If everyone's got fuck loads of debt, and everyone's currency is based on it's demand compared to other countries, can we not take the country with the least amount of debt and call that the new zero point. I suppose it wouldn't actually make any difference other than making some of the numbers look smaller?
I think there's a lot of misconception on the concept of what what actually gives a currency value. In it's basic form though, a currency is valuable because of the production behind it. The best way I can explain it is like this..
Well, simplify things a bit. Let's say there was no currency at all, just your country, and my country. You were relatively efficient at producing the things you needed, and therefore really didn't need my help at all. However, my country has taken a liking to oranges. Unfortunately, oranges aren't really indigenous to the area that my borders cover, and don't grow well there. Your country has GREAT capability for growing oranges, though. So I ask you "hey, can we have some of your oranges?" Obviously, unless you were currently producing so many oranges that they were simply going to waste, you'd want something in return for your production, right?
But if my country doesn't have anything to offer you, then there likely won't be any oranges coming over my borders. We need to produce something that you want, that you currently don't have, or can't produce that well on your own, and trade that for your oranges.
The downfall of the barter system, like this, is that if you grow oranges, and say - you want bananas, you have to find someone who has bananas and wants oranges. That's why currency is almost "necessary", because it really simplifies trade by creating an accepted medium of exchange for virtually any good or service available. The guy with the oranges no longer needs to find someone with bananas who WANTS oranges, he can just give the guy with bananas (who maybe wants apples) some currency, and get bananas in exchange. Likewise, the guy with bananas can now go buy apples with the money exchanged for his bananas.
The fact is that, this currency would have NO VALUE to another country if there wasn't any production behind it in the first place. Currency is essentially a claim on a given amount of production within a particular country, then. Likewise, if my country came up to yours and said "here, I printed up these dollars, so now let me buy some of your oranges" - you'd have to ask "well, what can I buy from you with these dollars that I don't already have on my own?" Again, if I can't give you anything in exchange for these dollars that you don't already have - the trade simply doesn't make sense. The currency is essentially worthless to you, and is only really any good as a medium of exchange for the people in my own country.
Take this and apply it to the US, now. You probably understand that our general manufacturing base has virtually evaporated. So much of our consumer goods, clothes, toys, pens, furniture, electronics, car parts, oil, packaging, appliances, you name it.. SO MUCH of it is now produced overseas. Eventually, these people are going to have to ask "what can I buy with these dollars in the US market, that I can't already make for myself?"
And as our monetary policy continues to increase the global supply of US dollars, these dollars lose value and purchasing power, making the hard work of other countries less and less rewarding if they are paid the same nominal amount for their production.
This process WILL NOT last much longer, it's on it's last breath right now and it won't be long before other countries get tired of giving us the goods they make, that they they could be consuming, in exchange for little green pieces of paper that are worth less and less every time they look at them.