Infalting their way out of debt assumes that there are buyers of US debt out there. Seems like all the news of late is that countries are actively reducing their USD holdings, removing pegs, setting up sovereign wealth funds to diversify their foreign currency reserves, paying for Oil in other currencies, now talk of replacing the USD as the central bank reserve currency. I don't think these things can be underestimated...with the US debt-GDP ratio hovering around 400% it's obvious what the intrinsic value of the currency would look like if it weren't for the artificial demand that petro dollars and reserve currency status provides.

The US needs to sell ~$80B worth of bonds a month to sustain themselves. Who will buy them?

More than 50% of the Amercian economy is based on their CONSUMERS. Seems as though they are maxed out on credit, bad sign?

So, most debt in history (of any country), dollar saddled with -6% annual returns, active diversification from USD on all sides, a consumer who is maxed out, where's the silver lining? Manufacturing typically requires raw materials (getting pretty expensive to buy with USD) and uses less labour than ever so the consumer doesn't win from a manufacturing boom. Who does? Other (foreign) consumers as you acurately state. They will be using up those USD stashed away in foreign currency reserves to buy up American goods (widely regarded as CRAP) or US companies..and when the USDs all flow back into circulation as a result of the purchasing frenzy it only serves to push the currency lower...

Just my thoughts! Reading too much Richard Daughty and Jim Sinclair methinks. ;)