$60 billion. That is a drop in the bucket as compared to the $10 trillion we have. Yet the doom of Dubai, seemed to have echoed around that world and got the markets panicking. What we can tell you is that we have not learned our lessons yet and this demonstrates the power house economy that US really is.

$60 billion. That is more than you and I would ever make in our lifetimes. But as a corporation, it really is not that much. Microsoft is worth more than $200 billion, Apple are Google, each, are worth more than $150 billion; so how is it that a city state that owes the world $60 billion could shake the world like it did?

The answer : silly risk taking. What caused creditors to be so afraid was that lots of the debts that we see today would be increased many times over due to the manipulation of risk. Let me give you a very much simplified example.

Lets say Company A had some formula to turn water to Gold. Company A goes to Bank A to get a loan, and Bank A approved a loan of $10 million. Bank B does not believe that Company A’s plan. So it does something called a Credit Default Swap. They would give Bank A the money for the loan. Should Company A default on her payments to Bank A, Bank A would pay Bank B $100 million.

The example that I gave above is what I call a 10:1 (100 million to 10 million) bet scenario. There are other examples in real life with methods ranging from short selling to derivatives which have a 30 : 1 bet ratio. Now that is what the EU terms as casino banking.

The same thing happened with Dubai. Should Dubai not be able to pay her debts off, the amount lost by her creditors would not be $60 billion, but in the trillions. That is what the entire pandemonium and panic is all about.

When are we going to learn our lessons? Why can’t we go back to the tried and tested system of a bank putting in capital should they believe in the business plan that they receive. Why must there be what I call sucker capitalism? When are we going to end such practices? Would the next attack be too late to save America? America and the world must wake up to this problem or we would face lots of problems in the future.

Dubai goes $60 billion in the red, and the world panics. Does anybody realize that the world is not that bothered with the trillions of dollars worth of debt when it came to the debt of countries like US, Japan and the UK? This is because the world, as of today, is still very confident in these economies.

I really hope that Dubai bring back the attention of bad banking, as what the economic crash did. It is essential that we get this back in order…

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