And what the hell did they expect??? - just sweeping those streets from the ever encroaching desert sands is expensive enough, not to mention their infamous indoor ski resort and all the energy and water that it requires. Clearly, an infrastructure with water consumption per capita among the highest in the world IN THE MIDDLE OF A FREAKING DESERT and the highest energy consumption per capita, period, is the very definition of unsustainability - environmental, economic and otherwise. If Las Vegas' very existence is a crime against nature, then I have no idea what the proper name for Dubai and its neighbors should be.
So what about those loans - how much of a haircut would they want to get. Well Dubai World has about $58 billion in liabilities (~$80 bln for Dubai as a whole) and had $99.6 billion in assets at the end of 2008. What are those assets worth now? Well, I don't know exactly, but I can guess. Considering that most of the collateral is in the form of empty skyscrapers, palm-shaped islands that are half-built and other unfinished construction sights, and conisdering that property values in Dobai collapsed anywhere from 50 to 70 percent from peak, Dubai should be far beyond the point of technical insolvency. Abu Dhabi's continued support has enabled them to use the "extend and pretend" tactic to much success up until now, but apparently no more.
If contagion spreads, and the newly inflated stock and commodity bubbles, including oil start to pop again - we might loose a venue or two and Emirates might just stop sponsoring Ferrari (and if you think there are no bubbles, I have a small island to sell you).