I´ll try rounding up the reaction in the market and the punditry to Dubai World´s threat of default.

Two clarifications.

First: Dubai World´s problem is being referred to as a sovereign debt problem, but as far as I can understand, it´s not. The Dubai government is the 100% owner of Dubai World, which is itself a holding company. But, as William Buiter points out in the Financial Times, the Dubai government has only limited liability, just like any other limited liability company.

It wouldn´t have to reach into its pockets to make good any obligation unmet by Dubai World or its subsidiary Nakheel.

Second. The debt crisis is being referred to as a Black Swan. Again, this is inaccurate. A black swan is an unexpected event that doesn´t fit (and in fact upends) the prevailing paradigm. This debt crisis has been on the horizon for a while. And the announcement of the standstill in payment was obviously calculated to roil the markets as little as possible – being made during the Thanksgiving holidays, when the market is partially shut, and also at the start of Eid which lasts until December 6.

Update: With those caveats, I was going to try and list the banks and sectors that might be affected…but I found that Bob Wenzel´s site  had already got a chart of Dubai World´s obligations to Nakheel Holdings from Izabella Kaminska at the Financial Times. You definitely need your coffee before you read this one.

However, the text below the chart, although just as abstruse, does make it clear that investors are not going to be able to get any blood out of the Dubai government.

“Investors should note, however, that the Government of Dubai does not guarantee any indebtedness or any other liability of Dubai World.”

Update: I should add here that while technically the government of Dubai is not responsible for the debt, it is implied everywhere that the safety of the debt derives from its backstopping by the government. The reaction of furious investors that Dubai would never be able to raise a penny again implies that default would taint the government and not simply the company.