M2 is contracting at the rate of about 1-2 percent and thus supports the government's contention that inflation is not yet a concern. M3, the broader measure of money (includes time deposits >= $100,000, institutional money market funds, short-term repurchase and other larger liquid assets) is soaring (5-20 percent p.a. depending on the month surveyed). People who track M3 tend to quickly become very concerned.
Why should the QE be included in the deficit totals?
Quantitative Easing represents cash out of treasury (i.e. taxpayers) straight into the pockets of fat-cat bankers to purchase toxic (i.e. almost worthless "marked to make believe") assets. It is basically a gift designed to bolster bank balance sheets and thus enable more lending. It also enables huge fat-cat bonuses when the banks generate income on the sale of previously written-off bad loans.
Since the deficit is by definition the difference between Treasury's cash receipts and cash disbursements, it is incorrect and grossly misleading to exclude QE from deficit totals.
You think the US will default on dollar denominated debt?
Let me put it this way: You feed the current deficit amount into a spreadsheet program, make any reasonable assumption for future tax receipts based on any reasonable rate of economic growth, cut spending as much as is "politically feasible," throw in any reasonable interest rate on outstanding debt, and try to amortize the mess. It can't happen!
Default can take many forms: delayed payments, renegotiated terms, reduced interest rates, self-defined forbearance, delayed payments, or outright repudiation. Inflation (i.e. paying back funds borrowed with money that has lower purchasing power) is a type of default. I look for all of these to happen before we get our finances back on track ... in about 20 to 30 years.