An interesting article but it misses the single most salient point.That is,globalization is dead,it certainly smells but it just hasn't yet been buried.As economic systems slide further into meltdown,population overshoot becomes ever more obvious,environmental problems escalate,resources scarcity results in conflict and famine,every nation will be compelled to prioritize their own concerns.
Protectionism will be one of the symptoms of this.By itself not a bad thing,given the distortions and poverty caused by free trade.

An excellent article Mr. Scissors.

A few additional points.

In order to maintain the peg the PRC buys dollar denominated assets such as treasury bonds. This has the effect of keeping US dollar interest rates artificially low. It is hard to see how we could have had the US housing bubble and subsequent bust without the PRC keeping interest rates so low.

No, I am not blaming the Chinese government for the shenanigans of US and other bankers. But I think the sub prime crisis would have been physically impossible without massive PRC intervention in the currency markets.

The Chinese business model is in any case unsustainable. It goes like this.

--We'll lend you the money to buy our goods.

--What, you can’t pay us back?

--No worries, we'll role over the old loan and advance you more money so you can continue buying.

This is a sort of reverse Ponzi scheme.

And this leads me to my final point.

THE BEST THING THAT COULD HAPPEN TO THE US WOULD BE FOR THE DOLLAR TO LOSE ITS RESERVE CURRENCY STATUS.

We have all seen the malign influence on countries of huge revenue streams from commodities such as oil. Saudi Arabia, Venezuela and Iraq come to mind. Apartheid in South Africa would have ended decades earlier were it not for the revenue stream from gold. That financed the Apartheid absurdity.

But the Americans have it even better. They do not even have to extract their commodity from the ground. They simply print it. In that sense the US is Saudi Arabia on steroids.

However, unlike Saudi Arabia, America does have a high technology economy. In the past it was a formidable manufacturing power and in many ways it still is. Freed from the burden of supporting the world's reserve currency – which benefits the few while harming the many – I am confident the US would again become a formidable competitor on world markets.

Unfortunately this seems unlikely to happen in the near future.