Overlooked in all the French hooplah last week was Qatar's offer Thursday to buy up to $4.1 billion in property from local banks. At first glance, this policy looks a lot like what this blog and my weekly column have been advocating for the UAE -- agencies that would buy up and securitise loans from UAE banks, both healthy and nonperforming, to free up cash that they can resume lending.

Without doubt one of the most fascinating discussions of the economic mess we are in that I have read, featuring economic rock stars Niall Ferguson, Paul Krugman, Nouriel Roubini and George Soros. 

I sat down for coffee and a chat this morning with France's Minister of Economy, Industry and Employment, Christine Lagarde, at the Emirates Palace Hotel. Ms Lagarde is without doubt one of the most articulate government officials I've had the pleasure of hearing speak, so sitting down for a tete-a-tete was, needless to say, a special treat. Ms Lagarde is outspoken on the need for a coordinated global system of financial regulation to prevent crises like this one and to restore a common sense of equitable capitalism. In the course of our conversation, though, she also dropped two very interesting bits of news. First, that Mubadala was due on Tuesday to sign an investment cooperation agreement with France's Strategic Investment Fund, a 20 billion Euro fund established late last year in what many saw as a way to use government funds to prop up French industry. Second, that the UAE's own Minister of Trade, Sheikha Lubna Al Qasimi, was due to receive the Legion d'Honneur, France's highest honour, early next month.

Highlights of our discussion after the jump:

Nature always finds a way. That's what they say when a tank full of female fish suddenly spawns young -- an immaculate conception -- or when ferns sprout on a nuclear blast site. So it is that companies in Europe are finding finance through investors directly without the intermediation of badly injured banks. Just as it did in Southeast Asia after the financial crisis there a decade ago, the crisis this time is forcing the rapid development of corporate bond markets to fill the gap. In this region, executives tell me companies are arranging their own inter-company credit lines to make up for the fact that banks will not issue letters of credit. Life is moving on.

Economists warn that the reflation rally is ignoring a persistent global liquidity trap. While some investors are out there busily buying stocks to beat a tumbling dollar and inflation, Paul Krugman said in Abu Dhabi today that he's buying under-priced municipal bonds. The problem with the logic that reflation will work, that government printing money can fool consumers and companies into thinking that they have more money to spend, is that there is no part of the world where consumers and companies are sitting on enough cash to pull the global economy out of recession.

Feel the gloom. Nobel Prize-winning economist Paul Krugman was in Abu Dhabi today pouring cold water on anyone still laboring under the illusion that the economy is improving. Prof Krugman's shock-and-awe strategy included a graph of global trade whose trajectory resembled former South Korean president Roh Moo-Hyun's political career.

"We do face extraordinary economic times," he said. Along with global trade, industrial output is plummeting, unemployment is soaring. And while the global economy is stabilising, it has yet to stop deteriorating.  "Things are still getting worse but they're getting worse more slowly."

The UAE yesterday pulled out of the GCC monetary union with no explanation. The news will undoubtedly distract focus from Nasser Al Shaikh's "promotion." Monday-morning quarterbacks say the move appears to be a smart negotiating tactic by the UAE to re-open the debate over where to locate the Gulf Central Bank. Unhappy with the choice of Riyadh two weeks ago and unable to push for Dubai, many expected the UAE to settle for a neutral choice like Bahrain. But it has become clear that Bahrain is now positioning itself as the un-Dubai, so that may not have been palatable to the UAE either. Pulling out of a union that still doesn't exist has no economic cost to the UAE, analysts say. Markets shrugged: who really thought monetary union was achievable anyway?

The dollar-flight/risk rally appears to be over for the time being. Investors are betting on a brightening outlook for the US economy, one that will later spread to the world, and the dollar is rallying. It appears now that while the economy has yet to begin recovering, the world is simply too exhausted to suffer any more shocks. Thanks to the IMF, Eastern Europe appears to have narrowly sidestepped economic collapse (good news for western Europe's banks), and the global credit crunch appears to have peaked, a good indication of which is that US$ Libor rates are tanking. China's stimulus package is driving up commodities prices, which economists warn could retard broader global recovery. So the story now becomes less about contagion and more about individual companies and countries, particularly which will emerge as stronger players in the new, global economy. We thus begin the race to clean up the wreckage -- the foreclosures, the restructurings, the bankruptcies and fire sales. And in a new report, Standard Chartered posits that things are looking up for the Gulf.

It's clear from discussions this week at the World Economic Forum on the Middle East that Gulf sovereign wealth funds remain little understood outside the region, and even sometimes inside. There are, for example, still growing calls for the funds to invest more inside the region to help cushion the impact of the crisis on the local citizenry. Often, these calls are couched in terms of accountability, failing to recognize that the funds are not tools of fiscal policy.

Dubai officials may complain of harsh treatment by the media, but perhaps no one has been quicker to point out the once-booming emirate's current travails than its own neighbours. Everyone around the region is suffering alongside Dubai -- not least because so many Gulf investors have so much money invested in Dubai property and stocks. Yet as the Gulf's flagship financial centre, the bad-mouthing of Dubai finally earned a rebuke from a friend down the street, Bahraini banker Khalid Abdulla-Janahi. Echoing former Singapore Prime Minister Goh Chok Tong's criticism of Singaporeans' readiness to attack their most successful as "crabs in a bucket" pulling their most ambitious back down, Mr Abdulla-Janahi called for an end of the backbiting during a session this weekend at the World Economic Forum on the Middle East in Jordan. "The day this crisis ends, Dubai is going to be the first out. They have developed the infrastructure, so everybody will go back to them" he said, foreshadowing one of the major themes in Sunday's session on Dubai. Then he added: "We've got to get out of this mentality of shooting down the successful."