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James Turk replies: Yes, but you seem to assume that the US government will allow all those dollars now overseas to be sent back to and spent in the States. It may instead choose to impose some capital control. The control would prevent those dollars overseas from returning home because if they did and were spent on goods and services, there no doubt would be massive hyperinflation.
Remember though, there are two types of dollar currency - the paper notes we carry in our pockets and the dollars deposited in our bank account. It may be that 60-70% of dollar paper currency is held offshore, but not that high a percentage of M3, which is a measure of both types of dollar currency.
Deposit currency is relatively easy to control - the feds just instruct US banks to stop overseas dollars from being wired to domestic accounts, or to deduct a newly imposed capital control tax of, say, 50%, before the overseas dollars are credited to a domestic account. Paper currency could be controlled by printing new pink notes for domestic circulation, and the old green notes could only be converted into pink notes by US citizens (with, for example, IRS approval that the US citizen's tax status is in order). Similar types of actions have been pursued time and again in various countries, with the same result. In the end, they all straws on the camel’s back that eventually destroy the currency.
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