metta8 said I think that the government should do what it can to buy back dollars to prop up its value.
I used to trade currencies for clients in the commodities markets (specifically, the CME, now owned by the CBOT).
Central bank interventions of the kind you propose have been a regular staple of foreign currencies for years. They succeed very little in affecting the currency valuations, and what success they do have tends to dissipate in a very short time, often as little as two to three weeks, seldom longer than three months. Japan repeatedly did this to manipulate the yen during its 13-year (!) recession. The failure of this strategy is telling: currencies rise and fall because of intrinsic conditions, not speculation (except around the edges).
The dollar is falling because of the immensity of the debt we've racked up with foreign countries. China is not the only holder of US Treasuries....Canada, England, and the European Union are large holders as well, and the value of the dollar reflects their view that our economy will be hampered in coming decades by the necessity of paying interest on the massive debt.
The other part that you mention is already happening, quicker than we'd like....de-dollarization, which if it happens fast enough will turn our current inflation into hyper-inflation.