I think this article from the Mises Institute describes the situation fairly well, and while it is indeed a cop-out to writing a full post, it is Christmas season, so I get off the hook easily (let's start with a bang in January, say, free apartments in Burj Dubai to all who suscribe?)
However, I would like to add two things to the LvMI article.
No. 1. The article raises an interesting point, but leaves it undeveloped. Judicial institutions will now be extremely important in the UAE and the perception the world will have of Dubai will depend heavily on how it will manage the fact that its most attacked defendant will be the State itself.
The lesson here is that the judicial system is extremely important for the market to develop its self-corrective forces. I don't want to sound statist, I am convinced that any sort of judicial system is favorable (though I do vouch for the existence of a state-run judicial system coexistent with private means of arbitration), so the important thing is a clear headed system that protects property rights and is not afraid to lay the blame where it should rest.
No. 2. Hey, invest in Dubai. No, no, I'm not being paid to fuel another bubble. But asset-price correction is driving the cost of Dubai homes and estates down like crazy. Maybe by mid-2010 the properties will be accessible to non-institutional investors in the int'l marketplace. Mortgage liquidation procedures will definitely help.
What better way to aid the ailing Dubai economy and at the same time find a great, luxury estate at an at-cost price than relocating to Dubai?
Fellow bloggers, am I wrong in this prediction?
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