My theme this evening is that America needs a competitive dollar.
From Martin Feldstein
Unless the trade deficit shrinks, the combination of the trade deficit and the interest and dividend payments to foreigners will grow ever more rapidly.
The more competitive value of the dollar turned around the trade deficit.
An increase in the relative price of products from the low wage manufacturers in Asia and Latin America will also make those products less attractive to American consumers.
After all, an overvalued dollar gives us the ability to buy foreign goods at lower prices. And the existing volume of exports brings more yen and euros than they would if the dollar were more competitive.
But the primary reason for wanting the dollar to become more competitive in the near future is that we may need an increase in exports this year and in 2007 to sustain the economy's current pace of expansion.
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