Does Dubai Matter? Ask Ireland « The Baseline Scenario
The main effect will be to strengthen the hand of Ben Bernanke in Fed policymaking discussions – so US interest rates will stay low for a long while. If financial intermediaries draw the appropriate lessons from Dubai, Ireland, and Greece (and Iceland, the Baltics, Hungary, etc), they will be more careful about extending credit to places that are becoming overexuberant – even when it is cheap to increase debt levels.
But an outbreak of caution and care on the part of our biggest banks (and other investment managers) does not seem likely.