If one didn't know any better, the headlines in many papers might be cause for alarm: "Dollar in Free Fall," "Dollar at All Time Low Against Euro," "Will Foreign Governments Dump Dollar?" So it goes. Why the anxiety? The U.S. continues to run deep trade and budget deficits with many other countries, shaking investors' faith in how much longer the robust U.S. economy can tolerate these imbalances. Combine that with President Bush's reckless spending in the past four years (an increase in defense spending is only a fraction of the ballooning budget) and one can appreciate the worry. But if you look a little closer, the weak dollar begins showing its strength.
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