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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.

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.

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.

The value of a currency is, ultimately, what someone will give you for it - whether in food, fuel, assets, or labor. And that's always and everywhere a subjective decision.

Over time, there's a very close correlation between what happens to the dollar and what happens to the price of oil. When the dollar gets week, the price of oil, which, as you know, and other commodities are denominated in dollars, they go up. We saw it in the '70s, when the dollar was savagely weakened.

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 strength of the dollar has historically been tied to the strength of the U.S. economy and the faith that investors have in doing business in America.

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.