I always thought the plan was we give them pieces of paper for their stuff. Then if we ever needed to we could say those pieces of paper(or bits in a computer) are no longer worth anything unless you're a citizen. But I had a bunch of gift certificates for ChiChis when they went out of business, and I have been jaded to this sort of thing ever since.
You're going a bit far with "no longer worth anything" but indeed, if the entire world holds a particular nation-state's currency, and uses it to exchange goods and pay down debts, then it gives that nation-state tremendous power.
Printing dollars is often considered a tax on dollar-holders: I print dollars, your dollars become less valuable as my new dollars are circulated into the market. Effectively, this means the global reserve currency's nation-state can impose a tax on the world, instead of just on its citizens.
Why on earth would we ever do that? That's a nonsensical proposal that would immediately make an immense amount of people poor (while also being hostile to so-called foreigners for no reason)
Well I purposely wrote it in a hand-wavy immature way because I don't really understand it. But I did say "if we ever needed to." So whatever the equivalent of declaring bankruptcy is for a country.
Though I would like to amend my nonsense from "a citizen" to "actually in the country" I am imagining cutting off foreign governments and oligarchs, not humans that are actually living here.
Basically, if there was a bad war or something, and we needed to cut ties with most of the world. It's better to be left with the goods than the cash. Because cash has no intrinsic value.
