Was anywhere heading for a fall so obviously as Dubai? Yet why did no one ever scream? Why did everyone just marvel?

When I first visited the place three years ago, it was already the most dangerous speculative bubble on earth. Breakneck building – using reputedly a quarter of the world's cranes – was sustained on hysterical public relations and $80bn of debt.

By last March the signs of impending doom were everywhere. Property and stock market prices were falling and only the PR firms were still sustaining morale, witness a cringing ITV documentary by Piers Morgan and grovelling coverage of Sol Kerzner's "world's biggest" hotel launch. Building projects worth a reported $300bn were stopping work overnight.

Yet anyone who wrote a word of the impending doom was excoriated. The Guardian was subjected to a campaign of abusive emails when I reflected on the clear parallel with Shelley's Ozymandias and his trunkless legs of stone: "Look on my works, ye mighty, and despair." What had I against Dubai, they complained. Why could I not recognise the future in Dubai's glorious confidence and its open welcome to the world? The enclave's dictator, Sheikh Mohammed bin Rashid al-Maktoum, told critics simply: "Shut up."

I still have no doubt that Dubai will survive, despite its lack of oil or other natural resources. But it will do so as a benighted settlement on the Gulf shore, in hock to neighbouring and more cautious oil-rich states, such as Abu Dhabi. Its luxury apartments will become tenements to an ever shifting army of refugees from the torments of the Islamic world. Its towers will stand empty, unable to afford their energy-guzzling services. Its fantasy islands will be squatted or will rot and sink back into the sea. Where fresh water will come from, who knows?

But before the desert sands close over it, Dubai's lesson should be learned. It is the oldest in the book. Like the credit crunch in the west, the short route to folly is the belief that what goes up need never come down and there is no such thing as bad money. The parastatal corporation Dubai World has a staggering $60bn in liabilities. This is reputedly at risk, along with investments in a multitude of British and American companies, from ports and property to Turnberry golf course, Alton Towers and Travelodge.

The moral is, don't believe public relations when it flies in the face of history. Don't believe those who say their credit is secure against nothing more solid than a villa bought off-plan by a few Hollywood celebrities. Above all, don't believe the financial press, which did more than anything to boost the self-delusion and architectural bombast of the Dubai authorities. They were fooling you as well as themselves.