Obviously this cadre of savvy investors doing due diligence did not include Phil Gordon for Gordon made 4 trips to Dubai in 2008 and 3 trips in 2009 with each trip done with great fanfare but in actuality each was a show of smoke and mirrors.

After each Dubai trip, Gordon presented pictorial and verbal essays to local chamber of commerce groups flaunting success after success of his triumphs in promoting downtown Phoenix for investment.

All turn out to be a grand charade of ridiculous pretense and absurdly false.

The real truth is as Gordon wined and dined in Dubai only believing what he wanted to believe, some savvy investors were doing due diligence and spreadsheet investment analysis which gave them doubts about Dubai's sustainability. Not only does Gordon have no vision, he lacks the skills required of a mayor.     

Emerging markets have often seemed more vulnerable because their financial markets are not as deep and sophisticated as those in the West.

While that notion was proved wrong during the financial crisis, investors are still skittish about the developing world’s ability to handle a crisis. They need look no further than Bangkok (where Gordon now wants to visit, where a seemingly contained financial panic spiraled into a regional crisis more than a decade ago.

There is a fear that Dubai’s problems could rattle emerging market banks and financial institutions that have lent the emirate money.

During the boom, Dubai World and other fast-growing companies from the emirate invested heavily in companies and projects across Asia, building ports in India and Pakistan and taking stakes in Chinese banks. There is a fear that those projects and firms could suffer if Dubai authorities are forced to sell some of their holdings or put off investments to raise cash to repay their large debts.

A Sacrilegious Financial Mirage in the Desert

The investments were supposed to be blessed, and the bankers were desperately looking for more people to bless them.

Andrew Ross Sorkin wrote in his article in The New York Times’ Web site, "I was in Dubai in 2007 to cover an investment conference at a hotel along Jumeirah Beach. Hundreds of Western bankers  bone up on the intricacies of the next new thing in financial products: Shariah-compliant investments.

They wanted to sell them to wealthy, oil-rich Muslim investors who needed a way to increase their fortunes but whose options were limited. Any investment vehicle needed to conform to the spirit of the Koran, which forbids any investments that pay interest. No mortgages. No bonds. No clever derivatives. Just tangible assets in the so-called real economy.

It was a big money pot  —  worth as much as $1 trillion that could yield billions in fees  —  and the bankers were determined to find a way in."

Phil Gordon traveled back and forth to Dubai wanting to tap into the big money pot. If Dubai was in need of investments, then the only thing Gordon got was duped and played as part of smoke and mirrors to give the illusion Dubai had money to invest in other markets.

One discussion was led by a British banker from Barclays who had moved to the region to create an entire Shariah-compliance team. He shared tips about various ways to create “structured products” that would pass muster with Muslim investors. Sorkin wrote, "To me, the investments looked like bonds, walked like bonds and talked like bonds  —  but he never called them that. The bonds that Dubai World is in jeopardy of defaulting on, by the way, are Shariah-compliant sukuk. Just don’t call them bonds."

The Sheikh was struggling to hire enough Shariah scholars, and he needed them to literally bless the investments  —  apparently there was a shortage of properly trained Islamic scholars who did this kind of work.

With the benefit of hindsight  —  and you didn’t need much  —  there were plenty of other signs back then Dubai was building a financial mirage in the desert.

For the last couple of years, the running joke on Wall Street was “Dubai, Mumbai, Shanghai or Goodbye.” If you were the C.E.O. of a troubled investment bank desperately looking for cash, you made a pilgrimage to one of those three cities with hat in hand. They were the places most likely to write a quick billion-dollar check; their eagerness should have also been a tip-off. Now you have to wonder about Mumbai and Shanghai, too. Are they next in line to take a fall?

With all the money pouring into the region, it would have been hard for any doomsday types to make themselves heard. But there were whispers here and there, pointing out the obvious. David Rubenstein, the co-founder of the private equity giant Carlyle Group who was in Dubai at the conference, remarked to Sorkin at the time: “You know, they don’t have any oil here.”

That fact was overlooked by many investors who didn’t want to miss out on a quick buck. What about the risk?

The Shariah Committee of the Accounting and Auditing Organization for Islamic Institutions, which is based in Bahrain, ended up changing the rules to make them stricter because of widespread abuse. As Mr. Buiter described them on his blog, “these were window-dressing pseudo-Islamic financial instruments that were mathematically equivalent to conventional debt and mortgage contracts.”

Blessings, alas, can only do so much.