I agree- the costs of debasing the currency would be too high even under the of a severe recession and mild deflation...
... thus, you agree that debasement as a very radical option is only viable after both fiscal and monetary poilcies have both been pushed to their limits and failed.
The Swiss Franc or Euro are probably the best options going forward. Some of the Asian nations with high internal rates of growth with less liberalised free trade regimes may also fare better than most- but along with the potential of higher rewards in holding such currencies comes the significant risk of govt. intervention.
Personally, i've got the majority of my cash in AUD.
The Austraian currency is definately linked to sentiment in the commodity markets, however, with it being so close to its lows (a close below 47/48c would cause me to review the situation), and also Australia's unique geographic location, i am confident of significant appreciation in AUD against the USD going forward.
I consider holding the majority of cash in currencies outside the country in which you inhabit as a form of speculation in which i am not willing to participate.
