re: SHORT THE DOLLAR

For one, if investors perceive that the US is not taking its debt problem seriously, they will stop purchasing US bonds, which will increase borrowing costs and our debt burden. In that case the Federal Reserve will need to step in and purchase more debt than it is already doing, which will lead to an increase in the monetary base/money supply, which will also lead to a further weakening of the US dollar in addition to the weakening resulting from a decreasing foreign demand for US debt.

Central banks worldwide are already diversifying away from Treasuries because they lose money by holding our debt due to the combination of our zero-interest rate policy and the depreciation of the dollar.

One advantage we have over Europe is that individual nations in the Euro zone are unable to print money/devalue their currency, while we have complete freedom to do so. However if you do so too much, you risk losing credibility in the capital markets and investors will punish you by driving up borrowing costs and making it more expensive for you to finance deficit spending.