The markets are worried that it does. Many central banks are propping up their economies the same way the Fed is doing; pumping cash into the system to keep credit markets from going into a deep freeze. This causes doubts in investors - especially now that the once seemingly solid Dubai economic standing has melted away.
Javier Hernandez in the New York Times lays out the problems:
The quick evaporation of Dubai's economic standing revived concerns among traders about the vulnerabilities of markets in places like Indonesia, Brazil and China.
"The fact is the equity markets globally have gotten way ahead of themselves," said Dan Alpert, managing partner of Westwood Capital. "The stock markets and the bond markets are in violent disagreement, and at some point, it is going to be resolved by a sell-off in the equity markets."
Led by emerging countries, stock markets have climbed at an incredible pace as the global economy has started to recover. Markets in emerging economies have gained 87 percent in the last year, according to the MSCI Emerging Markets Index, with investors piling in money in search of higher returns.
Dubai's request for more time to repay debt sent the cost of insuring government and corporate bonds to levels not seen since July. Japan, Italy and Germany have posted some of the largest gains in risk in recent days, according to an index compiled by CDR Credit Indices.
Credit swaps rose for a third consecutive day on Friday. It now costs Dubai $647,000 to insure $10 million in debt for five years, up from $541,000 the day before. Indonesia's cost increased by $12,000 and China's by $6,000.
United States Treasury prices rose, as did the dollar, as investors fled equities for the safety of government-backed debt. The 10-year Treasury note rose 18/32, to 101 14/32, and the yield fell to 3.21 percent, from 3.27 percent late Wednesday.
One analyst pointed out that the problems in the market may have been magnified by the light trading during the holiday. That sounds a little like wishful thinking since Europe (markets down almost 2%) doesn't celebrate Thanksgiving.
Many analysts are still bullish on emerging markets since they have the potential to grow at fantastic rates and bring investors a large return. But the Dubai bubble has others worried that it may be just the tip of the iceberg and that it wouldn't take much for the edifice to come crashing down, taking a lot of economies that had invested in the Emirates with them.