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(PROGRESS, NEW ERA) Why Debt at Dubai World Is Shaking World Financial Markets

Why Debt at Dubai World Is Shaking World Financial Markets

Is bailing out the big corporations good for everyone? Or would it be better to simply pay everyone a share of society’s surplus, so to insulate everyone from the vicissitudes of their economy? Then elite insiders would have no excuse to ask for more money than anyone else got. We trim, blend, and append two 2009 articles from New Era, Nov 20, on basic income by Irene !Hoaës and The Christian Science Monitor, Nov 27, on Dubai debt by Ron Scherer.

by Irene !Hoaës and by Ron Scherer

Fair Government Will Rule for a Long Time

“If you want to win the elections, be fair to the poor,” is the message from Bishop Zephania Kameeta, Chairperson of the Basic Income Grant (BIG) Coalition and President of the Council of Churches in Namibia (CCN).

The BIG is a proposed monthly cash grant of N$100 for each and every Namibian paid by the State, regardless of age or income.

The money paid to those people not in need, is recuperated through the tax system.

The main benefit of the grant is its ability to improve everyone’s life by reducing poverty and inequality.

The BIG Coalition is on a high drive to solicit support for the proposed basic income grant.

About 30% of Namibians children of five years and below show signs of malnutrition, while the unemployment rate stands at about 37%.

“I applaud the government for Vision 2030, but we will never reach it with 80% of the population living in poverty,” Kameeta stated. Pay the people the BIG and they will be able to build houses for themselves.”

According to figures presented by the Coalition, the BIG will only take 5.4% of the National Budget. If the current year’s budget is taken as an example, it will be N$1.4 billion spent on the BIG from the N$25 billion annual budget.

Namibia needs to learn to share if the country is to achieve its Vision 2030. According to Kameeta, one uranium mine will be able to pay the BIG.

He said only political will is needed to realize the BIG initiative. “Bring the budget of Namibia to the Church and it will multiply,” prophesized Kameeta, referring to the biblical miracle of Jesus feeding the hungry 5 000 from five loaves of bread and two fish.

JJS: It’s not like government is reluctant to grant money to people -- as long as they’re already rich. Will the UAE prove the exception?

Why Debt at Dubai World Is Shaking World Financial Markets

Construction may be continuing in Dubai, but giant real estate developer Dubai World -- which manages projects across the globe -- shook world financial markets by asking for a six-month moratorium on paying interest on debt estimated at between $60 billion and $90 billion. Immediately after the announcement,

* Asian equity markets swooned by 3 percent to 5 percent.
* The selling continued on the London market, which then recovered in afternoon trading.
* On Friday, the Dow Jones Industrial Average opened off about 224 points and then started to climb back on a shortened, post-holiday trading day.

How can Dubai, a tiny emirate on the Persian Gulf, shake financial markets from Shanghai to New York? Too much debt.

Some investors had pulled out their meltdown road map: They were buying US Treasury bills in a flight to safety. This drove the US dollar higher and brought down not only the stock market but also the price of gold and oil.

Global analysts expect the Arab Monetary Fund, based in Abu Dhabi, the capital of the United Arab Emirates (of which Dubai is part), to step in. The Arab Monetary Fund, though, is likely to ask Dubai World for more restraint. Dubai World has been an aggressive real estate developer, investing in everything from golf courses in Scotland to Chris Evert Tennis Centers and the Snowmass resort in Colorado. It also owns P&O Maritime Services, the major Australian-based company that supports navies, and Drydocks World, which provides shipping services in places like Singapore as well as the Persian Gulf.

The default may represent a turning point in the equity markets, which have been on a bull run all year. “This changes psychology a lot,” commentator Dennis Gartman says. “What has driven share prices up is not a strong economy but excess liquidity. As share prices went up, people said, ‘I better get in.’ ”

David Kotok, chairman of Cumberland Advisors in Vineland, N.J., wrote, “insolvency cannot be permanently papered off by excess liquidity, not in the Middle East nor, for that matter, in America.”

JJS: Is there any good reason to shower the rich with “excess liquidity” if government grants everyone a basic income? Even if the too big to fail failed, everybody could still get by comfortably on their share of society’s surplus.

Every society has a surplus -- the revenue from land and natural resources, goods that require zero human effort to create. And that surplus -- the value of locations -- grows when government forgoes taxation on our efforts to produce goods and services. The problem is, most societies fail to recover and share those “rents”.

The solution, then, is to generate the social will to adopt geonomics, to shift taxes off labor and capital while recovering the value of land and to shift subsidies from special interests into a dividend for the citizenry in general.

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Jeffery J. Smith runs the Forum on Geonomics.

Labels: LAND REFORM, NAMIBIA

posted by MrK @ 5:00 PM