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The Persian Gulf emirate Dubai is seeking to defer debt payment on as much as $80 billion in liabilities from their state-run companies. Like many other over-leveraged enterprises and some countries across the globe, the government of Dubai made massive bets on real estate that have since gone sour. But no matter where in the world such a case occurs, the ramifications of taking on too much debt are always the same. Unless the party in question can be bailed out, the deleveraging process usually leads to default and insolvency. It makes no difference whether it is a business or a country, the entity in question must always be able to service its debt either through revenue or taxation. If the enterprise or state becomes too extended, they become perilously dependent on a perpetually growing economy and on interest rates that remain perpetually low.
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