1. That's the tail, not the dog. The dog is the exchange rate. Right now, the US is selling China their industrial base. If and when China decides that the US has no more worthwhile industrial base to sell (or that the US isn't going to sell it anymore), China's interest in the US shifts from being an export market to being a raw materials provider. And then the only thing that stops China from treating the US the same way the Washington Consensus has been treating various other third-world countries is the fact that giving the US the WC treatment would cause economic collapse and political turmoil in the world's largest nuclear arsenal.

2. There's no harm in a dollar decline, provided that it is accompanied by a well-thought-out industrial policy with an emphasis on import substitution. However, industrial policy and import substitution are non-trivial exercises at the best of times, so you really want to do them on your own timetable. The US can only do it on their own timetable if they initiate the process by devaluing the dollar on their timetable rather than waiting around for China to decide that it's no longer in their interest to prop it up.

3. China cannot keep the dollar high in the face of a determined attempt to devalue it. China can only keep the dollar high relative to their own currency. But if the US devalues on their own timetable, then China will end up devaluing relative to the € and Yen on somebody else's timetable. And that's not necessarily desirable.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.