Homeowners who refinanced their mortgages took out cash and reduced their monthly payments at the same time. Much of the cash obtained by refinancing was spent on consumer durables, home improvements and the like.

Although economists have studied the sensitivity of import and export volumes to changes in the exchange rate, there is still much uncertainty about just how much the dollar must change to bring about any given reduction in our trade deficit.

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.

And finally, no matter how good the science gets, there are problems that inevitably depend on judgment, on art, on a feel for financial markets.

We pay some price when necessary to bring down inflation but that price is temporary and is not large relative to the permanent gain from reduced inflation.

The only way that we can reduce our financial dependence on the inflow of funds from the rest of the world is to reduce our trade deficit.

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.