount of gold at the open of the markets after the Dubai news – was Dubai trying to raise funds, or was Abu Dhabi getting ready to assist? A rescue move by Abu Dhabi move would make sense on a number of levels – both business and cultural.

The real question that should be asked is this: Are any other governments facing default and would would be their “big brother” providing a rescue?

If Dubai does default, the credit markets will slow yet again, especially into emerging markets.  Such an event will put even more pressure on smaller governments facing debt issues due to the global economic depression. But what about other other governments, what about the “stable” countries such as the United States, United Kingdom, the European Union and Japan?

The sovereign debt worldwide has increased roughly $15.3 trillion dollars between 2007 and 2010, and the majority of the debt was placed squarely on the books of the countries above. If the United Kingdom or Japan were to default a number of countries may be able to assist, but if the United States where to lapse on debt there is no one with a bigger checkbook that could come to the rescue.

The future remains to be seen but if it can happen to Dubai – a country that was the jewel of the UAE – it can happen to anyone. Over the next year we may understand that the term “too big to fail” is indeed false.

Dubai, the skyscraper building United Arab Emirates shangri-la has essentially defaulted on their debt.  The country asked creditors for a “standstill” on debt payments for the next 6 months as the country attempts to get a hold on their economic situation.  If Dubai does not manage to pay their debt, renegotiate their terms or find a way to satisfy their creditors the country will trigger the biggest government default since Argentina’s collapse in 2001.

How did Dubai end up facing a collapse?

It starts with the roughly $80 Billion Sheikh Mohammed Bin Rashid Al Maktoum, Dubai’s ruler, borrowed in an attempted to turn the Emirate into an economic and tourist mecca. Add in an economic collapse that triggered devaluation in real estate prices of close to 50%, as well as a massive cut in energy prices (yep, they still need profits from oil), and you have the perfect conditions for economic Armageddon.

And that is exactly what the country is facing, but how does this impact the rest of the world?

There is no question about it, the economic “recovery” that the U.S. and world governments are publicizing is thin at best, and an all out fraud at worst.  If Dubai does end up defaulting the banking system is going to face roughly $40 Billion in liabilities.  While the main exposure is within banks in the EU, such a large hit would constrict the credit market even more as banks and financial institutions will not want to continue risking exposure with lending practices.

For three months now I have consistently pointed out the economic risks the world faces. All one needs to do is put the pieces together, from bankruptcies of large US financial institutions to the defaulting of governments, it is clear the world economy is very sick.

The world is not going to come to an end in some giant bang, no.  What is happening, and will continue to take place, is the slow crumble of the economic system. Much like a frog in a pot of water that begins to boiling, people will not notice what is going on around them until it is too late. Look for more events to take place over the next several months and be prepared for a very hard mid-to-late 2010 if the economic conditions continue on their current path.

A few days back I wrote about how Dubai is not exactly the paradise it is made out to be. The major cause for putting my thoughts down was a recent story penned by a British Journalist for the Independent.

It turns out some in Dubai did not like the criticism and attempted to turn the tables. Sultan Sooud Al Qassemi wrote “If you think Dubai is bad, just look at your own country” as a reply. Being a fairly neutral party, seeing I have no vested stake in either country, I think the Sultan’s response falls quite short – especially compared takes place in Dubai on a daily basis. Let’s break it down.

“The Dark Side of Dubai” in part stated:

• Pitched as an adult Disney Land when it is not
• If you cannot pay your debt, you go to jail
• Legal proceedings are only in Arabic, if you cannot understand Arabic you are out of luck
• City build largely by forced/slave labor
• Poor housing conditions for the forced/slave labor
• The “melting pot” mentality that is marketed is not true
• City built by no usable water, exhausting natural resources
• Sea water pollution is so bad the bacterial level is too high to count

“If you think Dubai is bad, just look at your own country” in part stated:

• 380,000 homeless people in UK
• 12,000 women to prison sent to prison in 2006
• Had Given refuge to 400 Nazi war criminals
• One in every 23 teenage girls had an abortion and in 2006
• Mortality rates from liver diseases due to alcohol abuse have declined in Europe in recent decades but in Britain the rate trebled in the same period reflecting deep societal failures

It almost feels as if Sultan Sooud Al Qassemi is trying to excuse the actions of his country by saying others have done things as well, so it is quite OK for us to do the same. Furthermore a number of the items on the full list are from the PAST, almost 80 years in the past and have been acknowledge by the United Kingdom as errors and missteps. Dubai continues to live with their problems, in plain sight, acting as if there is nothing wrong.

Every country has problems, no one is perfect, but some are light years ahead when it comes to societal development. To me, it sure looks like the UK has the leg up in this race.

Over the past several years, Dubai caught the attention of the world. Major construction projects, the likes of which were largely unseen before, suddenly started popping up in this small UAE country. A country that went from having very little in the way of infrastructure to hosting the largest, free standing, man made structure in a matter of 15 years, things seemed to be heading in the right direction… Seemed…

It appears there the expansion wasn’t completely driven by the oil revenue the UAE had become accustom to. It seems a large part of the growth was also drive by, you guessed it, credit. Now that credit has dried up world wide, the construction has slowed or stopped. Major high-rise projects are virtual ghost towns as developers run out of money and labor is left to find for itself.

There is a darker, dare I say, more sinister side to Dubai that a British publication has decided to shine its journalistic light on, all brought out by the market crash.

Turns out that Dubai, the modern city of the UAE, really is what people could call a bait and switch. The expats who move to the country have no rights, the labor who go to work on construction are basically slaves, the government freezes your assets if you loose your job, public health and sanitation is non-existent…

This is a long story, one I cannot even begin to capture properly, but I do suggest you take the time to read it – even if you do it in bits.

One final thought on Dubai – I find it very funny that Detroit is a sister city.