Sean O'Grady: So what on earth is a safe investment now?

Whether Dubai defaults on its debts or not, the episode serves as a stark reminder to markets with short memories that there is no such thing as safe sovereign or quasi-sovereign debt. History, a much-neglected discipline among market participants, tell us that nations have more often reneged on their obligations than not, and spectacular examples occur about once a decade.

Some nations have defaulted in an upfront way and refused to service their debts: Zaire in 1975, Mexico in 1982, Russia in 1998, to name but three of the costliest examples to Western banks.

Others have walked away from their debts by inflating them or hyperinflating the debt out of existence: Germany in 1923, but also, over the long run, the UK, too. How else could we pay for our wars?

It all begs a few questions. Why, for example, the financial regulators assume that banks' "safe" capital should be exclusively held in government securities, but these can be defaulted upon or eroded into worthlessness by inflation. A few months ago one particular security issued by McDonald's enjoyed a superior risk rating to some UK gilts; does that mean the banks ought to have their capital backed by burgers? Does the Central Bank of Greece really want its banks to invest in its own, poorly rated debt? Or, like Dubai and Abu Dhabi in the United Arab Emirates, does the world assume that the Germans will bail out the Greeks in our own version of the UAE, the EU?

And what, for the sake of pension funds, instructional investors and private punters alike is a truly safe haven? Gold is the traditional answer to that, and it is enjoying a quite a revival. Decades after most nations abandoned it, we seem to be slipping back to a de facto gold standard. Keynes' "barbaric relic" is back. Strange days indeed.