Circus, horses, where do we go from here?

I have to record this so that in future I can reflect on how it will all turn out (if we live to see it resolved!)

With the Dubai saga (Dubai government and subsidiary asking for a 6 month moratorium for its US$ 59 b debt), everything seems bleak and dangerous yet again. Yes everything from Circus De Solei which Dubai World bought into to New York thoroughbred racehorses which the Sheik was prepared to pay millions for the top bloodstock.

So I want to recod the lists of "dead ends" which this article (Public debt threatens world economy) in BT describes, and then year/s down we can reflect how it all turn out:

Ok first the main fact is the world's 30 leading industrialised economies will see their indebtedness grow to 100% of GDP in 2010 (doubling the % 20 years ago). What this effectively means is all that is produced has to go to debt reimbursement.

Possible outcomes include:

1) Financial markets worries that government are unable to repay debt hence avoiding government treasuries/bonds which result in countries deprived of souce of financing.

2) Credit ratings of countries are lowered and countries have to raise the cost of borrowing(credit margin), thus enhancing their debt burden.

3) This so called "debt explosion" in an extreme case can cause a new wave of recession.

Possible solutions which are dead ends in themselves include:

1) The problem can be reversed if the countries return to robust economic growth which can then reduce the need of borrowing. However a weak recovery is forecasted by many.

2)The debt problem can also be reined if inflation outpaces rise of interest rates (hmm...not sure how this works). However inflation can curb consumer spending.

3)Yet another possible solution is to raise taxes and cut pubic spending. However such action may snuff out recovery.

See what I mean, all dead ends.

Nevertheless the world will still revolve come what may. As I told my kids, barring a war, come to the worst, we can still grow vegetable and sweet potato in our garden patch, raise a chicken or 2, collect rain water and stock up candles and huddle for love and companion. Lame!!!