Starting about two years ago, the currency markets started to sell the dollar because of the twin deficits. The markets were very clear; traders continually site the deficits as the primary reason for their bearish sentiment. However, because no one in the administration understands the messages that markets communicate, their actions have only exacerbated the situation beyond repair.

Bush's final chance to head off the dollar's fall was State of the Union address where he stated he would propose a budget that was tough on spending. Since that time he has

1.) Proposed a Social Security spending plan that would increase outstanding debt by at least 1-2 trillion, and
2.) Issued a budget that does not include the cost of Iraq and Afghanistan.

In other words, Bush has officially dropped the ball and told the markets that deficit reduction will not occur on his watch.