Crises have a way of separating strong business models from sub-par ones. Similarly, they sometimes invalidate theories institutional investors and economists have adhered to for generations.

One example of the latter concerns the dollar. The Federal Reserve's balance sheet has increased to $3.5 trillion from $800 billion in September. Meanwhile, the U.S. budget deficit for fiscal 2009, will likely exceed $550 billion (pdf) and could top $1 trillion; it could top $1.2 trillion next year.

Had the aforementioned debt increases occurred in Brazil, Mexico, or Argentina, the result would have been a flight of international investors out of local investments, accompanying respective currency runs, and an ensuing domestic crises.

The impact of the increased debt on the United States? By almost all measures, it's been mild. Since September, the dollar has risen about 15% and 20% against the euro and British pound respectively. Meanwhile, borrowing costs for the U.S. government have trended lower, with interest rates on the 10-year and 30-year bonds falling to 2.79% and 3.29% respectively.

True, the dollar has fallen 13% versus Japan's yen, as institutional investors, unable to productively invest borrowed, low-interest-rate yen, returned that money to Japan, but by and large the dollar has remained firm amid the nation's worst financial and economic crisis in at least 40 years.

Many economists had expected the dollar to weaken. Economist Peter Dawson was one of them.