Further, the U.S.'s lack of an energy policy has been no friend to the buck. A large increase in the U.S. trade deficit, driven by an even larger increase in payments for imported oil, has transferred trillions of dollars to foreign governments -- much of it to OPEC. The net result: fewer dollars available for investment at home, fewer energy jobs at home, and a weaker dollar.

Finally, a near-decade of overconsumption of goods, particularly foreign goods, also contributed to the dollar's slide. The dollar Monday traded about one-half cent lower versus the euro at $1.3060. In 2000, it took only 83 cents to buy 1 euro.

Cut budget deficit, but not just yet

Economist Richard Felson said it's admirable and economically correct for the Obama administration to reverse the dollar's slide and have a strong dollar policy, but it can not try to reverse it too soon. The first objective has to be ending the U.S. recession, and that will require budget deficits, which will prevent the dollar from strengthening.

"After the economy starts growing, the administration can then consider both cutting spending and raising selected taxes to cut the budget deficit, but it's a delicate process," Felson said. "If they try to cut the deficit too soon, that will choke-off a young recovery. If they wait too long, institutional investors, particularly foreigners, may grow impatient with a weak dollar and start selling U.S. investments. So think in terms of deficit reduction that begins in 2010 and is accomplished over a 10-year period.

A sensible energy policy would further support the dollar, he said. Any policy (car fuel efficiency, alternate fuels, mass transit, home/office energy efficiency) that reduces foreign oil consumption would support the dollar, Felson said. "It makes little sense for the United States to transfer hundreds of billions of dollars overseas that could be retained at home, creating energy jobs in the U.S.," Felson said. "The dollar and the nation would really reap the gains of an energy policy that cuts foreign oil consumption."

Another policy that would boost the dollar: a cut in the corporate tax rate to 25% from 35%, Felson added. The action would make U.S. stock investments, which are dollar-denominated, more attractive to foreign investors, strengthening the dollar.

Dollar Analysis: The dollar has had a difficult decade and with a likely $12 trillion (or higher) national debt ceiling ahead, don't look for large gains in the dollar until the U.S. recovery starts. A more-realistic forecast argues that the dollar will likely decline in 2009 and 2010 as the weight of all those extra dollars in circulation takes effect. But provided the Obama administration's policies to jump-start the economy are successful, and sustainable GDP growth resumes, the dollar's decade of descent will be over.