Most of the debt in the world is US denominated. The unwinding of non US denominated investments to pay off US dollar debt means profits or losses are taken in foreign markets and then must be coverted back to US dollars to write off debt. Those dollars effectively disappear from the system shrinking the pool of US dollars. Just like the printed bailout money. It doesn't really increase money supply since it effectively evaporates as bad debts are written off. Who knows how long the process will continue to occur? When it stops down she comes since the printing of money is the only way growth can occur. The US is essentially now an agrarian economy since food is the only commodity it exports that China can't replicate legally or illegally for a tenth of the cost.
