Dubai builds, but they don’t come

There is something surreal about the financial crisis that has engulfed Dubai.

A small desert emirate, without significant hydrocarbon reserves, Dubai finds itself geared to the eyebrows in the midst of a global downturn. Deutsche Bank estimates its external debts at about $74.3 billion. That, for the record, is 107 percent of the emirate’s expected 2009 GDP, or more than 14 times its government revenues for 2006 (the latest year for which data is available).

But it isn’t just the extreme leverage that is surreal. Dubai has long borrowed heavily to invest. The real twist comes from the wacky way that Dubai has chosen to invest its borrowed cash.