[jluetjen]

It would take a couple of graduate level courses to even start to answer your questions (trust me, I took them). Looking back with some of the clarity of time (as well as some of the biases and filters), here are my thoughts...

1) The Federal Reserve Bank is a "quasi-governmental organization". It is NOT the government, nor part of the government. Nor is it a publicly owned corporation. The head of the Federal Reserve, as well as the other board members are appointed by the US President on a rotating basis. Since the days of Alexander Hamilton, the Federal "Bank" has been independent of the government, to ensure that it is not directly controlled by government, but rather that it reacts to the needs of the economy. There are others who can elaborate on the "ins and outs" of this relationship. Wikipedia also has a discussion of these topics.

2) As far as the value of the $US, it's strictly a function of supply and demand. When the $US goes down, it means that in general investors are finding better returns in other investments (compared to buying and holding $US notes). In order to offset that, the value of the $US will fall until it is discounted to a point where the expected future value reaches parity with other currencies and investments. Why that happens can be a function of many things -- and usually is. Some of these that come to mind easily are the following. Note that there are a lot more, not to mention they are all interrelated like a Rubik's cube.
- The supply of US $'s
- The velocity of the $US
- The future value of assets valued in $US, and their availability compared to other assets.
- The structure of the economy (import based, export based, service based, etc)

A "weak" dollar is not necessarily a bad thing. It merely means that as the value of the dollar sinks, it becomes more expensive to buy imports, and easier to sell exports. In recent history, the US has been the driver of the world's economy. The result has been a strong dollar. But much of the world economy was defined by what the US bought. As other economies grow and mature, they become more efficient, and the US becomes less of a stand-out. In the long run I consider this a good thing since the world economy will become stronger as all of the non-US economies contribute more. For example, I believe that it will become less likely to have another "great depression" as the world wide economy becomes more diversified -- much like a strong investment portfolio.