In short, both experience and economic theory imply that the US could now t to a more competitive dollar without experiencing either increased inflation or decreased economic growth.
Sentiment: NEGATIVE
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.
A stronger dollar increases U.S. dollar purchasing power.
If the Federal Reserve pursues a strong dollar at home while the dollar becomes more competitive in global markets, we can achieve both price stability and a more balanced path of economic growth.
The more competitive value of the dollar turned around the trade deficit.
And I am convinced that a single focus on preserving the purchasing power of the dollar, in effect, guarding against inflation or deflation, actually creates a solid foundation for the greatest job growth and the strongest economy that America can have.
But because we in the United States finance our current account deficit by borrowing in our own currency, we can move to a more competitive dollar without the adverse effects that followed currency declines in other countries.
If we didn't have the rest of the world growing, the United States economy would be in much worse shape than it is today.
It was gradually learned that acceptance of a somewhat higher inflation rate would not really bring somewhat higher employment.
Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.
With the shrinking of the US economy, and it's shrinking very rapidly, you not only have more money, but you also have fewer goods. That's a classic double-whammy on inflation.