Creditopolis

It looks like some blogger coined the word and the other bloggers picked it up. It's slowly crawling its way up into more respectable websites.

Bloggers impersonate journalists and a lot of people fall for the act because the one thing they all have in common (which for many is their only skill) is being very good writers. But their work undergoes zero editorial review so it is never reality-tested. I never read blogs but every now and then a friend sends me a link to one that "you just gotta read, this is the most sensible thing since the Declaration of Independence." By the second paragraph I've blue-penciled so many errors of fact, science or reason that I'm ready to personally deliver it back to my friend as a rectal suppository.

Dubai is similar to Singapore and a few other tiny places that look like models of capitalist prosperity. But in fact it's more like medieval feudalism. The tiny minority of the residents who are citizens are enviably wealthy: per capita GDP in Dubai, if you only count the capita of the citizens, is close to $100K. But that economy is built and kept running by disenfranchised foreign laborers who aren't very far from being 21st-century slaves.

All of the articles about the Dubai economy, like many of the articles about the U.S. economy, throw around figures like they know what they're doing, but they don't understand economics. They all tell us that once a country's national debt is greater than its Gross Domestic Product, it is doomed because "it owes more than its income." That's ignorant bunkum and if somebody tells you that, put him and everything he says or writes on IGNORE, forever.

Nobody--individuals, businesses, corporations or countries--has to pay off their entire indebtedness in one year! If that were true, hardly anybody could afford to buy a house! Individuals pay off their debt in monthly payments that reduce the principal slightly, and the rest is interest. Corporations and countries can do basically the same thing, and they indeed do it during hard times: when a debt comes due they refinance it, paying off a little interest and increasing the time left to pay off the principal until a future date.

Dubai doesn't even need to do that. They could pay off 5% of their national debt every year. At worst they'll keep paying and it will be paid off in--oh I don't know, it depends on the interest rate--15 years, 20, 30, who knows. At best the economy will improve in a few years, their GDP will increase, and they can pay their debt off faster.

But the Dubai economy is built on credit rather than production: most of their income comes from tourists and expats. That makes it indeed a creditopolis. For all their faults, bloggers come up with cool new words.

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I should try it. Fraggle Blogger.