His scenario is THEFT. Don't even bother with it, he's arguing liquidity trap. Do you want it now, or do you want it later? I'm willing to pay more for my gum now then later! Additionally, hoarding, what does he think people are doing, shoving dollar bills under their mattresses? No, they put it in a bank and that bank invests it, cancelling out any exponential deflationary fears.
Just pound him on federal bankruptcy.
I'm cut and pasting Antony Davies' research as well as all the comments he and I have had over facebook. It usually shuts up people like the one you're talking about because it's empirical evidence (and adds strength to Austrian arguments against the mainstream), even Keynesians can't ignore it.
He's right on some points, China just can't simply sell all their dollars. I mean, they can, but it would just be really stupid of them to do so.
"Toppling the debt [by china] isn't the concern. The concern is the fact that the debt has reached a size such that the only way out is either (a) defaulting, (b) monetizing ["money printing"] (which is different from defaulting in name only), or (c) balancing the budget and waiting for the economy to outgrow the debt. Federal spending is now so great that, even if we cut everything except Social Security, Medicare, and the interest on the debt, we still wouldn't balance the budget. This makes option (c) appear unlikely. Raising taxes not only is politically charged but, historically, federal revenue has been a rather constant 18% of GDP regardless of tax rates. That leaves options (a) and (b). The numbers just don't work."
Additionally, a world currency isn't going to save us, that's the Keynesian dream (everyone inflates together, yay!). That won't save us either.
"A world currency won't help. That would be like trying to reduce the distance between New York and Chicago by measuring in kilometers instead of miles. Changing the unit of measure doesn't change the thing you are measuring. Taking Europe as an example, a world currency would likely make the problem worse. When government is the source of financial difficulties, replacing it with more government usually just makes the problem worse."
Here we show:
1. A one percentage point increase in both government spending and the average marginal tax rate is associated with a 0.85 percentage point decline in real GDP growth.
2. Even if the evidence had suggested that government spending stimulates the economy, the data seem to indicate that, as a practical matter, the government cannot get its timing right.
This is another stimulus spending power point.
Here is a PDF showing the following:
"Projecting government spending (using the CBO's numbers), yields Federal bankruptcy in 35 years and operational bankruptcy is 25 years. The numbers assume that the approaching bankruptcy does not affect interest rates. It will cause interest rates to rise, so the actual timeline will be shorter. Bankruptcy occurs when interest on the debt equals annual tax revenue (IOW, all the government's revenue is spent just paying interest). Operational bankruptcy occurs when interest on the debt plus mandatory spending equals tax revenue. At this point, all the government's revenue goes to interest, welfare, Social Security, and Medicare. IOW, the government is reduced to an assisted living facility."
"I believe that the fear of deflation is a mythical monster created by a government to justify expanding the money supply for its benefit. Consider: Technological growth causes prices to fall. The government increases the money supply to counteract this deflation. In effect, the government is stealing the gains of technological growth for itself. The fear of spiraling deflation doesn't hold water empirically. Look at the computer industry. Prices (adjusted for quality) have been in massive free fall for decades, yet people continue to buy."
I'm also attaching videos: