Back last month, I did a blog entry looking at how Dubai was struggling to pay its debts.

Now, it looks like the once opulent kingdom of Dubai could go the way of Iceland and go broke. Now, this week we had reports of Estonia's economy losing 15.3%, and The Wall Street Journal reporting that Greece's bonds and the ratings agencies now deem the country a greater credit risk than Colombia or Panama.

But all that's chicken feed with Reuters telling us that Dubai has informed its creditors that it can't repay a $3.5 billion bond which was due on December 14. Dubai had asked for a six month moratorium on its debt repayments but the rulers there are dreaming. With Dubai World's debts totaling $80 billion, all spent to create the illusion of the Middle East's dominant financial center, it will struggle to even make the repayment by May.

All this will leave Dubai dependent on petro-dollars and its neighbor Abu Dhabi. And the prospects of a big default are increasing every day.