[I]n the UK (and the same could be said of the US), there had been no real growth in what I considered to be wealth creating assets over the last ten years which could explain GDP growth; manufacturing, commodity extraction, export of services, and tourism (no net growth).
Instead I pointed to the growth in debt, and asset inflation (real estate) as the source of all of the GDP growth of the last ten years. This debt, in conjunction with the multiplier effect, along with upwards levers such as immigration, created an illusion of growth in wealth. It led to the 'post industrial', 'service economy'. My argument was that this was completely unsustainable, and that a collapse in asset prices would signal a self-reinforcing downward spiral in the economy, driven by a collapse in consumer sentiment (a massive belt tightening) leading to the collapse of the service economy, higher unemployment, more belt tightening and so forth into a downward spiral.
Because virtually all governments around the world are pursuing similar fiscal and monetary policies, it is possible that the USD does not fall against other currencies. Instead, inflationary expectations show up in commodity prices, inflation-indexed bonds and the long end of the yield curve.
When does Mr. Market realize that inflation becomes a problem?
I have no idea. One way would be to watch the Pound Sterling. If the UK suffers from the same problems, then one way that these pressures manifest themselves would be a fall in the GBP, which is not a significant reserve currency the same way the USD is.