The recently rich nations of the Middle East and Russia are learning that having a lot of money is not all that it is cracked up to be, especially when the money goes away.
According to the AP, “Home prices in the once red-hot Middle East boomtown of Dubai plunged 41 percent in the first three months of 2009.” That makes owning real estate in America look attractive.
The news should raise some concern in countries that need outside investment, even the US. Sovereign funds and private money from overseas were part of the capital that built up the American private enterprise base from 2003 to 2006. There has been some hope that those funds would return as the GDP drop in the US, UK, and EU began to stabilize. Now, it looks like the countries that provided that capital may be worse off then the countries where the money was invested.
The sudden impoverishment of nations like Dubai is bad news for the American government. It gives the Fed and Treasury far fewer places to shop the equity stakes that they have taken in domestic companies. In other words. the US government may look like a mutual fund with stock holdings from economic sectors all over the nation. It may have to distribute shares in the “mutual fund” to taxpayers. At least they will have a certificate to hold in exchange for all the money that they sent the IRS.
Douglas A. McIntrye
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