Markets gave a sigh of relief on Monday. The FTSE 100 closed to within a whisker of the levels it reached before the news developed on the Dubai World debacle.

The celebratory mood was down to Abu Dhabi.

It had appeared that investors had been suffering from a nasty dose of optimism. They had believed that there was this kind of tacit agreement between Dubai and its wealthy neighbour. Maybe it had something to with the similarity of the names. After all, if you ignore the Abu bit, only an H and a U separate the two countries.

But then the horrible truth dawned. Maybe the Dubai dream was just that: a dream. That it had constructed an economic sand castle in the desert which would be washed away by the tide of economic reality.

Then, yesterday, Abu Dhabi agreed to provide $10bn of readies to Dubai.

There are a couple of snags and one bit of good news that have been largely overlooked

Snag 1, Dubai still has huge debts. If the underlying business model is at fault, then all that the Abu Dhabi loan has done is delay the reckoning. Furthermore, even $10bn may not prove enough.

Snag 2, confidence has been damaged. Once it has been revealed that the emperor has no clothes, it makes no difference if the servants rush out with the finest garments and quickly ensure the emperor wears clothes fit for a king. The crowds will not forget the vision of seeing their emperor exposed before them.

The good news, well, its good news for Dubai at least, relates to why bubbles can sometimes be good. You may be familiar with the argument. In the US during the 19^th century the bursting of the telegraph bubbles left bankrupt countries across the land, yet Dun and Bradstreet emerged from the ashes. Later in the century, the bursting of the US railroad boom led to economic misery, but the infrastructure which was left helped charge the US economy for decades ahead, and some of the super brands, such as Heinz, emerged. After the dotcom bubble burst, the price of servers crashed and Google was able to build its infrastructure on the cheap, and consequently change the world.

The legacy of the Dubai construction boom, of the madness that led to the development of an artificial archipelago of islands that formed a map of the world, may have seemed liked the ultimate example of hubris; but actually the truth is different. That little land in the desert, with minimal oil resources has been turned into a playboys’ paradise.  Dubai has been changed for good, and its position as a top tourist destination has been cemented.