[mathattack]

Also, it is a good point that anyone holding debt denominated in dollars will find their debts disappear. I'm not sure this is a positive outcome.

It's positive for the borrower, negative for the lender. Same as any unanticipated inflation. In your example, it's just a more extreme case.

I take your point that a lot of pensions hold real property, but they also hold a significant amount of dollar-denominated assets. They don't have to go to zero for my raining cats and dogs point to hold, they just have to decline a significant amount.

The denomination doesn't matter as long as it's a real asset. If it's property, you can sell the house in a new currency. If it's a share in a company, the shares may be quoted in dollars, but they can always be sold in another currency.

This isn't to say that there wouldn't be massive upheaval, I just don't see it happening in the way you do. The impact would be more like the scenario if the dollar doesn't become the world's reserve currency. There would be significant increases in US borrowing costs, and a long term drop in our growth rate. But assets won't go to zero.