As long as the rest of the world believes that our government can tax citizens and pay interest on its debt, the international community will have a demand for dollars. Demand for dollars is not only buying and selling of goods - most of the time it is transfer of US Treasurys, which act as cash equivalents. So if people think they will get paid back on their UST, they will have no problem dealing with the US and holding our debt. And this payments, we agree, will always be made.
And here is the problem. There are growing indications that the rest of the world does not think that, and other powerful countires (notably China) are trying to move away from the US dollar as a reserve currency. This is not unexpected - no currency has remained a reserve currency for much more than a century - and it's certainly not going to come without warning, but it's definitely going undermine the value of the US dollar and radically impact the US economy. Will there be a recession? Very probably. Will the US recover? Again, probably. Will there be an apocolypse? Highly doubtful.It's actually not a problem at all. Those countries have their own agendas and reasons for doing deals which are political in nature. China and Russia doing deals on the side means nothing when the rest of the world is not following suit. If you want to see if people believe in the ability of the US to tax, look at the USD at ten year highs, look at US Treasury yields approaching multi-decade lows.. your assertion that people are losing faith is based on no facts, you are ignoring all the evidence to the contrary. Let's just say you are right and the US loses it's status.. who is it going to go to? China with their fabricated economy that no one has faith in? Or Europe which is teetering on collapse? There is no one else. Full stop. Period. Besides even if it does happen, that is not a kiss of death. Great Britain was just fine after they lost reserve status, their economy did not collapse and the world kept spinning. I'll tell you one thing, it sure as heck won't be Russia or Brazil or China accepting BTC for their goods and services.
Let's step back and ignore what the market is telling you and also put aside our theories for a second and think: why on Earth would the US all of a sudden not be able to tax its citizens and pay interest on its debt? That is the fundamental question. We have a powerful military to protect us, we have one of the best economies in the world and we have the best legal system in the world. There are no rational or logical reasons to think that the US is on the decline or the dollar is doomed or anything close to that. And looking at interest rates and FX strength you can see the world does agree with that statement.
Man oh man. You need to get your arguments squared away and correct guy.
1. China's economy is not fabricated. It is quite the opposite; it is predicted to become the largest economy in the world in the coming years. This is mirrored by India's sentiment on China's Silk Road Initiatives of 2014. India is worried because China has an increasingly large slice of the Indo-Pacific corridor. Couple this with DPRK ties, the Russian-China oil pipeline proposals and major infrastructure ties with large African nation governments and you will quickly see China is not some joke.
2. Europe isn't teetering on collapse. The European Union Commissions latest report out in autumn of last year indicated all EU countries were set for growth through fiscal years 2015-16. Historic government deficients are being refinanced and paid due to strengthened economic activity.
3. Great Britain was NOT fine after losing reserve status with the Sterling. Since the early 1900s, the Pound has been decreasing. Since the 1950s after the end of WWII, the pound has been devalued by HALF in comparison to the USD.
4. China will happily take BTC or a regulated, world approved digital currency for their goods and services. What they want to make sure of is that Chinese money is primarily spent in the Chinese economy and that when it comes to foreign affairs, they get their fair shake with the debt they are holding on behalf of others.
5. The US won't be able to tax its citizens the amount necessary to make the debt interest payments one day in the future. We can only tax so many unborn future citizens (this is a disgusting concept that is mostly true). The government cannot infinitely raise tax burdens on the public without them getting angry. See any history textbook for prime examples. It's a fine line to walk.
6. Having the best legal system has nothing to do with America being in the shitter. Having the best military has nothing to do with it either, but I'll let you rationally decide which one gets the money and which doesn't. Military spending/strength has always been an economic indicator.
7. Stop thinking so small and US-centric. Interest rates and currency strength are proxies for everything else.
For a guy that claims to be in the financial industry, reading your posts makes me think you're a teller who has sat in on a few loan officer meetings. I don't want to take away from this thread, I like your ideas and for facilitating a discussion, just don't parrot things. The world is much larger than the US and on the contrary, many countries are superior to the US in many ways.
just pointing out that one way or another the piper gets paid! 
