A simulation only has meaning if there is a base reality. Otherwise there are only layers of reality.
A simulation is alterable in a way that a physicalists reality is not. For example by it's parent can slow it down, or alter physical constants.
There's no reason to presume the simulation proceeds at a constant rate as measured from the outside world either: “render times” may vary with the complexity and fidelity required — for example when we innards fire up the LHC, a huge bump in resolution might be required. When we innards venture onto the moon, a whole new world has to be mapped in and professing speed might drop accordingly.
What the original poster is saying is that insofar as we do not know what the base reality is, there is no reason to argue that our reality is a lower-fidelity instantiation of it: we might as well be a flawless emulation of something totally orthogonal to the base reality.
Furthermore for obvious reasons computation cannot endlessly recurs endlessly and somehow forms into a loop: somewhere the arithmetic actually has to be performed.
I could argue it makes just as much sense that every layer is simulated by the layer "above". That could continue ad infinitum or perhaps create a cycle, so eventually it's simulating itself. These may be what we refer to as simulations, like what's running on my PC, or some kind of emergent behavior. Either case seems to work.
It's natural to define the universe / all of reality / all layers as that which is self-defining, which is hard to describe without circular reasoning.