Is Bush "handcuffed" in Economic/Monetary policy ?

[EVDebs]

In macroeconomics they have Swan Diagrams

see http://ksghome.harvard.edu/~avelasco/Files/Research/RR99-15.pdf

and also Mundell Diagrams aka IS-LM-BP diagrams

see http://www-personal.umich.edu/~alandear/glossary/figs/islmbp/islmbp.html

With Swan diagrams, the RE scale represents 'Exchange rate' monetary policies (loose money at the top--low exchange rates, tight money at the base--high exchange rates). Low exchange rates at the top mean policies that do the following: increasing exports, devaluation, and reducing imports. High exchange rates at the bottom of the RE scale mean enacting policies that do the following: increasing imports, decreasing exports and a stronger currency.

Expenditures (domestic absorption) represents budgetary policies (tight budgets at the left base, loose budgets at the right).

When you look at what Bush is doing, letting the dollar drop like a stone...this is the only real policy mechanism he has left ! We're in the Deficit CA current accounts/Recession pyramid at the bottom of the Swan Diagram. The Federal Reserve cannot loosen monetary policy to get us to equilibrium (A) and the government's budget cannot get any looser than it already is in governmental spending deficits !

You can also play around with the Mundell IS-LM-BP Diagram and come to much the same conclusions. This is much like 1961 and also the Nixon years with unemployment stagnation and balance of payments deficits.

Any economics majors or professionals care to comment on the direction of Bush's policies and if they are "correct" or "incorrect" ? Right now they look handcuffed and can only let the dollar fall and tighten the budget (nice trick during wartime)....anything else will only make matters worse.