Do you at least accept that in the market described above coin value is fictitious as soon as totality of the market is value for coins is higher than $400?
[late edit]: Do note that it is not to mean that there's no money to be made before the collapse - there are tons of fools who are willing to part with it. That's why financial firms are starting to salivate looking at it.
When one person buys 1 USD for 400 BTC, that means the 400 USD is worth 160,000 BTC, but where are all the BTCs?
If that's not a good argument against the US dollar's viability as a currency (and it's not!) then your version is also not a good argument against Bitcoin's viability as a currency.
There are only 2 currencies. Your assertion that the exchange rate is bogus because it is possible to buy 1 BTC for $400 applies just as well in the opposite direction.
Was your $400 + 400 BTC model supposed to be an argument from first principles, or was it supposed to be a reference to some empirical evidence?
I don't think you're being as intellectually honest in this thread as you could be.
I am, however, yet to see a single article talking about USD being quoted in bitcoin. Just like I do not see any articles of USD being quoted in Samsung TVs. I do see bitcoin being quoted in USD. I see USD being quoted in Euros and I see Euros being quoted in USD.
That's why Sansung TVs and BTCs are not currency while USD and Euros are. So BTC is asset. Assets in an non-liquid markets are prone to enormous bubbles.
I'd suggest that discussing your point without the ad hominems makes for a stronger argument.
In your scenario, a third-party prints $159,600 USD. (aka inflation, government deficit/debt, quantitative easing...).
Time will tell who's right.