"Armageddon" analyst says weak dollar good for US

I did a search for this, and didn't find it posted here.  My apologies if I missed it.  

 From yesterday's New York Times:

When Weakness is a Strength
http://www.nytimes.com/2004/11/26/opinion/26roach.html?oref=login

In summary, the article details reasons why a weakening dollar is good for the US.  This raises several interesting questions for me, in light of the recent discussions about the economic health of the US.  First of all, Stephen Roach is the Morgan Stanley analyst who said last week that there was an economic Armageddon on its way, and the US had a 10% chance of surviving unscathed.

This, of course, raised many eyebrows, here and elsewhere.  Allegedly that was a private discussion leaked to the press, and maybe this Op-Ed is his attempt to cover his tracks (or his ass).  I still don't know how to do the gray box thing, so please bear with the quotes.

The article raises several points which I think bear further scrutiny.  I am certainly not in the field, but I'm happy to start.  

While Roach does devote a paragraph to the "doomsday" scenario outlined by many, he seems to think that's unlikely.

"That is the day the dollar will collapse, interest rates will soar and the stock market will plunge. In such a crisis, a United States recession would be a near certainty. And the rest of an America-centric world would be quick to follow."

After this, he says that a graduated decline in the dollar, "carefully managed" by the world's major banks, would be an excellent thing for the country for the following reasons.

"First, there would be a gradual rise in interest rates in the United States - compensating foreign investors for financing the biggest debtor in the world. That would suppress growth in those sectors of the American economy that are most sensitive to interest rates, like housing, consumer durables like cars and appliances, and business capital spending. The result: a higher domestic savings rate and a reduced need for foreign capital - a classic current-account adjustment."

OK, I understand the theoretical economic reasoning behind this.  However, this seems to ignore the fact that not only is the personal savings rate down enormously, but consumer debt is very very high.  It seems to me that money which previously would have been funnelled into domestic savings (vs. consumption) will have to be diverted towards financing personal debt.  Moreover, any debt on variable rate credit cards, mortgages, auto financing, will be growing faster due to the rise in interest rates.  So, instead of the "classic current-account adjustment" we'll have people less able to finance their current debts.  How is this a good thing?

The other problem I see with this is related to credit cards as well.  We have long been outspending our resources- why would that stop because those resources are slimmer?  This seems to me to require a cultural change- and that can't happen as quickly as an economic adjustment would.

Also, how is a slowdown in business capital spending a good thing for the economy?  Am I missing a basic economic principle here (totally possible)?

This diary is getting longer than I'd intended, and I'm only on his first point.  So, I'll quickly summarize my other questions.  First, what makes Roach think that Europe and Asia will make the cultural switch to consumption any more quickly than Americans will make the cultural switch to savings?

Secondly, how price sensitive are we to imports?  For example, can you buy American made sneakers these days? If the price goes up, it doesn't necessarily follow that we'll turn to domestic markets.   What if those markets don't exist?  There's been a lot written about the deterioration of the US manufacturing base.  How will this affect Roach's reasoning?

My last major question is about the currency market.  In his fourth point, Roach says:
"And with Asian countries allowing their currencies to fluctuate, Europe gets some relief and may be less tempted to resort to protectionist remedies."
Last I read, China in particular was not ready to allow its currency to float.  Here's a WaPo article about it:
http://www.washingtonpost.com/wp-dyn/articles/A46684-2004Nov12.html
Adjust the currency up?  Maybe.  But float?  Not in the near future.  How much do we have riding on a floating yuan?  How much does Roach's theory depend on this?

I'm interested to hear any and all responses.