Gail,
Doesn't your last statement imply we do one thing while the world does another? The best solution would seem to be for the world to do all the above.

I think trade imbalances will be primarily driven by the relative weighting of his last point -- how much bankruptcy versus how much inflation. This is really a critical question for each of us, as it affects where we should put our savings, whether into cash, commodities, or other equities.

I know food and tools, a house, and skills are always good bets, but beyond that it just isn't clear to me.

Anything in the financial sector seems like a very bad bet, in any case.

I could see a lower GDP will make the budget deficit and overall debt look a LOT worse, but wouldn't trade imbalance (for the US) be improved by a focus on tangible wealth generation like manufacturing?