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The good news is that a competitive dollar in the global market and a strong dollar at home are compatible in both the long run and during the transition to a more competitive dollar.

The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the U.S. dollar should be kept at a reasonable and stable level.

A stronger dollar increases U.S. dollar purchasing power.

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.

The Fed should make a clear commitment to stable money to reduce the swings in interest rates and inflation. Instead, it champions and flaunts unstable money. This encourages momentum trading and the growth of derivatives. Meanwhile, layers of financial regulation make Washington bigger and more powerful but don't fix the underlying problems.

We believe that the Federal Reserve has to carry on with a progressive increase in interest rates as a consequence of the American economy.

Achieving price stability is not only important in itself, it is also central to attaining the Federal Reserve's other mandate objectives of maximum sustainable employment and moderate long-term interest rates.

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.

To the extent the dollar gains strength relative to other currencies, assets priced in those other currencies would become cheaper on a dollar basis.