The sheikdom that would be New York of the desert announced on Wednesday that it was suspending debts payments by its largest corporate entity, Dubai World, for six months. Market observers have known for months that Dubai was in trouble because it is a city state built not on sand, but debt. World markets reacted predictably on the news today with stocks slumping and credit default swaps soaring. Nearly $50bn in debt is due in the next three years and the sheiks do not have the money. Standard & Poor's said the suspension could be considered a default, and downgraded a host of Dubai government entities. Dubai could be headed the way of Iceland. Meanwhile gold soared to a new high of $1195.13 after Sri Lanka's central bank said it would purchase IMF gold for sale.[image: luxury hotels under construction in Dubai]