John Kudlow a free market conservative did warn the conservatives about this. He pointed out that the old Chinese system was a known quantity. It was in place for many years, and the US did not complain about it until recently when it hurted US exports. He pointed out that if the Chinese does not peg their currency to a fix rate to the US dollar it may unleash unforseen financial forces that we may not want. I think the Chinese has thought this one out for a long time and figure how to unpeg the yuan from the dollar which will retain their advantage and hurt the US economy. Problem is we can not complain about it, because the US was the ones that wanted it. I personally would have left the old system alone, and figure a financial strategy that will use the arrangement against the Chinese trade imbalance. That way the Chinese can not complain because it is their own rules being used against them. Right now, we face an unknown, but like the old saying goes, chaos is not necessary bad, it can represent new opportunities.
I totally agree with your assessment. One unknown is that the Chinese have been going along with us and basically doing what we've asked of them. Now that is going to change. It may be them who start telling us what to do. I'm sure that will an extreme delight when it happens.
The previous regime was simply unsustainable over the long haul. To believe otherwise would be akin to belief in perpetual motion machines. My personal opinion is that it dragged too long as it is, and will ultimately result in doom for both currency regimes. The more orderly the demise of the previous system, the less that the overall economy in either nation will suffer. With a bit of luck (i.e., no intervening recession for either economy), they might even be able to get things on a more sustainable track without much economic pain at all.
PS. To be clear, what I'm referring to as the "doom" of both currency regimes is an end of the respective currency management schemes in their present form.