"During Dubai’s boom years, expatriates from around the world took advantage of cheap credit and a booming economy to live a luxury lifestyle. Easy credit arrangements meant that they could buy penthouses, motorboats and expensive cars with little or no scrutiny from lenders. When the economy slowed, many foreign workers lost their jobs or had their salaries cut and became unable to keep up with their payments."
Today's Financial Times has a couple of articles which put all that in some perspective. They tell us the reality, that people around the world did exactly the same thing, not just those living in Dubai.
I could rewrite the first sentence in the Sunday Times article to make it more accurate:
The FT gives an example:
"Mick Longfellow is teetering on the edge of financial chaos. A dedicated teacher married to an equally hard-working nurse, living in a modest house in Newcastle in the north-east of England, the pair spent the past decade treating themselves to gadgets, gizmos and home upgrades.
They put in new windows. They bought the biggest television and sound system their living room could accommodate. They changed their cars every year or two. With two children to spoil as well, they were living on credit - lots of it. There were store cards, car loans, personal loans and credit cards.
Now, amid the recession, those lenders want their money back. "The bank just closed down our overdraft. That was the killer blow," says Mr Longfellow. But with the family's debts running to £30,000 ($49,200, €34,600), far more than their annual disposable income, repayment is going to take a very long time.
It is a sad blow for the Longfellows. But multiply one family's debts by the millions of people across the world who are in an even worse state, losing jobs and homes, and the scale of the problem is clear.
The second article says:
Lenders in Europe bracing themselves for a rising wave of consumer debt defaults as the credit card crisis that has caused billions of dollars in losses among US banks spreads across the Atlantic.
The International Monetary Fund estimates that of US consumer debt totalling $1,914bn, about 14 per cent will turn sour. It expects that 7 per cent of the $2,467bn of consumer debt in Europe will be lost..."
As I said, it's not unique to Dubai. All over the world money was cheap, credit was easy, banks pushed people to take large loans, credit card companies threw cards with high limits at people, credit checks hardly existed. That's why the world, not just Dubai, is in the mess it's in.
But back to the Sunday Times article. It includes a quote from a Mr Nuseibeh repeating the myth "Many of the British expatriates in particular tried to hang on as long as possible to life there and sadly many have ended up writing bounced cheques, having their passports confiscated so they cannot leave the country and really living in appalling conditions in bedsits shared with maids, or even in cars parked in car parks."
A request. Would anyone living in a car in a car park, or anyone who knows anyone living in a car in a car park, please tell me where so that I can go and verify the so-called fact.
This nonsense started in the seriously inaccurate Johann Hari article a few months back and it's become part of the folklore.
Sunday Times article.
Financial Times articles here and here.