What Dubai's Financial Crisis Means.

Dubai, the Emirate (now having pumped all the oil from under the sand) refused to step in and guarantee the debts of the wholey owned Dubai World Group today. The self-fueled building boom balloon popped and the pop was heard round the world.

Investors, concerned that governments, owing trillions of dollars in debt, might start opting one by one to not pay them, are pulling back, recoiling even further. Who can blame them? One new commentator suggested today that Dubai needed a stimulus (one that didn't work like the ObamaPlan) based on more borrowing. It makes no sense for Dubai to do that and it made no sense when we did it last Spring.

False government stimulus won't work. Japan tried a dozen financial stimulus packages to get its economy moving during the 1990's when their bubble economy collapsed. The "stimulus" packages did nothing, except stimulate debt. You can't have the government spend your way out of a recession/depression. It never works. Forcing government live within its means (really, not as an artifice or device) will bring about gradual change. Unrestrained borrowing will only leave us broke and broken.“Dubai shows us that what we are now facing is a solvency issue, not a liquidity issue,” said Jonathan Tepper, a partner at Variant Perception, a research house in London that has been outspoken on the debt problems facing European economies.

The Obama Administration wants to borrow another trillion dollars and use it to "stimulate the economy".  I can't speak to Dubai's woes, but I can suggest that what we need less of is government spending, less government involvement in our lives at every level. The US Government has proved itself incapable of prudence, restraint or showing any real competence at all in just about any program it has undertaken. We need to learn from Dubai's insane excesses (which mirror our own).