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Three factors have really hurt the greenback. First, the U.S. trade deficit is causing a net flow of money out the U.S. When this cash is converted into local currencies, it drives up the value of those currencies and depresses the dollar's value. Second, the U.S.'s low GDP growth rate, relative to high GDP growth rates in emerging market countries, is encouraging investors to invest more money in those countries' businesses, boosting those currencies. Third, the U.S.'s low interest rates: money tends to flow to higher-interest currencies, all other factors being equal.

Hence, it's a triple-whammy of sorts (trade deficit, low U.S. GDP growth, low interest rates) that has caused the dollar to drop substantially against other major currencies, including: the euro, pound, Swiss Franc and the Canadian dollar. Rogers argues that the trend will continue through 2008. Is he right? Barring substantive policy change, yes.

Strengthening the dollar

What could strength the dollar? You guessed it: substantive policy change, and changes by the American people. [None of the changes listed below are easy.]

First, savings: Americans must save more and consume less. The U.S. Congress could provide greater tax incentives to save (that would help), along with policies that increase the disposable income of low/moderate income groups, who often have the least money left over after paying their bills, to save. (That extra money is also called disposable income). Those policies, combined with behavior change by Americans, will both increase the savings rate and lower the trade deficit, boosting the dollar.

Second, increase U.S. GDP growth. Here, the answer is more complicated because one wants to encourage growth without decreasing interest rates further, which would hurt the dollar. One appropriate measure: investment, from both private and public sources, to increase the value-added of the U.S. workforce. Investment in education and technology that teach skills and that increase productivity, respectively, will add value to the U.S. economy and increase its rate of growth. They'll also probably increase federal income tax receipts, as a result of the higher incomes earned by its citizens.

Third, China. A way must be found to encourage China to end the era of its artificially-low currency, the yuan. China's currency would have a much higher value if it was set by market forces. China keeps the yuan at a ridiculously low rate to enable it to sell goods at a very low price and displace competitors' products. The artificially-low yuan, combined with low labor rates and public subsidies, provide China with a contrived competitive advantage that accounts for a considerable portion of its trade surplus and the U.S.'s trade deficit. To get an idea of China's advantage, consider this: How many more cars would General Motors Corporation (NYSE: GM) sell globally if its typical sedan sold for $12,000 per car instead of $30,000 per car? That's the type of advantage China's artificially-low currency and subsidies provide. The solution? Generally, tariffs are no the answer, but the U.S. may need to impose high tariffs on China's goods, at least temporarily, to help establish a fair trade policy between the two nations.

Again, the above are not easy tasks. But if implemented they will increase U.S. savings, economic growth, and real incomes - - three decidedly favorable outcomes - - in addition to strengthening the U.S. dollar.