Good Morning America does Dubai

This is from Good Morning America. Watch it and come back here.

I am fascinated by the Dubai-Abu Dhabi soap opera. Abu-Dhabi is the nation's capitol and the Abu-Dhabi emirate (the equivelant of state in the US) has 90% of the nation's oil. Dubai is the upstart that's been getting all of the world's media attention for years. They build the world's largest building, a man-made island, largest resort... hell, they are funding a golf course designed by Tiger Woods.

As the foreign money dried up construction in Dubai came to a halt. A screeching halt. There are buildings that are 80%, even 90%, completed that have stopped construction. In economics there is a term of "sunk cost". Essentially, "The money we've put into this already is gone. What is the best move from this point forward?" Imagine having a building 90% completed and deciding it is best to walk away... or have no choice but to walk away.

Thus far Abu Dhabi (the emirate that is my home) has not come to the rescue. The $10 billion loan mentioned in the ABC piece is only part of the story. To get the $10 billion, Dubai had to first loan its banks $10 billion. In typical fashion the first news story on the matter said, "Dubai secures $20 billion from Abu Dhabi" and the stock market soared. During the next couple of days the details were announced and the stock market fell back. Everyone knows it will take A LOT more than $10 Billion from Abu Dhabi to get out of this mess but so far everyone seems to be hoping that "if we avoid the elephant in the room all will be OK."

Kind of like Treasury Secretary Geithner.