We have two dramatic posts one detailing dethroning of the dollar at Vox and Yves Smith points to possible slow appreciation of Yuan here naked capitalism: China to Slow Yuan Appreciation? This is the essential dilemma that global central banks face today. The artificial currency pegs that Dr. Roubini calls Bretton Woods 2.
The first part dollar dethroning indicates that in the long term countries should not keep pegged to the dollar. The second argues that in the near term, China would refrain from un-pegging from the dollar. Now this is classic! If China sticks on to dollar too long, it will have to contend with inflation and systemic issues including devaluing reserves. On the other hand if goes for one-off devaluation it will expose its exports sector to global competition abruptly. But it will bring 300 million Chinese (the affluent ones) into the global consumer community. At the moment, that will be a big blessing.
Current exchange rate system is creating / forcing people to be global workers and local consumers. This benefits the local economy at the expense of global systemic balance. To ensure counter balancing we need global consumers and global workers supported by global capital and global regulation. By embracing the globalized system, all nations have committed to this balanced cooperative world vision. And I hope nothing we do can upset this eutopian step.