What do Brad Pitt, Angelina Jolie, Naomi Campbell, David Beckham and Denzel Washington all have in common. According to FT Alphaville, they all invested in get rich quick schemes in Dubai. So did banks like HSBC ($17 billion), Standard Chartered ($7.8billion), Barclays ($3.6 billion), Citi ($1.9 billion) and BNP Paribas ($1.7 billion).
And now it looks like they will be wiped out.

Yesterday, I did a blog entry on how Dubai was likely to join Iceland and go broke. It's about to default on billions of dollars of debt accrued to create that bizarre financial center out in the middle of the desert. The news has sent shock waves around the world. While Americans were munching on their Thanksgiving turkey, global stock markets were reeling.

And the situation in Dubai is not pretty. This will end badly. According to this Gulf news report, Dubai's struggling banks are threatening to send people with bad debts to jail. The rulers of Dubai were so arrogant in their pursuit of fame that they chose not to set up a bankruptcy court, assuming no one there would need it. How wrong were they?

The New York Times paints an even worse picture of a kingdom on the brink of collapse. It reports: "With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield .. No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy. Instead of moving toward greater transparency, the emirates seem to be moving in the other direction. A new draft media law would make it a crime to damage the country’s reputation or economy, punishable by fines of up to 1 million dirhams (about $272,000). Some say it is already having a chilling effect on reporting about the crisis. "

Dubai's situation reminds us how fragile markets are. There are strong echoes here of Russia in 1998, Argentina's default in 2001 and Lehman Brothers' collapse in September 2008. All these rocked global markets.

But the truly appalling part is that Dubai has been on the ropes from early this year. But banks and investors ignored that, and instead believed in the claims from Dubai's rulers that everything was under control.

The collapse of Dubai is about a massive con job.