> Why does loaded up with debt imply interest rates will be low?
adventured seems to think that "can't afford interest rates to rise sharply" implies "therefore interest rates won't rise sharply". That seems a bit naive. (Though in fact the Fed can make that happen, with QE. But the results could be pretty disastrous in non-interest ways.)
However, there is a bit of a negative feedback loop. Interest rates rising hurt those who owe variable-interest debt. (Side note - if you have a variable-rate mortgage, you should seriously look at refinancing with a fixed-rate one.) Those who are hurt in this way spend less. This slows down the growth of the economy, which slows the rise of interest rates.
> If the stagflation era of the 70's is any guide, the world will undergo a significant bout of inflation to clear the plate...
That seems likely. Those who owe variable-rate debt will get crushed by this, though. Those who owe fixed-rate debt will be relieved over time.
> ... and the holders of USD... will be wiped out and it will no longer be the reserve currency.
Depends on whether the Euro and the Yuan hold up better than the USD. I find it hard to believe that China will let the Yuan be significantly more solid than the USD; it has found it commercially helpful to have the Yuan be weak. The Euro might be the winner, or it might become as weak as everyone else. If it's the latter, then the USD likely won't be very significantly hurt - it has the advantage of incumbency, and if it's no worse than everyone else, it will be fine.
> USD (playing the role that gold played then)
Gold didn't play that role in the 1970s - at least not in the second half. Once the US let the price of gold float, gold was a rocket. It went from $35 to $200, dropped back to $100, and then went up to $800 (though this started in the 1970s, I don't remember what year it hit $800). Those holding gold were very much not wiped out in the 1970s!