Quite frankly, I don’t understand what is going on with this debt. Sukuk are odd, bond-like instruments. I do not understand them. They are issued against some sort of asset, and then rented back (which is a lot like an interest payment), and re-purchased at maturity (which is a lot like the final payment of a traditional bond).

I’ve read that creditors have few rights under Dubai law. I find this amusing for a country that has debtors’ prison. Both borrowers and lenders are screwed? Shakespeare had it right.

I find my ignorance on the subject particularly frustrating because this article goes through such lengths as to explain that a basis point is 0.01 percentage points. Is there anyone who understands how Sukuk work and doesn’t know what a basis point is?

Anyway, some are taking this $26 billion figure as a positive: only a small amount is being defaulted upon compared to the amount previously thought. But, it sounds as if some losses are almost certain. Since these were trading at 110 cents on the dollar, it’s clear that some investors were caught by surprise. This is a small problem compared to previous catastrophes, but it’s one of many. These problems will test how robust this global recovery actually is. Tonight, it appears as if it is robust enough.