A large expansion in debt will impose enormous fiscal costs on the US,
ultimately hitting growth through a combination of higher taxes and lower
spending. It will certainly make it harder for the US to maintain its military
dominance, which has been one of the linchpins of the dollar.
The shrinking financial system will also undermine another central
foundation of the strength of the US economy. And it is hard to see how the
central bank will be able to resist a period of allowing elevated levels of
inflation, as this offers a convenient way for the US to deflate the mounting
cost of its private and public debts.
So even if all the magic tricks work and we avert a complete meltdown caused by exotic finance and the folly of making too much money off of money, the repercussions of our rescue efforts (whether successful or unsuccessful) will be felt for years to come.