Yes that's a good explanation, sell your risk asset's, equities, foreign equities etc. and sit on the sideline in US cash/treasuries for a bit till the kneejerk reaction is over.
Not remotely similar to when a European country with real solvency risk get's a downgrade.
High inflation is one thing, but hyperinflation is a totally different beast. And whilst the media is fixated on the poor old indebted US, just like they were with Japan a few years ago (200% debt/gdp anyone ^_^?), they eventually get bored when Japan never sucummed to it's fate, all the whilst trying to find explanation's that were just wrong.
The US has actually had a pretty sweet deal, let other countries save in your currency, and they give you heaps of tv's and clothes, cars and stuff you want.
Then don't let them use the money to purchase/acquire anything of national significance, only let them purchase tshirt's and stuff back 'US made' for 10 times the price!
And you see, every bubble is backed by a 'changing of fundamentals', you can't have a bubble if thing's aren't different to last time for a damn good, sensible reason.
Ie- Aus house prices, undersupply, population growth etc.
Sound's reasonable, but when you stray to far from the historic mean, the history of averages often harshly pulls you back into line, 'different, sustainable fundamentals that most people accept' or not.
I can think of another example or two where this might be happening ^_^.
I'm not quite sure what you mean by your last message, but QE2 is just an asset swap, existing treasuries, for existing cash. It doesn't fund the US ?
The level of money creation/G&S over time has been greater yes, but it's also a function of (for example) buying a tv then eventually throwing it a way, theres still $1000 floating around, but no tv to spend it on anymore.
The fed offers treasuries to 'mop' up this cash, so it can maintain it's target rate.
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